What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-04-28 compared with 2022-04-28 · 144 added, 132 removed, 276 unchanged (50% of the section changed)

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Virco started as a local manufacturer of chairs and desks for Los Angeles-area schools, and over the years has become the largest manufacturer and supplier of moveable educational furniture and equipment for the preschool through 12th grade market in the United States.

The Company manufactures a wide assortment of products, including mobile tables, mobile storage equipment, desks, computer furniture, chairs, activity tables, folding chairs and folding tables.

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

As the market for school furniture has evolved, the Company has developed significant selling and service capabilities.

The Company employs interior designers, CAD layout specialists, and project management specialists to support its direct sales force.

These resources utilize proprietary PlanSCAPE® software which enables our selling and service professionals to provide project management from design and layout to full-service classroom delivery and set up.

The Company manufactures a wide assortment of products, including mobile tables, mobile storage equipment, student and teacher desks, technology tables, chairs, activity tables, folding chairs and

folding tables.

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

These include the best-selling ZUMA Series;

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To complement our Torrance-based operations, Virco owns three manufacturing and distribution facilities in Conway, Arkansas.

The primary facility is located on 100 acres of land in Conway, Arkansas, containing 1,200,000 sq.

of manufacturing, warehousing, and office space.

The primary facility is located on 100 acres of land in Conway, Arkansas, containing 1.2 million square feet of manufacturing, warehousing, distribution, and office space.

With high-density storage systems, 70 dock doors dedicated to outbound freight, and substantial yard capacity to store and stage trailers, this facility supports Virco's ability to handle increased sales during our peak summer delivery season and enhances the efficiency with which orders are filled.

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

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.

To address the needs of lower elementary classrooms, adjustable-height low legs were introduced for the 5000 series activity tables as well.

Providing color choices is also important to our customers.

As such, we added additional colors to our edge banding offerings for our various table lines.

Because mobility is essential in dynamic classrooms, we introduced our Tetra Series Student desk with casters.

Keeping up with technology, we updated our power and data ports to better accommodate modern devices.

Looking beyond our K-12 market, the Virco Tilt-Top Training Table provides a simple and effective solution to setting up and storing multi-use tables.

The fiscal year ended January 31, 2021 ("fiscal 2021") was unique due to the unprecedented circumstances of the global COVID-19 pandemic.

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.

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.

Rather, we focused on meeting current customer needs by utilizing our existing product offerings that are well-suited to best help schools bring back students for in person learning.

These included 785 Series open front desks, ZUMA Series student desks as well as the 9400 Series and 3400 Series combo desks.

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.

Over the past few years, Virco has continued to leverage our most popular classroom products while also launching new products.

Many of today’s modern classrooms are focusing on creating more dynamic, active, and flexible environments for their 21st Century learners.

Virco has continued to innovate around its line of Healthy Movement furniture with flexible seating that takes movement and choice to a new level.

The Room to Move ("R2M") Collection, introduced in Fiscal 2018, is based on the idea that today’s classrooms are active, dynamic places where students are often given room to move - empowering them with choices of where to sit, how to sit and even when to sit.

The Floor Rocker (available in Analogy, Sage, and ZUMA styles) provides a safe, durable, and ergonomic option for floor seating.

The Choose to Move (" C2M") 4-Leg Chair won the EDspaces Innovation in Seating Award and offers an empowering new twist on flexible seating with a patent-pending mode selector that allows the same chair to easily transform from fixed to active seating.

Like the C2M chair, the R2M Mobile Task Chair offers movement in all directions - front-to-back and side-to-side - as well as the mobility and adjustability of a task chair.

All these products enable healthy movement and flexibility in the classroom while blending with existing Virco furniture.

Given the success of our R2M products, we continue to support the collection with additions such as the Sage Floor Rocker with a padded seat which adds additional comfort and design appeal to the Virco Floor Rocker line.

Our newest addition, the R2M Series Sit-to-Stand Workstation, adjusts up and down with a pneumatic height adjustment lever, easily transitioning from a sitting to standing position.

Available in 3 styles - including Rectangle, Wedge, and Corner – along with multiple storage accessories, these mobile workstations open the classroom to new possibilities.

Virco’s 4000 and 5000 Series collaborative activity tables continue to fill the need for active, flexible spaces now offering expanded shapes and sizes as well as a Floor Table Conversion Kit for the 4000 Series tables.

