What changed in this filing

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Item 1. Financial Statements

2024-06-07 compared with 2023-12-08 · 125 added, 170 removed, 280 unchanged (51% of the section changed)

6 unchanged sentences

Trade accounts receivables, net 19,772 23,161 15,524

Other receivables 27 68 102

Income tax receivable 66 — 321

31 unchanged sentences

Accrued pension expenses 9,480 9,429 10,802

Income tax payable, less current portion 206 128 85

Long-term debt, less current portion 6,766 4,136 14,323

9 unchanged sentences

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

issued and outstanding 16,347,314 shares at 10/31/2023 and 16,210,985 at 1/31/2023 and 10/31/2022

issued and outstanding 16,207,612 shares at 4/30/2024, 16,347,314 at 1/31/2024, and 16,210,985 at 4/30/2023

Additional paid-in capital 120,048 121,373 120,993

4 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Income

Unaudited Condensed Consolidated Statements of Operations

Three months ended

5 unchanged sentences

Selling, general and administrative expenses 17,376 14,514

Operating income 14,706 8,800

Unrealized loss (gain) on investment in trust account 176 ( 220 )

Pension expense 301 259

Interest expense 765 567

Income before income taxes 13,464 8,194

Income tax expense 3,304 319

Net income $ 10,160 $ 7,875

Net income per common share:

Basic $ 0.62 $ 0.49

Diluted $ 0.62 $ 0.48

Weighted average shares of common stock outstanding:

Basic 16,347 16,211

Diluted 16,428 16,249

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Income

Nine months ended

10/31/2023 10/31/2022

(In thousands, except per share data)

Net sales $ 226,516 $ 192,276

Costs of goods sold 126,525 119,947

Gross profit 99,991 72,329

Selling, general and administrative expenses 65,343 57,099

Operating income 34,648 15,230

Unrealized (gain) loss on investment in trust account ( 448 ) 85

Operating income (loss) 2,971 ( 1,312 )

Unrealized gain on investment in trust account ( 215 ) ( 299 )

Pension expense 107 161

Interest expense 208 712

Income before income taxes 31,913 12,803

Income tax expense 7,661 332

Net income $ 24,252 $ 12,471

Net income per common share:

Income (loss) before income taxes 2,871 ( 1,886 )

Income tax expense (benefit) 731 ( 444 )

Net income (loss) $ 2,140 $ ( 1,442 )

Cash dividends declared per common share:

Net income (loss) per common share:

Basic $ 0.13 $ ( 0.09 )

4 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Comprehensive Income

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

Three months ended

1 unchanged sentence

(In thousands)

Net income $ 10,160 $ 7,875

Other comprehensive income:

Pension adjustments (net of tax expense of $ 406 and $ 0 at October 31, 2023 and 2022, respectively)

Net comprehensive income $ 11,323 $ 11,420

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Comprehensive Income

Nine months ended

10/31/2023 10/31/2022

(In thousands)

Net income $ 24,252 $ 12,471

Other comprehensive income:

Pension adjustments (net of tax expense of $ 406 and $ 0 at October 31, 2023 and 2022, respectively)

Net comprehensive income $ 25,415 $ 16,286

Net income (loss) $ 2,140 $ ( 1,442 )

Other comprehensive loss:

Pension adjustments (net of tax adjustment of $ 10 and $ 0 )

Net comprehensive income (loss) $ 2,112 $ ( 1,442 )

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Condensed Consolidated Statements of Cash Flows

Nine months ended

Three months ended

4/30/2024 4/30/2023

1 unchanged sentence

Operating activities

Net income $ 24,252 $ 12,471

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ 2,140 $ ( 1,442 )

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

Depreciation and amortization 1,334 1,195

Non-cash lease benefits ( 203 ) ( 165 )

Provision for doubtful accounts 45 60

Provision for credit losses 15 15

Amortization of debt issuance costs 30 26

Loss on sale of property, plant and equipment 1 —

Deferred income taxes ( 62 ) ( 448 )

