VIRCO MFG CORPORATION 10-Q

Item 1. Financial Statements Virco Mfg. Corporation Unaudited Condensed Consolidated Balance Sheets 4/30/2024 1/31/2024 4/30/2023 (In thousands) Assets Current assets Cash $ 644 $ 5,286 $ 625 Trade accounts receivables, net 19,772 23,161 15,524 Income tax receivable 66 — 321 Inventories 71,333 58,371 85,640 Prepaid expenses and other current assets 3,974 2,208 2,733 Total current assets 95,789 89,026 104,843 Non-current assets Property, plant and equipment Land 3,731 3,731 3,731 Land improvements 694 694 686 Buildings and building improvements 51,575 51,576 51,391 Machinery and equipment 115,215 114,400 114,655 Leasehold improvements 523 523 983 Total property, plant and equipment 171,738 170,924 171,446 Less accumulated depreciation and amortization 137,664 136,356 136,779 Net property, plant and equipment 34,074 34,568 34,667 Operating lease right-of-use assets 6,274 6,508 9,326 Deferred tax assets, net 6,705 6,634 8,249 Other assets, net 9,631 9,709 8,848 Total assets $ 152,473 $ 146,445 $ 165,933 See accompanying notes to unaudited condensed consolidated financial statements. 3 Virco Mfg. Corporation Unaudited Condensed Consolidated Balance Sheets 4/30/2024 1/31/2024 4/30/2023 (In thousands, except share and par value data) Liabilities Current liabilities Accounts payable $ 19,202 $ 12,945 $ 23,628 Accrued compensation and employee benefits 5,626 10,880 9,416 Income tax payable — 145 — Current portion of long-term debt 250 248 20,362 Current portion operating lease liability 6,221 5,744 5,271 Other accrued liabilities 10,362 8,570 7,868 Total current liabilities 41,661 38,532 66,545 Non-current liabilities Accrued self-insurance retention 1,244 650 1,251 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 Operating lease liability, less current portion 915 1,829 5,648 Other long-term liabilities 564 562 557 Total non-current liabilities 19,175 16,734 32,666 Commitments and contingencies (Notes 6, 7 and 13) Stockholders’ equity Preferred stock: Authorized 3,000,000 shares, $ 0.01 par value; none issued or outstanding — — — Common stock: Authorized 25,000,000 shares, $ 0.01 par value; 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 162 164 162 Additional paid-in capital 120,048 121,373 120,993 Accumulated deficit ( 27,235 ) ( 29,048 ) ( 52,073 ) Accumulated other comprehensive loss ( 1,338 ) ( 1,310 ) ( 2,360 ) Total stockholders’ equity 91,637 91,179 66,722 Total liabilities and stockholders’ equity $ 152,473 $ 146,445 $ 165,933 See accompanying notes to unaudited condensed consolidated financial statements. 4 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Operations Three months ended 4/30/2024 4/30/2023 (In thousands, except per share data) Net sales $ 46,735 $ 34,943 Costs of goods sold 26,388 21,741 Gross profit 20,347 13,202 Selling, general and administrative expenses 17,376 14,514 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 (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: $ 0.02 $ — Net income (loss) per common share: Basic $ 0.13 $ ( 0.09 ) Diluted $ 0.13 $ ( 0.09 ) Weighted average shares of common stock outstanding: Basic 16,264 16,211 Diluted 16,393 16,211 See accompanying notes to unaudited condensed consolidated financial statements. 5 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) Three months ended 4/30/2024 4/30/2023 (In thousands) Net income (loss) $ 2,140 $ ( 1,442 ) Other comprehensive loss: Pension adjustments (net of tax adjustment of $ 10 and $ 0 ) ( 28 ) — Net comprehensive income (loss) $ 2,112 $ ( 1,442 ) See accompanying notes to unaudited condensed consolidated financial statements. 6 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Cash Flows Three months ended 4/30/2024 4/30/2023 (In thousands) 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 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 Amortization of net actuarial gain for pension plans ( 38 ) — Non-cash unrealized gain on investment ( 215 ) ( 299 ) Changes in operating assets and liabilities: Trade accounts receivable 3,374 2,896 Other receivables ( 27 ) 33 Inventories ( 12,962 ) ( 18,234 ) Income taxes ( 133 ) ( 296 ) Prepaid expenses and other current assets ( 1,620 ) ( 490 ) Accounts payable and accrued liabilities 3,687 5,391 Net cash used in operating activities ( 4,507 ) ( 11,715 ) Investing activities: 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 — Net cash used in investing activities ( 941 ) ( 1,533 ) Financing activities: Borrowing from long-term debt 15,737 15,241 Repayment of long-term debt ( 13,105 ) ( 2,300 ) Common stock repurchased ( 1,499 ) — Payment of deferred financing costs — ( 125 ) 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 Cash at end of period $ 644 $ 625 Supplemental disclosures of cash flow information: Property, plant and equipment acquired and not yet paid at end of period $ 248 $ 402 Cash paid during the year for interest $ 208 $ 712 Cash paid during the year for income taxes, net of refunds $ 971 $ 344 See accompanying notes to unaudited condensed consolidated financial statements. 