The floor table provides a solution for allowing students to select flexible seating, including having a stable surface while sitting low to the ground.

The 5000 Series also now includes stand-up height options to meet the need of more flexibility and choice in today’s classrooms.

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.

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

Our newest collection, the Topaz Series TM , was designed by Peter Glass and Bob Mills with teachers in mind.

Combining sleek design with intelligent functionality to support modern learning environments, the collection offers a full classroom line that includes 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.

As of January 31, 2023, the Company employed approximately 800 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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In response to these changes, the Company has expanded both the products and the services it provides to its educational customers.

Now, in addition to buying furniture FOB (Freight On Board) Factory, customers can purchase furniture for delivery to warehouses and school sites and can also purchase full-service furniture delivery that includes the delivery of the furniture in classrooms.

Now, in addition to buying furniture Freight On Board ("FOB") Factory, customers can purchase furniture for delivery to warehouses and school sites and can also purchase full-service furniture delivery that includes the delivery of the furniture in classrooms.

Because the Company has been aggressively developing new furniture lines to enhance the range of products it manufactures - and by purchasing furniture and equipment from other companies for re-sale with Virco products - the Company is now able to provide “one-stop shopping” for all furniture, fixtures, and equipment ("FF&E") needs in our educational market.

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In addition, the Company also sells to wholesalers, distributors, internet, and catalog retailers that serve these same markets.

Sales, Marketing and Distribution

Virco serves its customers through a well-trained, nationwide sales and support team, as well as a dealer network.

In addition, Virco has a Corporate Sales Group to pursue international sales, wholesalers, mail order accounts and national chains where management believes it would be more efficient to have a single sales representative or group approach, as they tend to have needs that transcend the geographic boundaries established for Virco's local accounts.

Virco's educational product line is marketed through what management believes to be the largest direct sales force of any education furniture manufacturer.

The Company's approach to servicing its customer base is very flexible and is tailored to best meet the needs of individual customers and regions.

When considered to be most efficient, the sales force will call directly upon school business officials, who may include purchasing agents or individual school principals where site-based management is practiced.

Where it is considered advantageous, the Company will use large exclusive distributors and full-service dealer partners.

The Company's direct sales force is considered to be an important competitive advantage over competitors who rely primarily upon dealer networks for distribution of their products.

Virco's sales force is supported by a project management team which includes interior designers, CAD layout specialists, project management specialists, purchasing specialists, and field service supervisors.

The project management team and the sales force utilize the Company's proprietary PlanSCAPE® software when preparing complete package solutions for the FF&E segment of bond-funded public-school construction projects.

The PlanSCAPE® software supports classroom by classroom product selection, product specification, pricing, furniture delivery including delivery to and turnkey classroom setup.

PlanSCAPE® software also enables the entire Virco sales force to prepare quotations for less complicated projects.

A significant portion of Virco's business is awarded through annual bids with school districts or other buying groups used by school districts.

These bids are typically valid for one year.

Many contracts contain penalty, performance, and debarment provisions that can result in debarment for several years, a financial penalty, or calling of performance bonds.

Sales of commercial and contract furniture are made throughout the United States by distributorships and by Company sales representatives who service the distributorship network.

Virco representatives call directly upon state and local governments, convention centers, individual hospitality venues, and places of worship.

This market includes colleges and universities, preschools, private schools, and office training facilities, which typically purchase furniture through commercial channels.

The Company sells to thousands of customers and no single customer represented more than 10 percent of the Company's consolidated net sales in fiscal 2023.

Significant purchases of furniture using public funds often require annual bids or some form of “authorization” to purchase goods or services from a vendor.

This authorization can include state contracts, local and national buying groups, or local school districts that “piggyback” on the bid of a larger district.

In virtually all cases, purchase orders and payments are processed by the individual school districts, even though the contract pricing may be determined by a state contract, national or local buying group, or consortium of school districts.

Schools usually can purchase from more than one contract or purchasing vehicle if they are participants in buying groups as well as being eligible for a state or national contract.

Virco is the exclusive supplier of movable classroom furniture for one nationwide purchasing organization under which many of our customers price their furniture.

See “ Item 1A.

Risk Factors:

The majority of our sales are priced through one contract, under which we are the exclusive supplier of classroom furniture .” Sales priced under this contract represented approximately 64% of sales in fiscal 2023 and 69% of sales in fiscal 2022.

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-year extensions at the sole discretion of the purchasing organization extending through 2026 if both options are exercised.