Stock-based compensation 172 103

Defined pension plan settlement 372 64

Amortization of net actuarial loss for pension plans 3 405

Non-cash unrealized (gain) loss on investment ( 448 ) 85

Surrender of life insurance policies ( 95 ) —

Amortization of net actuarial gain for pension plans ( 38 ) —

Non-cash unrealized gain on investment ( 215 ) ( 299 )

Changes in operating assets and liabilities:

5 unchanged sentences

Accounts payable and accrued liabilities 3,687 5,391

Net cash provided by operating activities 22,273 1,455

Net cash used in operating activities ( 4,507 ) ( 11,715 )

Investing activities:

Capital expenditures ( 4,605 ) ( 2,614 )

Purchases of marketable securities in trust accounts — ( 7,280 )

Proceeds from sale of marketable securities in trust accounts — 4,536

Purchases of property, plant and equipment ( 1,088 ) ( 1,533 )

Proceeds from sale of property, plant and equipment 2 —

Proceeds from surrendering life insurance policies 145 —

3 unchanged sentences

Repayment of long-term debt ( 13,105 ) ( 2,300 )

Common stock repurchased ( 1,499 ) —

Payment of deferred financing costs — ( 125 )

Tax withholding payments on share-based compensation ( 110 ) ( 213 )

Net cash (used in) provided by financing activities ( 13,838 ) 1,975

Net increase in cash 3,830 816

Cash dividends paid ( 327 ) —

Net cash provided by financing activities 806 12,816

Net decrease in cash ( 4,642 ) ( 432 )

Cash at beginning of period 5,286 1,057

3 unchanged sentences

Cash paid during the year for interest $ 208 $ 712

Cash paid during the year for income tax, net of refunds $ 4,156 $ 65

Cash paid during the year for income taxes, net of refunds $ 971 $ 344

See accompanying notes to unaudited condensed consolidated financial statements.

Unaudited Consolidated Statements of Changes in Stockholders' Equity

Three-Month Period Ended October 31, 2023

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

Balance at August 1, 2023 16,347,314 $ 164 $ 121,030 $ ( 36,539 ) $ ( 2,360 ) $ 82,295

Net income — — — 10,160 — 10,160

Cash dividends — — — — — —

Pension adjustments — — — — 1,163 1,163

Shares vested and others — — — — — —

Stock compensation expense — — 171 — — 171

Balance at October 31, 2023 16,347,314 $ 164 $ 121,201 $ ( 26,379 ) $ ( 1,197 ) $ 93,789

Three-Month Period Ended October 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 August 1, 2022 16,210,985 $ 162 $ 120,684 $ ( 62,582 ) $ ( 5,759 ) $ 52,505

Net income — — — 7,875 — 7,875

Cash dividends — — — — — —

Pension adjustments — — — — 3,545 3,545

Shares vested and others — — — — — —

Stock compensation expense — — 103 — — 103

Balance at October 31, 2022 16,210,985 $ 162 $ 120,787 $ ( 54,707 ) $ ( 2,214 ) $ 64,028

Nine-Month Period Ended October 31, 2023

Three-Month Period Ended April 30, 2024

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, 2023 16,210,985 $ 162 $ 120,890 $ ( 50,631 ) $ ( 2,360 ) $ 68,061

Balance at January 31, 2024 16,347,314 $ 164 $ 121,373 $ ( 29,048 ) $ ( 1,310 ) $ 91,179

Net income — — — 2,140 — 2,140

3 unchanged sentences

Stock compensation expense — — 172 — — 172

Balance at October 31, 2023 16,347,314 $ 164 $ 121,201 $ ( 26,379 ) $ ( 1,197 ) $ 93,789

Nine-Month Period Ended October 31, 2022

Stock repurchase ( 139,702 ) ( 2 ) ( 1,497 ) — — ( 1,499 )

Balance at April 30, 2024 16,207,612 $ 162 $ 120,048 $ ( 27,235 ) $ ( 1,338 ) $ 91,637

Three-Month Period Ended April 30, 2023

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 income — — — 12,471 — 12,471

