What changed in this filing

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Item 1. Financial Statements

2022-09-13 compared with 2022-06-10 · 133 added, 64 removed, 317 unchanged (38% of the section changed)

51 unchanged sentences

Authorized 25,000,000 shares, $ 0.01 par value;

issued and outstanding 16,102,023 shares at 4/30/2022 and 1/31/2022 and 15,918,642 at 4/30/2021

issued and outstanding 16,210,985 shares at 7/31/2022 and 16,102,023 at 1/31/2022 and 7/31/2021

Additional paid-in capital 120,684 120,492 119,985

4 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Operations

Unaudited Condensed Consolidated Statements of Income

Three months ended

5 unchanged sentences

Selling, general and administrative expenses 20,671 16,251

Operating loss ( 4,744 ) ( 4,295 )

Operating income 11,174 6,068

Unrealized loss on investment in trust account 305 —

Pension expense 196 724

Interest expense 698 359

Loss before income taxes ( 5,366 ) ( 5,094 )

Income tax benefits ( 282 ) ( 1,185 )

Net loss $ ( 5,084 ) $ ( 3,909 )

Net loss per common share:

Income before income taxes 9,975 4,985

Income tax expense 295 1,225

Net income $ 9,680 $ 3,760

Net income per common share:

Basic $ 0.60 $ 0.24

4 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Comprehensive Loss

Unaudited Condensed Consolidated Statements of Operations

Six months ended

7/31/2022 7/31/2021

(In thousands, except per share data)

Net sales $ 114,881 $ 87,389

Costs of goods sold 73,329 57,382

Gross profit 41,552 30,007

Selling, general and administrative expenses 35,122 28,234

Operating income 6,430 1,773

Unrealized loss on investment in trust account 305 —

Pension expense 391 1,230

Interest expense 1,125 652

Income (loss) before income taxes 4,609 ( 109 )

Income tax expense 13 40

Net income (loss) $ 4,596 $ ( 149 )

Net income (loss) per common share:

Basic $ 0.29 $ ( 0.01 )

Diluted $ 0.29 $ ( 0.01 )

Weighted average shares of common stock outstanding:

Basic 16,071 15,872

Diluted 16,071 15,872

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Comprehensive Income

Three months ended

1 unchanged sentence

(In thousands)

Net loss $ ( 5,084 ) $ ( 3,909 )

Net income $ 9,680 $ 3,760

Other comprehensive income:

Pension adjustments (net of tax expense of $ 0 and $ 116 at April 30, 2022 and 2021, respectively)

Net comprehensive loss $ ( 4,949 ) $ ( 3,582 )

Pension adjustments (net of tax expense of $ 0 and $ 803 at July 31, 2022 and 2021, respectively)

Net comprehensive income $ 9,815 $ 6,020

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Comprehensive Income

Six months ended

7/31/2022 7/31/2021

(In thousands)

Net income (loss) $ 4,596 $ ( 149 )

Other comprehensive income:

Pension adjustments (net of tax expense of $ 0 and $ 919 at July 31, 2022 and 2021, respectively)

Net comprehensive income $ 4,866 $ 2,438

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Cash Flows

Three months ended

Six months ended

7/31/2022 7/31/2021

1 unchanged sentence

Operating activities

Net loss $ ( 5,084 ) $ ( 3,909 )

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss) $ 4,596 $ ( 149 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 2,259 2,289

Non-cash lease expense ( 126 ) ( 90 )

Non-cash lease benefits ( 265 ) ( 192 )

Provision for doubtful accounts 35 46

2 unchanged sentences

Stock-based compensation 406 506

Defined pension plan settlement — 220

Amortization of net actuarial loss for pension plans 270 885

Non-cash unrealized loss on investment 305 —

Changes in operating assets and liabilities:

8 unchanged sentences

Capital expenditures ( 1,524 ) ( 963 )