The Company is currently in the first of the available two-year extensions.

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.

The Company’s education customers typically do not have logistic capabilities and approximately 80% of sales are FOB destination and include freight to customer.

Approximately 50% of sales are “full service” and are FOB classroom and include turnkey set-up.

Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics and service to the ultimate customer.

More than 90% of the Company’s freight is supplied 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.

Reliance on third-party carriers can expose the Company to freight rate volatility, fuel surcharges, and to capacity constraints in the transportation industry.

Historically, the Company has been able to obtain adequate capacity from freight vendors to service the summer season.

Virco has a seasoned team of installation and project management professionals located throughout the country.

These resources work with local agencies to provide classroom delivery and set up as required by customers.

Manufacturing and Distribution

Virco serves its customers through a well-trained, nationwide sales and support team.

Virco's educational product line is marketed through an extensive direct sales force, as well as through a dealer network.

In addition, Virco has a Corporate Sales Group to pursue international business wholesalers, mail order accounts and national chains.

The Company also has an array of support services, including complete package solutions for the FF&E line item on school budgets;

computer-assisted layout planning;

transportation planning;

and product delivery.

Virco also now offers registered customers the ability to purchase products online through our shop.virco.com website.

Another important element of Virco's business model is the Company's emphasis on developing and maintaining key manufacturing, assembly, distribution, and service capabilities.

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Warehouses have substantial staging areas combined with a large number of dock doors to support the seasonal peak in shipments during summer months.

In years subsequent to China entering the World Trade Organization, many furniture manufacturers closed their domestic manufacturing facilities and began importing increasing quantities of furniture from international sources.

In the years subsequent to China entering the World Trade Organization in 2001, many U.S.

furniture manufacturers closed their domestic manufacturing facilities and began importing increasing quantities of furniture from international sources.

The Company’s primary competition evolved from manufacturers of furniture to importers and distributers of furniture.

During this same period, Virco elected to significantly reduce its work force, but retain its domestic factory locations.

The Company believes that its domestic manufacturing capabilities are a significant strength.

As recent global supply chain challenges have led to “reshoring, nearshoring, and friendshoring” of production or other modifications to supply chains, Virco has a comprehensive, established, and fully functioning manufacturing footprint in the United States.

The Company has effectively used product selection, color selection, and dependable execution of delivery to customers to enhance its market position.

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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 2023, the Company started to return to the traditional seasonality and delivered approximately 47% of annual sales in 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.

The Company anticipates that the traditional seasonal peak will return when COVID-19 and global 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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Principal Products

Virco produces the broadest line of furniture for the K-12 market of any manufacturer in the United States.

Virco produces the broadest line of furniture for the K-12 school market of any manufacturer in the United States.

By supplementing products manufactured by Virco with products from other manufacturers, Virco provides a comprehensive product assortment that covers substantially all products and price points that are traditionally included on the FF&E line item on a new school project or school budget.

Virco also provides a variety of products for preschool markets and has developed products that are targeted for college, university, and corporate learning center environments.

The Company has an ambitious and on-going product development program featuring products developed in-house as well as products developed with accomplished designers.

The Company has an ambitious and ongoing product development program featuring products developed in house as well as products developed with accomplished designers.

The Company's primary furniture lines are constructed of tubular metal legs and frames, combined with wood and plastic tops, plastic seats and backs, upholstered seats and backs, and upholstered rigid polyethylene and polypropylene shells.

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steel-frame rockers and floor rockers.

The Sage™ line, originally designed to serve students in college, university and other adult education settings - and on high school campuses - now offers a 13” and a 15” 4-leg chair and a corresponding pair of cantilever chairs for younger or smaller students;

Virco has continued to innovate around its line of healthy movement furniture with the Room to Move ("R2M") collection of flexible seating that take movement and choice to a new level.

The R2M Collection is based on the idea that today’s classrooms are active, dynamic places where students are often given room to move – empowering them with choices of where to sit, how to sit and even when to sit.

The Floor Rocker provides a safe, durable and ergonomic option for floor seating.

The Choose to Move ("C2M") 4-leg Chair, winner of the EDspaces Innovation in Seating Award, offers an empowering new twist on flexible seating with a mode selector that allows the same chair to easily transform from fixed to active seating.

Like the C2M Chair, the R2M Mobile Task Chair offers movement in all directions – front-to-back and side-to-side – as well as the mobility and adjustability of a task Chair.