Balance at January 31, 2023 16,210,985 $ 162 $ 120,890 $ ( 50,631 ) $ ( 2,360 ) $ 68,061

Net loss — — — ( 1,442 ) — ( 1,442 )

Cash dividends — — — — — —

2 unchanged sentences

Stock compensation expense — — 103 — — 103

Balance at October 31, 2022 16,210,985 $ 162 $ 120,787 $ ( 54,707 ) $ ( 2,214 ) $ 64,028

Stock repurchase — — — — — —

Balance at April 30, 2023 16,210,985 $ 162 $ 120,993 $ ( 52,073 ) $ ( 2,360 ) $ 66,722

See accompanying notes to unaudited condensed consolidated financial statements.

Notes to unaudited Condensed Consolidated Financial Statements

October 31, 2023

April 30, 2024

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 and nine months ended October 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2024.

Operating results for the three months ended April 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2025.

The balance sheet at January 31, 2024 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.

18 unchanged sentences

Recently Issued Accounting Standards

The Company evaluates all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our condensed consolidated financial statements.

Accounting Standards Updates ("ASUs") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

In November 2023, the FASB issued this ASU to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We do not expect that this guidance will have a material impact on our consolidated financial statements and disclosures.

ASU 2023-09, Income Taxes (Topic 740):

Improvements to Tax Disclosures.

In December 2023, the FASB issued this ASU which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S.

and foreign jurisdictions.

The update will be effective for annual periods beginning after December 15, 2024.

We do not expect that this guidance will have a material impact on our consolidated financial statements and disclosures.

The Company evaluates all ASUs issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our condensed consolidated financial statements.

We have assessed all ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact.

5 unchanged sentences

The Company has determined that the performance obligations are satisfied at a point in time when the Company completes delivery per the customer contract.

The majority of sales are free on board ("FOB") destination where the destination is specified per the customer contract and may

include delivering the furniture into the classroom, school site or warehouse.

The majority of sales are free on board ("FOB") destination where the destination is specified per the customer contract and may include delivering the furniture into the classroom, school site or warehouse.

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.

10 unchanged sentences

We do not manage or evaluate the business based on product line or any other discernable category.

Inventory is valued at the lower of cost or net realizable value (determined on a first-in, first-out basis) and includes material, labor, and factory overhead.

Inventory is valued at the lower of cost or net realizable value (determined on a first-in, first-out basis (“FIFO”)) and includes material, labor, and factory overhead.

The Company records valuation adjustments for the excess cost of the inventory over its estimated net realizable value.

Valuation adjustments for slow-moving and obsolete inventory involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations.

Valuation adjustments for slow-moving and obsolete inventory are calculated using an estimated percentage applied to inventories based on a physical inspection of the product in connection with a physical inventory, a review of slow-moving products and component stage, inventory category, historical and forecasted consumption of sales, and consideration of active marketing programs.

The market for education furniture is traditionally driven by value, not style, and the Company has not typically incurred material obsolescence expenses.

The market for educational furniture is traditionally driven by value, not style, and the Company has not typically incurred material obsolescence expenses.

If market conditions are less favorable than those anticipated by management, additional valuation adjustments may be required.

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 October 31, 2023, January 31, 2023 and October 31, 2022:

The following table presents a breakdown of the Company’s inventories as of April 30, 2024, January 31, 2024 and April 30, 2023:

4/30/2024 1/31/2024 4/30/2023

6 unchanged sentences

The Company determines if an arrangement is a lease at inception and assesses classification of the lease at commencement.

The Company's lease terms include options to extend or terminate the lease only when it is reasonably certain that we exercise that option.

All of the Company’s leases are classified as operating leases.

4 unchanged sentences

The Company has an operating lease for its corporate office and manufacturing and distribution facility located in Torrance, California, currently with a remaining lease term through April 2025.

The Company's lease terms include options to extend or terminate the lease only when it is reasonably certain that we exercise that option.

The Company leases equipment under a 5-

year operating lease arrangement.

The Company leases equipment under a 5-year operating lease arrangement.

The Company has the option of buying the assets at the end of the lease period at a price that does not result in the Company being reasonably certain of exercising the option.