Purchases of marketable securities in trust accounts ( 4,856 ) —

Proceeds from sale of marketable securities in trust accounts 2,112 —

Proceeds for surrendering life insurance policies 2,744 110

Net cash used in investing activities ( 1,524 ) ( 853 )

3 unchanged sentences

Payment on deferred financing costs ( 200 ) —

Tax withholding payments on share-based compensation ( 213 ) ( 176 )

Net cash provided by financing activities 22,314 9,649

Net (decrease) increase in cash ( 820 ) 154

Net increase in cash 820 239

Cash at beginning of period 1,359 402

2 unchanged sentences

Unaudited Consolidated Statements of Changes in Stockholders' Equity

Three-Month Period Ended April 30, 2022

Three-Month Period Ended July 31, 2022

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity

Balance at May 1, 2022 16,102,023 $ 161 $ 120,745 $ ( 72,262 ) $ ( 5,894 ) $ 42,750

Net income — — — 9,680 — 9,680

Cash dividends — — — — — —

Pension adjustments, net of tax effect of $ 0

— — — — 135 135

Shares vested and others 108,962 1 ( 214 ) — — ( 213 )

Stock compensation expense — — 153 — — 153

Balance at July 31, 2022 16,210,985 $ 162 $ 120,684 $ ( 62,582 ) $ ( 5,759 ) $ 52,505

Three-Month Period Ended July 31, 2021

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity

Balance at May 1, 2021 15,918,642 $ 159 $ 119,908 $ ( 55,951 ) $ ( 13,258 ) $ 50,858

Net income — — — 3,760 — 3,760

Cash dividends — — — — — —

Pension adjustments, net of tax effect of $ 803

— — — — 2,260 2,260

Shares vested and others 183,381 2 ( 176 ) — — ( 174 )

Stock compensation expense — — 253 — — 253

Balance at July 31, 2021 16,102,023 $ 161 $ 119,985 $ ( 52,191 ) $ ( 10,998 ) $ 56,957

Six-Month Period Ended July 31, 2022

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity

Balance at February 1, 2022 16,102,023 $ 161 $ 120,492 $ ( 67,178 ) $ ( 6,029 ) $ 47,446

Net loss — — — ( 5,084 ) — ( 5,084 )

Net income — — — 4,596 — 4,596

Cash dividends — — — — — —

3 unchanged sentences

Stock compensation expense — — 406 — — 406

Balance at April 30, 2022 16,102,023 $ 161 $ 120,745 $ ( 72,262 ) $ ( 5,894 ) $ 42,750

Three-Month Period Ended April 30, 2021

Balance at July 31, 2022 16,210,985 $ 162 $ 120,684 $ ( 62,582 ) $ ( 5,759 ) $ 52,505

Six-Month Period Ended July 31, 2021

In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity

6 unchanged sentences

Stock compensation expense — — 506 — — 506

Balance at April 30, 2021 15,918,642 $ 159 $ 119,908 $ ( 55,951 ) $ ( 13,258 ) $ 50,858

Balance at July 31, 2021 16,102,023 $ 161 $ 119,985 $ ( 52,191 ) $ ( 10,998 ) $ 56,957

See accompanying notes to unaudited condensed consolidated financial statements.

Notes to unaudited Condensed Consolidated Financial Statements

April 30, 2022

July 31, 2022

Basis of Presentation

4 unchanged sentences

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Operating results for the three months ended April 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2023.

Operating results for the three months and six months ended July 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2023.

The balance sheet at January 31, 2022 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.

12 unchanged sentences

Second, many customers during this period are educational institutions and government entities, which tend to pay accounts receivable slower than commercial customers.

For the three months ended April 30, 2022, management believes that the traditional peak season has been and will continue to be impacted by economic conditions related to supply chain disruption and COVID 19.

The Company is experiencing supply chain disruptions for raw materials.