All R2M seating is offered in our ZUMA®, Sage™ and Analogy® Series.

Sage™ line, originally designed to serve students in college, university, and other adult education settings - and on high school campuses - now offers a 13” and a 15” 4-leg chair and a corresponding pair of cantilever chairs for younger or smaller students;

there's also a selection of Sage rockers and floor rockers for K-12 applications and several tablet arm units.

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Civitas™ chairs and stools are intended for foodservice, libraries, media centers, circulation areas, and related areas where people gather.

Additional Virco seating alternatives range from 120, 121 and 122 Series stools to Analogy™ Series chairs by Peter Glass and Bob Mills.

The N2 Series was designed by Virco as a comprehensive, ergonomic seating line that specifically caters to the budget conscious consumer.

Additional Virco seating alternatives include the Parison Series for business, dining, and higher education;

120, 121 and 122 Series stools;

the N2 Series, which was designed as a comprehensive, ergonomic seating line that specifically caters to the budget conscious consumer.

Classic Series™ stack chairs and Martest 21® hard plastic seating models are popular choices in schools across America.

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Our 4000 and 5000 Series Activity Tables provide a broad range of shapes, sizes, and heights ideal for collaborative learning.

Virco’s TEXT® table collection for learning environments - designed by Peter Glass and Bob Mills- features heavy-gauge tubular steel and proven Virco construction for extended product life, and elliptical legs, swooping yokes and arched feet for exceptional elegance.

Virco’s TEXT® table collection for learning

environments - designed by Peter Glass and Bob Mills- features heavy-gauge tubular steel and proven Virco construction for extended product life, and elliptical legs, swooping yokes and arched feet for exceptional elegance.

Selected TEXT models can be equipped with a variety of technology-support and storage accessories.

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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.

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 media 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.

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Virco’s Makerspace tables are designed specifically for hands-on learning environments most commonly found in vocational classes, makerspace areas and STEM / STEAM centered education.

Virco also carries traditional folding tables, CT Series tables with a hand crank mechanism for top height adjustment, and office tables, as well as the computer tables and mobile tables described below.

COMPUTER FURNITURE - The TEXT ® and Tetra Series table collections described in the preceding paragraph provides an array of computer furniture choices for learning or business environments;

Virco's Flip-Top Technology tables and HWT (Hinged Wire Trough) Technology tables also deliver popular computer furniture solutions.

Future Access® computer tables come with an integral wire management panel and all rectangular models have a smooth post-formed front and rear edge.

Like our Future Access models, 8700 Series computer tables can be equipped with Virco's functional computing accessories, such as keyboard mouse trays, CPU holders and support columns for optional elevated shelves.

To address the demand for collaborative solutions in a computer lab environment, Virco added the Quarter Round 8700 Series Computer Table that allows multiple tables to be grouped together while maintaining a technology-based environment.

Designed for modern learning environments, Virco Butcher Block Tables feature thick-profile legs and a durable, hard maple surface with an easy to clean finish.

Virco also carries traditional folding tables and office tables, as well as the technology tables and mobile tables described below.

TECHNOLOGY TABLES - The TEXT ® and Tetra Series table collections described in the preceding paragraph provides an array of computer furniture choices for learning or business environments;

Virco's Flip-Top Technology tables and Hinged Wire Trough ("HWT") Technology tables also deliver popular computer furniture solutions.

The 5700 Series features the thick profile leg of the 5000 Series with integrated technology for a modern look.

The Plateau Office Solutions collection offers desks and workstations with technology-support capabilities, while the Plateau Library/Technology Solutions line has specialty tables and other products for computing applications.

Plateau Media Tables feature a TV mount for adding a TV screen as well as built-in USB and Power Ports so students and colleagues can easily exchange ideas and share content.

Virco offers Instructor Media Stations and Towers that include several options for media storage and presentation.

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

Many of our student desks offer stand-up height and adjustable height options to accommodate flexible classroom set-ups.

For teachers, principals, and district administrators - and for business environments - Virco offers an extensive range of Parameter® desks, returns and credenzas designed by Peter Glass and Bob Mills.

Textameter™ mobile workstations provide additional furniture choices for educators.

Designed with teachers in mind, the Topaz Series Teacher Desks combine sleek design with intelligent functionality to support modern learning environments.

