What changed in this filing

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Item 1. Business

2022-04-28 compared with 2021-04-28 · 58 added, 50 removed, 350 unchanged (24% of the section changed)

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Additionally, Virco has worked with accomplished designers - such as Peter Glass, Richard Holbrook, and Bob Mills - to develop additional products for contemporary applications.

These include the best-selling ZUMA

These include the best-selling ZUMA Series;

Analogy and Civitas furniture collections;

Metaphor and Sage Series items for educational settings;

and the wide-ranging Plateau and Text Series.

the wide-ranging Plateau and Text Series;

and the new Topaz Series.

Along with serving customers in the education market - which in addition to preschool through 12th grade public and private schools includes:

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Often these custom requests are incorporated into our product offering for all customers.

Over the past three years, Virco has launched a substantial number of new products, including the products discussed below.

In the fiscal year ended January 31, 2019 (“fiscal 2019”), Virco continued with the full launch of our Room to Move Collection, bringing our new Floor Rockers and C2M and R2M chairs to market, further supporting varied classroom and student needs.

Adding additional comfort and design appeal to the Floor Rocker family, we introduced the Sage Floor Rocker with Padded Seat, now available in nine coordinating colors.

Also new to our Healthy Movement seating was the Adjust-Right Stool.

Designed for use in one-on-one settings, this stool adapts to each user as they develop and strengthen their core and sense of balance.

Understanding that collaboration and engagement take place beyond the walls of a classroom, Virco introduced the Plateau Series Media Tables.

With collaborative environments in mind, these tables were designed to bring groups of people together in schools and the workplace.

Featuring a TV mount for screens and built-in USB and Power Ports, students and colleagues can easily exchange ideas and share content.

To address changing preferences and meet the needs of designers, Virco added to our robust color program by introducing two new soft plastic colors with vibrant, modern tones, Kelly Green and Lemon Yellow, as well as expanding our edge banding color offering for our 4000 and 5000 series tables.

We also added new upholstery colors to complement our existing pallet.

For the fiscal year ended January 31, 2020 (“fiscal 2020”), we continued to refine and enhance our product lines to further address the needs of today’s modern classrooms.

Over the past three years, Virco has continued to leverage our most popular classroom products while also launching a substantial number of new products, including the products discussed below.

For the fiscal year ended January 31, 2020 (“fiscal 2020”), Virco continued to refine and enhance our product lines to further address the needs of today’s modern classrooms.

We extended our line of 5000 Series stand-up height activity tables broadening the selection for this option popular in flexible classrooms.

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With many schools across the country completely shut down and others selectively opening under strict guidelines for safety and physical distancing, we saw a shift away from collaborative classroom furniture.

More traditional single-student desks and chair desk combo units began to replace tables and collaborative set-ups to allow for physical distance

in the classroom environment.

More traditional single-student desks and chair desk combo units began to replace tables and collaborative set-ups to allow for physical distance in the classroom environment.

While we did release several new products to address customer demand, such as both a ZUMA Series ® and Plateau Series ® slide-shaped student desk, a ZUMA Series adjustable-height lab stool and adjustable-height low legs for our TEXT Series student desk, this was not the year to introduce an extensive line of new products.

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Our product development pipeline also continued during this time in preparation for new product releases in the coming year.

The fiscal year ended January 31, 2022 ("fiscal 2022") gave Virco an opportunity to return to launching product updates and new products, while also continuing to provide physically distanced furniture solutions where needed.

The Plateau Series Table collection was expanded with more popular shapes and additional leg options including stand-up, low legs, and casters to broaden height ranges and mobility.

Continuing focus on our tables, Virco released the Butcher Block Series, a new line of STEAM tables featuring durable and versatile hard maple tops.

To further support healthy movement and flexible classrooms, we introduced a stand-up height version of our popular Molecule TM Series student desk;

and the Room to Move® Series Sit-to-

Stand Workstations which adjust up and down with a simple lever.

Designed by Peter Glass and Bob Mills with teachers in mind, Virco’s new Topaz Series TM combines sleek design with intelligent functionality to support modern learning environments.

The collection offers a teacher desk and accessory table, classroom cart, mobile bookcases, mobile storage, and two new sit-to-stand workstations ideal for both teachers and students.