For the three and six months ended July 31, 2022, management believes that the traditional peak season has been and will continue to be impacted by economic conditions related to supply chain disruption and COVID 19, although not as severely as in the prior year.

The Company continues to experience supply chain disruptions for raw materials.

In addition, the Company's customers are experiencing supply chain disruption impacting the completion of new school construction and renovation.

4 unchanged sentences

useful lives of property, plant and equipment;

liabilities under pension, warranty, self-insurance and environmental claims;

liabilities under pension, warranty and self-insurance;

and the accounts receivable allowance for doubtful accounts.

Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after April 30, 2022, including those resulting from the continuing impacts of the COVID-19 pandemic and supply chain disruption, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after July 31, 2022, including those resulting from the continuing impacts of the COVID-19 pandemic and supply chain disruption, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

New Accounting Pronouncements

3 unchanged sentences

ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The adoption date, as modified by the recently issued ASU 2019-10, will be for the fiscal year beginning after December 15, 2022 and interim periods therein.

The adoption date, as modified by ASU 2019-10, will be for the fiscal year beginning after December 15, 2022 and interim periods therein.

The Company is currently evaluating the effect the standard will have on the consolidated financial statements and related disclosures.

26 unchanged sentences

The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.

The following table presents a breakdown of the Company’s inventories as of April 30, 2022, January 31, 2022 and April 30, 2021:

The following table presents a breakdown of the Company’s inventories as of July 31, 2022, January 31, 2022 and July 31, 2021:

7/31/2022 1/31/2022 7/31/2021

12 unchanged sentences

The quantitative information regarding our leases is as follows:

Three-Months Ended

Three Months Ended Six Months Ended

7/31/2022 7/31/2021 7/31/2022 7/31/2021

10 unchanged sentences

Weighted-average discount rate 6.38 % 6.40 %

Minimum future lease payments for operating leases in effect as of April 30, 2022, are as follows:

Minimum future lease payments for operating leases in effect as of July 31, 2022, are as follows:

Operating Lease

For the year ending January 31, (in thousands)

Remaining of 2023 $ 2,829

Remaining balance of lease payments $ 15,462

35 unchanged sentences

2, although there are uncertainties there within, such as raw material costs and supply chain challenges.

The Company was in compliance with its debt covenants as of April 30, 2022.

The Company was in compliance with its debt covenants as of July 31, 2022.

In addition to the financial covenants, the Restated Credit Agreement provides for customary events of default, subject to certain cure periods and other limitations.

2 unchanged sentences

The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season.

Approximately $ 11,699,000 was available for borrowing as of April 30, 2022.

The interest rate as of April 30, 2022 was 5.25 %.

Approximately $ 37,498,000 was available for borrowing as of July 31, 2022.

The interest rate as of July 31, 2022 was 7.25 %.

The Company also incurs a fee on the unused portion of the revolving line of credit at a rate of 0.375 %.

Management believes that the carrying value of debt approximated fair value at April 30, 2022, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

Management believes that the carrying value of debt approximated fair value at July 31, 2022, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized.

7 unchanged sentences

During the fourth quarter of the year ended January 31, 2022, based on this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined the realization of a majority of the net deferred tax assets no longer met the more likely than not criteria and a valuation allowance was recorded against the majority of the net deferred tax assets.

Valuation allowances of $ 10,099,000 , $ 11,412,000 and $ 996,000 as of April 30, 2022, January 31, 2022 and April 30, 2021, respectively, are needed for federal deferred tax assets and certain state net operating loss carryforwards to reduce the carrying amount of deferred tax assets to an amount that is more-likely-than-not to be realized.

For the first quarter ended April 30, 2022 and 2021, the effective tax rates were 5.3 % and 23.3 %, respectively.

The change in effective tax rates for the three months ended April 30, 2022 was primarily due to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended April 30, 2022.

Effective tax rate for the first quarter ended April 30, 2021 was primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

The January 31, 2017 and subsequent years remain open for examination by the IRS and state tax authorities.