ADMINISTRATIVE OFFICE FURNITURE - In addition to the Plateau® Office Solutions, Parameter®, and Textameter™ product lines, Virco manufactures a selection of desks, returns, bookcases and other items that employ the Company's flat metal forming capabilities.

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additional mobile cabinet models with a magnetic marker back are available.

ADA compliant Mobile Bench & Stool Tables were also introduced to the Virco line of mobile products to expand on our wheelchair accessible solutions.

ADA compliant Mobile Bench & Stool

Tables were also introduced to the Virco line of mobile products to expand on our wheelchair accessible solutions.

An array of Virco product lines includes mobile chairs for school settings and offices.

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Virco's ZUMA and ZUMAfrd™ products earned the distinction of being the first classroom furniture models to be certified by the GREENGUARD Children & Schools Program, now known as GREENGUARD Gold certification.

All of the models in the Company's most popular product lines - including ZUMA, Sage, Analogy™, 9000 Series, 5000 and 4000 Series Activity Tables, TEXT®, Core-a-Gator®, Parameter®, Plateau®, Tetra™ furniture models - are GREENGUARD-certified.

All of the models in the Company's most popular product lines - including ZUMA, Sage, Analogy™, 9000 Series, 5000 and 4000 Series Activity Tables, TEXT®, Core-a-Gator®, Parameter®, Plateau®, and Tetra™ furniture models - are GREENGUARD-certified.

Along with Virco's leadership relative to GREENGUARD-certified furniture, the Company also introduced the classroom furniture industry's first Take-Back program in, enabling qualifying schools, colleges, universities, and other organizations and customers to return selected out-of-service furniture components for recycling rather than sending these items to a landfill.

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 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.

None of the products from vendor partners accounted for more than 10% of consolidated net sales in fiscal 2022.

None of the products from vendor partners accounted for more than 10% of consolidated net sales in fiscal 2022 or 2023.

To complement Virco's extensive selection of furniture and equipment, we offer customers a variety of valuable services in connection with the purchase of Virco products;

revenues from these service levels are included in the purchase price of the furniture items.

In addition to giving customers the option of purchasing Virco products and making their own delivery arrangements, Virco provides three levels of delivery service.

The Company has a staff of interior designers to assist in designing engaging school environments, CAD layouts, our proprietary PlanSCAPE® software prepares detailed quotations and product specification along with detailed room-by-room installation plans, and project management for the delivery and set up of all capital acquisitions that fall under the FF&E line item of new school budget.

Approximately 50% of the Company’s revenues in fiscal 2023 included this level of service and support.

In addition to giving customers the option of purchasing Virco products utilizing our full-service offering, Virco provides two additional levels of delivery service.

When customers choose Standard Delivery - also known as tailgate delivery - the delivery driver is responsible for moving the customer's goods to the tailgate of the truck only;

therefore, the customer must have personnel on hand to unload the truck.

Virco also offers Inside Delivery (to an inside location), or Full-Service Delivery (delivered and placed in the classroom).

Virco's major customers include educational institutions, convention centers and arenas, hospitality providers, government facilities, and places of worship.

Virco also offers Inside Delivery (to an inside location).

The Company will sell furniture to dealers, distributors, and other resellers on FOB factory terms where the reseller provides service to the customer.

In the United States there are approximately 55,000,000 students along with approximately 7,000,000 teachers and support staff that can utilize Virco’s product offering.

Virco's major customers include public and private educational institutions, charter schools, convention centers and arenas, hospitality providers, government facilities, and places of worship.

No customer exceeded 10% of the Company’s net sales for fiscal years ended January 31, 2023 and January 31, 2022.

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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 2023, the cost of commodities remained volatile, but the volatility dampened noticeably compared to fiscal 2022.

Some commodities decreased in cost, but others increased, resulting in a net modest increase in costs.

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

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

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.

Subsequent to fiscal year end 2023, the Company is anticipating that the global sanctions on Russia and other geopolitical challenges may impact steel, plastic and fuel-related costs.

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.

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.

Cost for ocean freight moderated during fiscal 2023, and by the end of the year had returned to more normal levels.

While we currently don’t believe there will be a recurrence of material supply chain disruptions, 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 typically benefits from any decreases in raw material costs under the contracts described above.

Marketing and Distribution

Virco serves its customers through a well-trained, nationwide sales and support team, as well as a dealer network.

Virco's educational product line is marketed through what management believes to be the largest direct sales force of any education furniture manufacturer.