We also continued to add to Virco’s robust color program with the introduction of four new soft plastic colors:

Celery, Peach, Mustard and Avocado.

As of January 31, 2022, the Company employed approximately 815 full-time employees, manufacturing its products in 1.1 million square feet of fabrication facilities and 1.2 million square feet of assembly and warehousing facilities in Torrance, California and Conway, Arkansas.

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Finally, management continues to hone Virco's ability to finance, manufacture and warehouse furniture within the relatively narrow delivery window associated with the highly seasonal demand for education sales.

In fiscal 2021 and 2020, approximately 49-52% of the Company's total sales were delivered in June, July, and August.

Historically Virco ships approximately 50% of its annual revenue in the months of June, July, and August.

In fiscal 2022 the seasonal peak was distorted due to severe supply chain interruptions, labor shortages, and COVID related employee absences and the Company delivered less than 40% of sales during June, July, and August.

In fiscal 2021, approximately 52% of the Company's total sales were delivered in June, July, and August.

The Company anticipates that the traditional seasonal peak will return when COVID-19 and supply chain disruptions normalize.

Shipments of furniture during peak weeks in July and August can be six times greater than in the seasonally slow winter months.

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The Tetra™ Series is a versatile collection of tables and student desks suitable for various environments.

From classrooms to open-office spaces, the Tetra is simple enough to serve as an everyday workstation but can be customized to suit the needs of a fast-paced computer lab or seminar training room.

Lunada® tables, combining Virco's popular Lunada bi-point bases with a selection of 20 top sizes, make great choices for

seminar, conference and related settings.

From classrooms to open-office spaces, the Tetra is simple enough to

serve as an everyday workstation but can be customized to suit the needs of a fast-paced computer lab or seminar training room.

Lunada® tables, combining Virco's popular Lunada bi-point bases with a selection of 20 top sizes, make great choices for seminar, conference and related settings.

Designed for Virco by Peter Glass, Plateau® tables bring exceptional versatility, sturdy construction and great styling to working and learning environments.

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The Molecule is a student desk with a unique shaped collaborative work surface that can be used by a single student or grouped together with multiple Molecules to create various arrangements and group settings.

Related products include an array of tablet arm units, new Agile Combo models and new Analogy™ Series combo chair desks.

Related products include an array of tablet arm units, Agile Combo models and Analogy™ Series combo chair desks.

Selected models are available with durable, colorfast Martest 21® or Fortified Recycled Wood™ hard plastic components.

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To provide a comprehensive product offering for the education market, the Company supplements Virco-manufactured products with items purchased for re-sale, including wood and steel office furniture, early learning products for pre-school and kindergarten classrooms, science laboratory furniture, and library tables, chairs and equipment.

Virco now offers customized, space-efficient workstations by Interior Concepts™ for technology and language labs, media centers, computer classrooms, reception areas and offices.

Virco offers customized, space-efficient workstations by Interior Concepts™ for technology and language labs, media centers, computer classrooms, reception areas and offices.

Interior Concepts is one of the many vendors with which the Company partners to effectively position Virco as the preferred one-stop furniture and equipment source for K-12 schools.

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Historically the Company has experienced years where the price of steel, plastic, and wood have spiked significantly, often because of global demand or tariffs on international supply but also in response to domestic supply interruptions.

In fiscal 2022, the cost of commodities was extremely volatile and unfavorably impacted the results of operations.

The cost of steel nearly tripled and the cost of plastic doubled.

Other material costs increased, but not as severely.

In fiscal 2021, the cost of commodities was relatively stable.

In fiscal 2020, the Company incurred an additional 15% increase in tariffs related to components sourced from China.

Other than the tariffs on these products, the cost of commodities was stable, and in some cases decreased slightly.

Subsequent to fiscal year end 2021, the Company has experienced significant cost increases for steel and components sourced from China.

While Virco sources most of its steel domestically, domestic prices increase concurrently with the effective date of the tariff on foreign steel.

Subsequent to fiscal year end 2022, the Company is anticipating that the global sanctions on Russia may severely impact plastic and fuel related costs and has already affected the cost and availability of nickel, a required material for chrome plating.