Valuation allowances of $ 9,241,000 , $ 11,412,000 and $ 1,144,000 as of July 31, 2022, January 31, 2022 and July 31, 2021, respectively, are needed for federal deferred tax assets and certain state net operating loss carryforwards to reduce the carrying amount of deferred tax assets to an amount that is more likely than not to be realized.

The Company has taken significant measures to return to profitability, order rates for the first six months of the year were favorable, and the second quarter and year-to-date results are showing significant improvement compared to the prior year.

Despite these improvements the Company is still operating at a cumulative twelve quarter operating loss at July 31, 2022.

If the current favorable trends in operating income continue through the balance of the year, the Company will utilize a material portion of the net operating losses and will re-evaluate the balance of the valuation allowance on a quarterly basis.

For the three months ended July 31, 2022 and 2021, the effective income tax rates were 3.0 % and 24.6 %, respectively.

For the six months ended July 31, 2022 and 2021, the effective income tax rates were 0.3 % and ( 36.7 )%, respectively.

The change in effective tax rates for the three and six months ended July 31, 2022, was primarily due to the recording of a valuation allowance needed for federal deferred tax assets and certain state net operating loss carryforwards which commenced in the fourth quarter of fiscal year ended January 31, 2022 and continued through the period ended July 31, 2022.

The effective tax rate for the three and six months ended July 31, 2021 was primarily due to the change in forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

The January 31, 2017 and subsequent fiscal years remain open for examination by the IRS and state tax authorities.

The Company is not currently under any state examination.

The Company is currently under IRS examination for its fiscal year ended January 31, 2016 Federal tax return.

Net loss per Share

Three Months Ended

Net Income (loss) per Share

Three Months Ended Six Months Ended

7/31/2022 7/31/2021 7/31/2022 7/31/2021

(In thousands, except per share data)

Net loss $ ( 5,084 ) $ ( 3,909 )

Net income (loss) $ 9,680 $ 3,760 $ 4,596 $ ( 149 )

Weighted average shares of common stock outstanding 16,108 15,920 16,071 15,872

1 unchanged sentence

Totals 16,108 15,929 16,071 15,872

Net loss per share - basic $ ( 0.32 ) $ ( 0.25 )

Net loss per share - diluted (a) $ ( 0.32 ) $ ( 0.25 )

(a) At April 30, 2022 and 2021, approximately 169,000 and 155,000 shares of common stock equivalents were excluded from the computation of diluted net loss per share, as the effect would be anti-dilutive since the Company reported a net loss.

Net income (loss) per share - basic $ 0.60 $ 0.24 $ 0.29 $ ( 0.01 )

Net income (loss) per share - diluted (a) $ 0.60 $ 0.24 $ 0.29 $ ( 0.01 )

(a) For periods ended July 31, 2022, there were 0 dilutive shares of common stock equivalent included in the computation of net income per share.

For the six-month period ended July 31, 2021, approximately 1,500 shares of common stock equivalents were excluded in the computation of diluted net loss per share, as the effect would be anti-dilutive since the Company reported a net loss.

Stock-Based Compensation

1 unchanged sentence

The Company's two stock incentive plans are the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan”).

Under the 2019 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards.

Restricted stock units and awards granted under the

2019 Plan are expensed ratably over the vesting period of the awards.

Under the 2019 Plan, the Company may grant an aggregate of up to 1,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards.

Restricted stock units and awards granted under the 2019 Plan are expensed ratably over the vesting period of the awards.

The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted.

During the three-month period ended April 30, 2022, the Company granted 0 awards, vested 0 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of April 30, 2022, there were approximately 608,435 shares available for future issuance under the 2019 Plan.

The Board of Directors has approved an increase in the number of shares available for grant under the 2019 Plan from 1,000,000 to 2,000,000 shares, which increase is subject to approval of the Company’s stockholders at the upcoming 2022 Annual Meeting of Stockholders.