The Company's approach to servicing its customer base is very flexible and is tailored to best meet the needs of individual customers and regions.

Where it is considered advantageous, the Company will use large exclusive distributors and full-service dealer partners.

The Company's direct sales force is considered to be an important competitive advantage over competitors who rely primarily upon dealer networks for distribution of their products.

Virco's sales force is assisted by the Company's proprietary PlanSCAPE® software and experienced PlanSCAPE support team when preparing complete package solutions for the FF&E segment of bond-funded public-school construction projects.

PlanSCAPE software also enables the entire Virco sales force to prepare quotations for less complicated projects.

A significant portion of Virco's business is awarded through annual bids with school districts or other buying groups used by school districts.

These bids are typically valid for one year.

Many contracts contain penalty, performance, and debarment provisions that can result in debarment for several years, a financial penalty, or calling of performance bonds.

Sales of commercial and contract furniture are made throughout the United States by distributorships and by Company sales representatives who service the distributorship network.

Virco representatives call directly upon state and local governments, convention centers, individual hospitality venues, and places of worship.

This market includes colleges and universities, preschools, private schools, and office training facilities, which typically purchase furniture through commercial channels.

The Company sells to thousands of customers, and, as such no single customer represented more than 10 percent of the Company's consolidated net sales in fiscal 2022.

Significant purchases of furniture using public funds often require annual bids or some form of “authorization” to purchase goods or services from a vendor.

This authorization can include state contracts, local and national buying groups, or local school districts that “piggyback” on the bid of a larger district.

Schools usually can purchase from more than one contract or purchasing vehicle if they are participants in buying groups as well as being eligible for a state or national contract.

Virco is the exclusive supplier of movable classroom furniture for one nationwide purchasing organization under which many of our customers price their furniture.

See “ Item 1A.

Risk Factors:

Approximately 60% to 70% of our sales are priced

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.

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.

The Company’s education customers typically do not have logistic capabilities and more than 75% of sales are FOB destination and include freight to customer.

Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics to the ultimate customer.

More than 90% of the Company’s freight is supplied 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.

Reliance on third-party carriers can expose the Company to freight rate volatility, fuel surcharges, and to capacity constraints in the transportation industry.

Historically, the Company has been able to obtain adequate capacity from freight vendors to service the summer season.

The educational sales market is extremely seasonal.

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.

Historically, Virco ships approximately 50% of its annual revenue in the months of June, July, and August, and shipments of furniture during peak weeks in July and August can be six times greater than in the seasonally slow winter months.

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

In fiscal 2023, the Company started to return to the traditional seasonality and delivered approximately 47% of annual sales in June, July, and August.

Working Capital Requirements During Our “Peak” Summer Season

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Virco has historically enjoyed high levels of collectability on these accounts receivable due to the low-credit risk associated with such customers.

Nevertheless, due to the time differential between inventory build-up in anticipation of the peak season and the collection on accounts receivable throughout the peak season, the Company must rely on external sources of financing.

As a result of the seasonality of our business, our manufacturing capacity is dictated by the capacity requirement during the months of June, July and August.

Nevertheless, due to the

time differential between inventory build-up in anticipation of the peak season and the collection on accounts receivable throughout the peak season, the Company must rely on external sources of financing.

As a result of the seasonality of our business, our manufacturing and distribution capacity is dictated by the capacity requirement during the months of June, July, and August.

Because of this seasonality, factory utilization is lower during the slow season.

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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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If management overestimates any of these requirements, the Company may have to absorb higher storage, labor, and related costs, each of which may negatively affect the Company's results of operations.

On an on-going basis, management evaluates and adjusts its estimates, including those related to market demand, labor costs, and stocking inventory.

On an ongoing basis, management evaluates and adjusts its estimates, including those related to market demand, labor costs, and stocking inventory.

Moreover, management continually strives to improve its ability to correctly forecast the requirements of the Company's business during the peak season each year, based in part on annual contracts, which are in place and management's experience with respect to the market.

As part of Virco's efforts to balance seasonality, financial performance and quality without sacrificing service or market share, management has been refining the Company's ATS (assemble-to-ship) operating model.

As part of Virco's efforts to balance seasonality, financial performance, and quality without sacrificing service or market share, management has been refining the Company's Assemble-to-Shi p ("ATS") operating model.

ATS is Virco's version of mass-customization, which assembles standardized, stocked components into customized configurations before shipment.