9 unchanged sentences

The quantitative information regarding our leases is as follows:

Three Months Ended Nine Months Ended

Three Months Ended

4/30/2024 4/30/2023

3 unchanged sentences

Sublease income ( 10 ) ( 10 )

Variable lease cost 252 16 673 547

Variable lease (benefit) cost ( 72 ) 261

Total lease cost $ 1,441 $ 1,628

4 unchanged sentences

Weighted-average discount rate 6.36 % 6.33 %

Minimum future lease payments for operating leases in effect as of October 31, 2023, are as follows:

Minimum future lease payments for operating leases in effect as of April 30, 2024, are as follows:

Operating Lease

15 unchanged sentences

The Company and Virco Inc., its wholly-owned subsidiary (the “Borrowers”) has a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”).

The Credit Agreement was amended numerous times since its origination in December 2011.

On September 28, 2021, the Borrowers entered into an Amended and Restated Revolving Credit and Security Agreement (the “Restated Credit Agreement”) with PNC Bank, which amended and restated the prior Credit Agreement and effectively incorporated all of the prior amendments into an amended and restated form of agreement.

The Restated Credit Agreement permits the Company to issue dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $ 3.0 million during any fiscal year, provided that no default shall have occurred or is continuing or would result from any such payment, and the Company must demonstrate pro forma compliance with a 12-month trailing fixed charge coverage ratio of not less than 1.20 :1.00 as of the fiscal quarter immediately preceding the date of any such dividend or payment.

The Restated Credit Agreement also requires the Company to maintain a minimum fixed charge coverage ratio, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers.

In connection with the Restated Credit Agreement, the Company also agreed to pay to PNC Bank a non-refundable fee of $ 50,000 .

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

Substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Restated Credit Agreement upon receipt by the Borrowers.

Due to this automatic liquidating nature of the Restated Credit Agreement, if the Borrowers breach any covenant, violate any representation or warranty or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion.

The other material terms of the Restated Credit Agreement are substantially the same as those of the original Credit Agreement, consisting of (i) a revolving line of credit with a Maximum Revolving Advance Amount of $ 65.0 million that is subject to a borrowing base limitation and generally provides for advances of up to 85 % of eligible accounts receivable, plus a percentage equal to the lesser of 60 % of the value of eligible inventory or 85 % of the liquidation value of eligible inventory, plus $ 15.0 million from January through July of each year, minus undrawn amounts of letters of credit and reserves and (ii) an equipment loan of $ 2.0 million.

The Restated Credit Agreement is secured by substantially all of the Borrowers’ personal property and certain of the Borrowers’ real property.

The Restated Credit Agreement is subject to certain prepayment penalties upon early termination of the Restated Credit Agreement.

Prior to the maturity date, principal amounts outstanding under the Restated Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions, including reduced borrowings under the revolving line to less than or equal $ 10.0 million for a period of 30 consecutive days during the fourth quarter of each fiscal year.

The Restated Credit Agreement also contains certain financial covenants, including covenants requiring a minimum fixed charge coverage ratio and limits on capital expenditures.

The Company was in compliance with its debt covenants as of October 31, 2023.

The Credit Agreement was amended numerous times since its origination in December 2011, most recently on April 29, 2024.

The Credit Agreement as currently in effect permits the Company to issue dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $ 5.0 million during any fiscal year, provided that no default shall have occurred or is continuing or would result from any such payment, and the Company must demonstrate pro forma compliance with a 12-month trailing fixed charge coverage ratio of not less than 1.20 :1.00 as of the fiscal quarter immediately preceding the date of any such dividend or payment.

The Credit Agreement also requires the Company to maintain a minimum fixed charge coverage ratio, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers.

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

Substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Credit Agreement upon receipt by the Borrowers.

Due to this automatic liquidating nature of the Credit Agreement, if the Borrowers breach any covenant, violate any representation or warranty or suffer a deterioration

in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion.