Under the 2011 Plan, the Company may grant an aggregate of 2,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards.

During the six-month period ended July 31, 2022, the Company granted 0 awards, vested 114,470 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of July 31, 2022, there were approximately 608,435 shares available for future issuance under the 2019 Plan.

Under the 2011 Plan, the Company was originally allowed to grant an aggregate of up to 2,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards.

Restricted stock units and awards granted under the 2011 Plan are expensed ratably over the vesting period of the awards.

The 2011 Plan expired in 2021 and no new awards may be made under the 2011 Plan, although existing awards will remain outstanding in accordance with their terms.

There were no restricted stock awards granted or vested under the 2011 Plan during the three-month period ended April 30, 2022.

During the three months ended April 30, 2022 and 2021, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $ 55,000 and $ 198,000 , respectively.

As of April 30, 2022, there was $ 908,000 of unrecognized compensation expense related to unvested restricted stock units and/or awards, which is expected to be recognized over a weighted average period of approximately 3 years.

The 2011 Plan expired in 2021 and no new awards may be made under the 2011 Plan.

During the six-month period ended July 31, 2022, the Company vested 119,200 shares according to their terms and forfeited 0 shares under the 2011 Plan.

During the three months ended July 31, 2022, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $ 37,000 and $ 116,000 , respectively.

During the three months ended July 31, 2021, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $ 55,000 and $ 198,000 , respectively.

During the six months ended July 31, 2022, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $ 92,000 and $ 314,000 , respectively.

During the six months ended July 31, 2021, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $ 110,000 and $ 396,000 , respectively.

As of July 31, 2022, there was $ 755,000 of unrecognized compensation expense related to unvested restricted stock units and/or awards, which is expected to be recognized over a weighted average period of approximately 2 years.

Retirement Plans

4 unchanged sentences

As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2022, benefit accruals under this plan were frozen since December 31, 2003.

The net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2022 and 2021 were as follows:

The net periodic pension cost for the Pension Plan and the VIP Plan for the three and six months ended July 31, 2022 and 2021 were as follows:

Combined Employee Retirement Plans

Three Months Ended

Three Months Ended Six Months Ended

7/31/2022 7/31/2021 7/31/2022 7/31/2021

(in thousands)

$ — $ — $ — $ —

Interest cost 299 280 597 561

3 unchanged sentences

Recognized net actuarial loss 134 442 268 885

$ 196 $ 724 $ 391 $ 1,230

401(k) Retirement Plan

2 unchanged sentences

The plan includes Virco stock as one of the investment options.

At April 30, 2022 and 2021, the plan held 1,165,985 shares and 970,632 shares of Virco stock, respectively.

For the three months ended April 30, 2022 and 2021, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 330,000 and $ 184,000 , respectively.

At July 31, 2022 and 2021, the plan held 1,221,095 shares and 991,899 shares of Virco stock, respectively.

For the three months ended July 31, 2022 and 2021, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 322,000 and $ 207,000 respectively.

For the six months ended July 31, 2022 and 2021, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 652,000 and $ 391,000 respectively.

Warranty Accrual

6 unchanged sentences

The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred.

The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2022 and 2021:

Three Months Ended

The following is a summary of the Company’s warranty-claim activity for the three and six months ended July 31, 2022 and 2021:

Three Months Ended Six Months Ended

7/31/2022 7/31/2021 7/31/2022 7/31/2021

11 unchanged sentences

Delivery Costs

For the three months ended April 30, 2022 and 2021, shipping and classroom delivery costs of approximately $ 3,254,000 and $ 2,921,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the three months ended July 31, 2022 and 2021, shipping and classroom delivery costs of approximately $ 7,129,000 and $ 5,112,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the six months ended July 31, 2022 and 2021, shipping and classroom delivery costs of approximately $ 10,383,000 and $ 8,033,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Subsequent Events

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-Q

Item 1. Financial Statements