In addition to the raw materials described above, the Company purchases components used in the fabrication and assembly of furniture from a variety of overseas locations, primarily from China, and certain components from domestic suppliers.

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The supply chain for components from China is typically interrupted for a short period of time each year during the Chinese New Year in January or February.

As this is in a seasonally slow period of the Company’s business cycle and is predictable, it has not created supply chain disruptions.

In 2020, the COVID-19 pandemic caused several weeks of additional supply chain

disruption following the 2020 Chinese New Year.

Starting in April 2020, our sources in China operated at a capacity level adequate to supply our requirements, and as the entire period of disruption occurred in our slow season, the Company was not materially affected.

In 2021 the Company has experienced supply chain disruption caused primarily by availability of freight from China to the United States.

There can be no assurance that our suppliers in China will not experience material disruptions in the future, whether due to COVID-19 or otherwise.

As this is in a seasonally slow period of the Company’s business cycle and is predictable, it

has not created supply chain disruptions.

In fiscal 2022 the Company has experienced supply chain disruption caused primarily by availability of freight from China to the United States.

During fiscal 2022, freight costs for containers from China increased by a factor of nearly eight.

While we currently don’t believe there to be a material supply chain disruption, our suppliers in China may experience material disruptions in the future, whether due to COVID-19 or otherwise.

In addition, our domestic suppliers of components, services and consumables used in the manufacturing process have been disrupted due to COVID-19 and may continue to be disrupted, which could result in a slowdown of our manufacturing processes and result in increased costs to us.

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The Company has, however, negotiated increased flexibility under many of these contracts, allowing the Company to increase prices on future orders.

Nevertheless, even with respect to these more flexible contracts, the Company does not have the ability to increase prices on orders received prior to any announced price increases in commodities.

Nevertheless, even with respect to these more flexible contracts, the Company may not have the ability to increase prices on orders received prior to any announced price increases in commodities.

Due to the intensely seasonal nature of our business, the Company may receive significant orders during the first and second quarters for delivery in the second and third quarters of its fiscal year.

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through one contract, under which we are the exclusive supplier of classroom furniture .” Sales priced under this contract represented approximately 69% of sales in fiscal 2022 and 67% of sales in fiscal 2021.

We have had a history of contracts with the purchasing organization and was most recently awarded in fiscal 2018, a five-year contract with this organization that extends through December 2022, with two two-year extensions extending through 2026.

If Virco were unable to sell under this contract, we believe we would be able to sell to the vast majority of our customers under alternative contracts.

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The educational sales market is extremely seasonal.

Approximately 52% of net sales in fiscal 2021 and 49% of net sales in fiscal 2020 were delivered in June, July and August.

Historically Virco ships approximately 50% of its annual revenue in the months of June, July, and August.

In fiscal 2022 the seasonal peak was distorted due to severe supply chain interruptions, labor shortages, and COVID-19 related employee absences and the Company delivered less than 40% of sales during June, July, and August.

In fiscal 2021, approximately 52% of the Company's total sales were delivered in June, July, and August.

The Company anticipates that the traditional seasonal peak will return when COVID-19 and supply chain disruptions normalize.

Shipments during peak weeks in July and August can be as great as six times the level of shipments in the winter months.

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During summer months, temporary labor is hired to supplement experienced warehouse and distribution personnel.

More than 90% of the Company's freight is provided by third-party carriers.

More than 90% of the Company's

freight is provided by third-party carriers.

Utilizing third-party carriers is an effective method of addressing the significant seasonal peak in summer and moderating excess capacity issues in the slow season.

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Competitors typically fall into two categories (1) furniture manufacturers that sell to dealers which re-sell furniture to the end user, and (2) dealers that purchase product from these manufacturers and re-sell to educational customers.

The manufacturers that Virco competes with include Artco-Bell, KI Inc., Smith System (owned by Steelcase), V/S America, Scholarcraft, Academia, Alumni, Columbia, Paragon, SICO, Learniture (owned by School Outfitters) and Hon ("HNI").

Our competitors that purchase and re-sells furniture include School Outfitters, School Specialty ("SCHS"), MeTEOR (formerly Contrax), and Hertz.