The other material terms of the Credit Agreement as currently in effect include the following:

(i) a revolving line of credit with a Maximum Revolving Advance Amount of $ 65.0 million (increasing to $ 70.0 million during the months of June

through August 2024) that is subject to a borrowing base limitation and generally provides for advances of up to 85 % of eligible accounts receivable, plus a percentage equal to the lesser of 60 % of the value of eligible inventory or 85 % of the liquidation value of eligible inventory, plus $ 15.0 million from January through July of each year, minus undrawn amounts of letters of credit and reserves;

(ii) inventory sublimit of $ 35.0 million and assemble-to-ship (ATS) inventory sublimit of $ 15.0 million during the months of May through August 2024;

and (iii) an equipment loan of $ 2.0 million.

The Credit Agreement is secured by substantially all of the Borrowers’ personal property and certain of the Borrowers’ real property.

The Credit Agreement is subject to certain prepayment penalties upon early termination of the Credit Agreement.

Prior to the maturity date, principal amounts outstanding under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions, including reduced borrowings under the revolving line to less than or equal $ 10.0 million for a period of 30 consecutive days during the fourth quarter of each fiscal year.

The Credit Agreement also contains certain financial covenants, including covenants requiring a minimum fixed charge coverage ratio and limits on capital expenditures.

The Company was in compliance with its debt covenants as of April 30, 2024.

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

Approximately $ 23.1 million was available for borrowing as of October 31, 2023.

The interest rate for outstanding loan balances during the quarter ended October 31, 2023 was 10.00 %.

Approximately $ 42.4 million was available for borrowing as of April 30, 2024.

The interest rate is determined as a sum of the applicable margin rate, which is 3.00 % from January through July and 2.50 % from August through December, plus the Secured Overnight Financing Rate (SOFR).

The interest rate for outstanding loan balances during the quarter ended April 30, 2024 was 10.50 %.

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

1 unchanged sentence

The original note was dated August 2017 for $ 5.8 million, at a fixed rate of 4.0 % per year and 20 -year term.

The outstanding amount under this note was $ 4.4 million as of October 31, 2023.

On May 19, 2023, the Company entered into Amendment No.

3 to Amended and Restated Revolving Credit and Security Agreement (“Amendment No.

3”) with PNC, with an effective date of May 5, 2023.

Amendment No.

3 amended the Restated Credit Agreement and the secured revolving line of credit provided to the Company under the revolving credit facility to reflect the following material changes:

Maximum size of the PNC line of credit has been increased to $ 72.5 million during the months of June through August of 2023, to provide additional availability for the Company’s forecast through the 2023 peak borrowing period;

Increase in the total inventory sublimit under the Credit Agreement to $ 35.0 million and increase in the Assemble-to-ship (ATS) inventory sublimit to $ 15.0 million during the months of May through August of 2023;

The Company agreed to pay an amendment fee of $ 50,000 , which is 0.67 % on the incremental line increase of $ 7.5 million;

Increase in the Applicable Margin (as defined in the Credit Agreement) of 25 basis points.

Management believes that the carrying value of debt approximated fair value at October 31, 2023, as all of the long-term debt bears interest at variable rates based on prevailing market conditions ,except mortgage on a manufacturing building in Conway Arkansas at a fixed rate of 4 % per year.

The outstanding amount under this note was $ 4.3 million as of April 30, 2024.

On April 29, 2024, the Company entered into Amendment No.

4 to the Credit Agreement ("Amendment No.

4") with PNC.

Amendment No.4 amended the Credit Agreement to reflect the following material changes:

Maximum size of the PNC line of credit has been lowered from $ 72.5 million to $ 70.0 million during the months of June through August, and

Maximum amount allowed for the Company to issue dividends or repurchase stock has been increased from $ 3.0 million to $ 5.0 million in the aggregate during any fiscal year.

Management believes that the carrying value of debt approximated fair value at April 30, 2024, as all of the long-term debt bears interest at variable rates based on prevailing market conditions, except mortgage on a manufacturing building in Conway Arkansas at a fixed rate of 4.0 % per year.

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.

1 unchanged sentence

As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carry backs, tax-planning strategies, and results of recent operations, to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets.