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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, Moore Co., Paragon, SICO, Learniture (owned by School Outfitters) and Hon ("HNI").

The manufacturers that Virco competes with include Artcobell, KI Inc., Steel Case, 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.

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The educational furniture market is characterized by price competition, as many sales occur on a bid basis.

Management compensates for this market characteristic through a combination of methods that include emphasizing the value of Virco's products and product assortment, the convenience of one-stop shopping for “Equipment for Educators™”, the value of Virco's project management capabilities, the value of Virco's distribution and delivery capabilities, and the value of Virco's customer support capabilities and other intangibles.

Management compensates for this market characteristic through a combination of methods that include emphasizing the value of Virco's

products and product assortment, the convenience of one-stop shopping for “Equipment for Educators™”, the value of Virco's project management capabilities, the value of Virco's distribution and delivery capabilities, and the value of Virco's customer support capabilities, and other intangibles.

In addition, management believes that the streamlining of costs assists the Company in compensating for this market characteristic by allowing Virco to offer a higher value product at a lower price.

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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, 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.

Sales order backlog at January 31, 2023 totaled approximately $58.6 million.

The sales order backlog was markedly higher at January 31, 2023, compared to the same date in prior years due in large part to a significant number of orders received in January 2023 for delivery in the Company’s second quarter ending July 31, 2023.

Sales order backlog at January 31, 2022, totaled approximately $40.8 million.

Order backlog at January 31, 2022 was greater than normal due in part to supply chain disruptions that occurred during fiscal 2022.

The average order backlog as of January 31 for the prior five fiscal years was approximately $18.8 million.

Substantially all of the current backlog is expected to ship during the fiscal year ending January 31, 2024.

Patents and Trademarks

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Virco has no franchises or concessions that are considered to be of material importance to the conduct of its business and has not appraised or established a value for its patents or trademarks.

Human Capital

Human Capital Resources

As of January 31, 2023, Virco and its subsidiaries employed approximately 800 full-time employees across our facilities.

Of this number, approximately 630 are involved in manufacturing and distribution, approximately 110 in sales and marketing and approximately 60 in administration.

Our employees are not unionized or represented by collective bargaining agreements.

None of our employees are unionized or represented by collective bargaining agreements.

The Company also utilizes temporary workers as necessary to meet seasonal production, warehousing or distribution requirements that cannot be filled by its full-time workforce.

In a typical year, the Company employs a range of 200 - 300 temporary workers during the months of May, June, and July, with smaller numbers immediately preceding and following these months.

For fiscal 2022 the Company utilized fewer temporary workers in response to the COVID-19 pandemic.

In a typical year, the Company employs a range of 200 - 300 temporary workers during the months of May through August with smaller numbers immediately preceding and following these months.

Our employees play a central role in the success of our long-term strategy.

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We believe we offer fair, competitive compensation and benefits that support our employees’ overall well-being and foster their growth and development.

To ensure alignment with our short-term and long-term goals, our compensation programs for employees include base pay, short-term incentives, and opportunities for long-term incentives.

To ensure alignment with our short-term and long-term goals, our compensation programs for

employees include base pay, short-term incentives, and opportunities for long-term incentives.

We offer a wide array of benefits including comprehensive health and welfare insurance;

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In addition, our financial education and financial wellness coaches offer employees tools and resources to reach their personal financial goals.

In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees as well as the communities in which we operate.

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

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

Environmental Compliance and Government Regulation

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.

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:

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Risk Factors:

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.

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

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

In addition to environmental laws, we are also required to comply with federal, state, and local law and regulation in the areas of workplace health and safety, payroll and other labor and employment matters, and consumer product safety.

We believe that we are in material compliance with all such applicable laws and regulations.

Financial Information About Industry Segment and Geographic Areas

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Virtue (2) President 64 2014

Dose (3) Senior Vice President - Chief Financial Officer, Secretary and Treasurer 65 1995

Dose (3) Senior Vice President of Finance, Chief Financial Officer and Secretary and Treasurer 66 1995

________________________

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(3) Appointed in 1995;

has been employed by the Company for 31 years and has served as the Corporate Controller, and currently as Senior Vice President of Finance, Secretary and Treasurer.

has been employed by the Company for 32 years and has served as the Corporate Controller, and currently as Senior Vice President of Finance, Chief Financial Officer and Secretary and Treasurer.

None of the Company’s executive officers have written employment contracts.

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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