The manufacturers that Virco competes with include Artco-Bell, KI Inc., Smith System (owned by Steelcase), V/S America, Scholarcraft, Academia, Alumni, Columbia, Moore Co., Paragon, SICO, Learniture (owned by School Outfitters) and Hon ("HNI").

Our competitors that purchase and re-sell furniture include School Outfitters, School Specialty ("SCHS"), MeTEOR (formerly Contrax), and Hertz.

There are numerous catalogers, internet resellers, and smaller local education furniture dealers that sell into local markets.

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Although management prefers to compete on the value of Virco products and services, when market conditions warrant, the Company will compete based on direct prices and may reduce its prices to build or maintain its market share.

Sales order backlog at January 31, 2021, totaled approximately $20.9 million and approximated eight weeks of sales, compared to $20.7 million at January 31, 2020.

Sales order backlog at January 31, 2022, totaled approximately $40.8 million and approximated 16 weeks of sales, compared to $20.9 million at January 31, 2021.

Substantially all of the backlog will ship during the fiscal year ending January 31, 2023.

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The Company adopted a number of measures in response to the COVID-19 pandemic.

Our sales force has been working remotely and as a general matter only physically called on school sites when specifically invited by the district.

The Company is considered to be an essential manufacturer under the California public health order issued in March 2020, and with the exception of a two brief closures of our Torrance operations, all facilities in California and Arkansas have been operating.

However, we are operating our Torrance manufacturing and distribution facility on a voluntary basis to give employees the flexibility to remain at home with children who are out of school or for other personal reasons as they deem necessary.

In addition, office employees and others who can work from home continue to do so.

Since fiscal 2021 our sales force has been working remotely and as a general matter only physically called on school sites when specifically invited by the district.

The Company is considered to be an essential manufacturer under the California public health order issued in March 2020, and with the exception of a two brief closures of our Torrance operations that occurred during fiscal 2021, all facilities in California and Arkansas operated during fiscal years 2021 and 2022.

Environmental Compliance

Virco is subject to numerous federal, state and local environmental laws and regulations in the various jurisdictions in which it operates that (a) govern operations that may have adverse environmental effects, such as the discharge of materials into the environment, as well as handling, storage, transportation and disposal practices for solid and hazardous wastes, and (b) impose liability for response costs and certain damages resulting from past and current spills, disposals or other releases of hazardous materials.

In this context, Virco works diligently to remain in compliance with all such environmental laws and regulations as these affect the Company's operations.

Moreover, Virco has enacted policies for recycling and resource recovery that have

earned repeated commendations, including:

In this context, Virco works diligently to remain in compliance with all such environmental laws and regulations as

these affect the Company's operations.

Moreover, Virco has enacted policies for recycling and resource recovery that have earned repeated commendations, including:

recognition by the California Department of Resources Recycling and Recovery ("CalRecycle") in 2012 and 2011 as a Waste Reduction Awards Program (WRAP) honoree;

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Should such eventualities occur, the Company records liabilities for remediation costs when remediation costs are probable and can be reasonably estimated.

See " Item 1A.

Risk Factors:

We could be required to incur substantial costs to comply with environmental requirements.

Violations of, and liabilities under, environmental laws and regulations may increase our costs or require us to change our business practices.

We could be required to incur substantial costs to comply with environmental requirements and other legal requirements." Violations of, and liabilities under, environmental laws and regulations may increase our costs or require us to change our business practices.

Financial Information About Industry Segment and Geographic Areas

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Available Information

Virco files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”).

Virco files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”).

Stockholders may read and copy this information at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C.

Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Stockholders may also obtain copies of this information by mail from the Public Reference Room at the address set forth above, at prescribed rates.

The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers like Virco who file electronically with the SEC.

The address of that site is www.sec.gov.

The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers such as Virco that file electronically with the SEC.

The address of that website is www.sec.gov.

In addition, Virco makes available to its stockholders, free of charge through its Internet website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed, or furnished pursuant to, Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”), as soon as reasonably practicable after Virco electronically files such material with, or furnishes it to, the SEC.

The address of that site is www.virco.com.

The inclusion of our website address in this report does not include or incorporate by reference into this report any information on, or accessible through, our website.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business