Valuation allowances of $ 255,000 , $ 864,000 and $ 8,893,000 as of October 31, 2023, January 31, 2023 and October 31, 2022, 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 three months ended October 31, 2023 and 2022, the effective income tax rates were 24.5 % and 3.9 %, respectively.

For the nine months ended October 31, 2023 and 2022, the effective income tax rates were 24.0 % and 2.6 %, respectively.

The change in effective tax rates for the three and nine months ended October 31, 2023 was primarily due to the change in forecasted mix of income before federal and state income taxes and estimated permanent differences.

The lower effective tax rate for the three and nine months ended October 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.

Valuation allowances of $ 217,000 , $ 251,000 and $ 575,000 as of April 30, 2024, January 31, 2024 and April 30, 2023, 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 three months ended April 30, 2024 and 2023, the effective income tax rates were 25.5 % and 23.5 %, respectively.

Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.

The January 31, 2019 and subsequent fiscal years remain open for examination by the IRS and state tax authorities.

The Company is not currently under any state examination.

Net Income per Share

The following table sets forth the computation of basic and diluted net income per share:

Three Months Ended Nine Months Ended

Net Income (Loss) per Share

The following table sets forth the computation of basic and diluted net income (loss) per share:

Three Months Ended

4/30/2024 4/30/2023

(In thousands, except per share data)

Net income $ 10,160 $ 7,875 $ 24,252 $ 12,471

Net income (loss) $ 2,140 $ ( 1,442 )

Weighted average shares of common stock outstanding - basic 16,264 16,211

1 unchanged sentence

Weighted average shares of common stock outstanding - diluted 16,393 16,211

Net income per share - basic $ 0.62 $ 0.49 $ 1.49 $ 0.77

Net income per share - diluted $ 0.62 $ 0.48 $ 1.48 $ 0.77

Net income (loss) per share - basic $ 0.13 $ ( 0.09 )

Net income (loss) per share - diluted $ 0.13 $ ( 0.09 )

Stock-Based Compensation

Stock Incentive Plan

Under the Company's 2019 Omnibus Equity Incentive Plan (the “2019 Plan”), the Company may grant an aggregate of up to 1.0 million shares to its employees and non-employee directors in the form of restricted stock units, restricted stock awards and stock options.

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

Under the Company's 2019 Omnibus Equity Incentive Plan (the “2019 Plan”), the Company may grant an aggregate of up to 1,000,000 shares to its employees and non-employee directors in the form of restricted stock units, restricted stock awards and stock options.

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

There were no awards grant and vested during the three-month period ended October 31, 2023.

During the nine-month period ended October 31, 2023, the Company granted 70,510 awards, vested 93,600 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of October 31, 2023, there were approximately 537,925 shares available for future issuance under the 2019 Plan.

The following table summarizes the stock-based compensation expense related to restricted stock awards recognized in the Company's statements of operations for the three and nine months ended October 31, 2023 and 2022:

Three Months Ended Nine Months Ended

During the three-month period ended April 30, 2024, the Company granted 0 awards, vested 0 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of April 30, 2024, there were approximately 537,925 shares available for future issuance under the 2019 Plan.

The following table summarizes the stock-based compensation expense related to restricted stock units and awards recognized in the Company's statements of operations for the three months ended April 30, 2024 and 2023:

Three Months Ended

4/30/2024 4/30/2023

3 unchanged sentences

Total stock-based compensation expense $ 172 $ 103

As of October 31, 2023, there was $ 400,000 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 1 year.

As of April 30, 2024, there was $ 57,000 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 1 month.

Retirement Plans

The Company and its subsidiaries cover certain employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”).

As more fully described in the Annual Report on Form 10-K, benefit accruals under the Employees Retirement Plan were frozen effective December 31, 2003.

There is no service cost incurred under this plan.

As more fully described in the Annual Report on Form 10-K, benefit

accruals under the Employees Retirement Plan were frozen effective December 31, 2003.

There is no service cost incurred under the Pension Plan.

The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”).

1 unchanged sentence

There is no service cost incurred under the VIP Plan.

The following table summarizes t he net periodic pension cost for the Pension Plan and the VIP Plan for the three and nine months ended October 31, 2023 and 2022:

Three Months Ended Nine Months Ended

The following table summarizes the net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2024 and 2023:

Three Months Ended

4/30/2024 4/30/2023

11 unchanged sentences

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

At October 31, 2023 and 2022, the plan held 1,404,774 shares and 1,250,468 shares of Virco stock, respectively.

For the three-month period ended October 31, 2023 and 2022, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 356,000 and $ 333,000 respectively.

For the nine-month period ended October 31, 2023 and 2022, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 1,078,000 and $ 985,000 respectively.

At April 30, 2024 and 2023, the plan held 1,240,365 shares and 1,320,482 shares of Virco stock, respectively.

For the three months ended April 30, 2024 and 2023, the compensation costs incurred for employer match, which is paid in the form of Company stock, was $ 441,000 and $ 403,000 respectively.

Warranty Accrual

The Company provides a warranty against all substantial defects in material and workmanship.

The standard warranty offered on products sold through January 31, 2013 is ten years .

Effective February 1, 2014 the Company modified its warranty to a limited lifetime warranty.

3 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 and nine months ended October 31, 2023 and 2022:

Three Months Ended Nine Months Ended

The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2024 and 2023:

Three Months Ended

4/30/2024 4/30/2023

5 unchanged sentences

Contingencies

The Company has a self-insured retention for product losses up to $ 250,000 per occurrence, workers’ compensation liability losses up to $ 250,000 per occurrence, general liability losses up to $ 50,000 per occurrence and automobile liability losses up to

$ 50,000 per occurrence.

The Company has purchased insurance to cover losses in excess of the self-insurance retention or deductible up to a limit of $ 30,000,000 .

The Company has purchased insurance to cover losses in excess of the self-insurance retention or

deductible up to a limit of $ 30.0 million.

The Company has obtained an actuarial estimate of its total expected future losses for liability claims and recorded a liability equal to the net present value.

2 unchanged sentences

Delivery Costs

For the three months ended October 31, 2023 and 2022, shipping and classroom delivery costs of approximately $ 8,634,000 and $ 8,393,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the nine months ended October 31, 2023 and 2022, shipping and classroom delivery costs of approximately $ 21,968,000 and $ 18,776,000 , respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

For the three months ended April 30, 2024 and 2023, shipping and classroom delivery costs of approximately $ 4.2 million and $ 3.3 million, respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Subsequent Events

On December 5, 2023, the Company’s Board of Directors declared a cash dividend for the Company’s fourth fiscal quarter of $ 0.02 on each outstanding share of common stock.

The dividend is payable on January 10, 2024 to stockholders of record of the common stock as of the close of business on December 22, 2023.

While the Company intends to pay future dividends on a quarterly basis, following review and approval by the Board of Directors, the declaration and payment of future dividends, as well as the amounts thereof, are subject to the discretion of the Board as well as restrictive covenants in the Company’s lending agreements.

On June 4, 2024, the Company’s Board of Directors declared a cash dividend for the Company’s second fiscal quarter of

$ 0.02 on each outstanding share of common stock.

The dividend is payable on July 12, 2024 to stockholders of record of the

common stock as of the close of business on June 21, 2024.

While the Company currently intends to pay future dividends on a quarterly basis, following review and approval by the Board of Directors, the declaration and payment of future dividends, as well as the amounts thereof, are subject to the discretion of the Board as well as restrictive covenants in the Company’s lending agreements.

There can be no assurance that the Company will declare and pay dividends in future periods.

In addition, the Board of Directors has authorized the repurchase of up to $ 5,000,000 of the Company’s common stock.

Repurchases may be made at management’s discretion from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.

The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate, legal and regulatory requirements, prevailing stock prices, trading volume, and other considerations.

The repurchase program has no time limit and may be suspended for periods or discontinued at any time.

The Company expects to utilize its existing cash and cash equivalents to fund repurchases under the share repurchase program .

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