7 Virco Mfg. Corporation Unaudited Consolidated Statements of Changes in Stockholders' Equity Three-Month Period Ended April 30, 2024 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity Balance at January 31, 2024 16,347,314 $ 164 $ 121,373 $ ( 29,048 ) $ ( 1,310 ) $ 91,179 Net income — — — 2,140 — 2,140 Cash dividends — — — ( 327 ) — ( 327 ) Pension adjustments — — — — ( 28 ) ( 28 ) Shares vested and others — — — — — — Stock compensation expense — — 172 — — 172 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 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity 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 — — — — — — Pension adjustments — — — — — — Shares vested and others — — — — — — Stock compensation expense — — 103 — — 103 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. 8 VIRCO MFG. CORPORATION Notes to unaudited Condensed Consolidated Financial Statements April 30, 2024 Note 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2024 (“Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended April 30, 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. All references to the “Company” refer to Virco Mfg. Corporation and its subsidiaries. Note 2. Seasonality and Management Use of Estimates The market for educational furniture is marked by extreme seasonality, with approximately 50 % of the Company’s total sales typically occurring from June to August each year, the Company’s peak season. Hence, the Company typically builds and carries significant amounts of inventory during and in anticipation of this peak summer season to facilitate the rapid delivery requirements of customers in the educational market. This requires a large up-front investment in inventory, labor, storage and related costs as inventory is built in anticipation of peak sales during the summer months. As the capital required for this build-up generally exceeds cash available from operations, the Company has generally relied on third-party bank financing to meet cash flow requirements during the build-up period immediately preceding the peak season. In addition, the Company typically is faced with an overall higher accounts receivable balance during the peak season. This occurs for two primary reasons. First, accounts receivable balances typically increase during the peak season as shipments of products increase. Second, many customers during this period are educational institutions and government entities, which tend to pay accounts receivable slower than commercial customers. The Company’s working capital requirements during and in anticipation of the peak summer season require management to make estimates and judgments that affect assets, liabilities, revenues and expenses, and related contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to market demand, labor costs and stocking inventory. Significant estimates made by management include, but are not limited to, valuation of inventory; deferred tax assets and liabilities; useful lives of property, plant and equipment; liabilities under pension, warranty and self-insurance; and the accounts receivable allowance for doubtful accounts. Note 3. Recently Issued Accounting Standards 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. 9 Note 4. Revenue Recognition The Company manufactures, markets and distributes a wide variety of school and office furniture to wholesalers, distributors, educational institutions and governmental entities. Revenue is recorded for promised goods or services when control is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company's sales generally involve a single performance obligation to deliver goods pursuant to customer purchase orders. Prices for our products are based on published price lists and customer agreements. 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. 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. Once a product has been delivered per the shipping terms, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment or delivery in accordance with shipping terms because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset. Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. The Company offers sales incentives and discounts through various regional and national programs to our customers. These programs include product rebates, product returns allowances and trade promotions. Variable consideration for these programs is estimated in the transaction price at contract inception based on current sales levels and historical experience using the expected value method, subject to constraint. The Company generates revenue primarily by manufacturing and distributing products through resellers and direct-to-customers. Control transfers to both resellers and direct customers at a point in time when the delivery process is complete as determined by the corresponding shipping terms. Therefore, we do not consider them to be meaningfully different revenue streams given similarities in the nature of the products, performance obligation and distribution processes. Sales are predominately in the United States and to a similar class of customer. We do not manage or evaluate the business based on product line or any other discernable category. Note 5. Inventories 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 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 April 30, 2024, January 31, 2024 and April 30, 2023: 4/30/2024 1/31/2024 4/30/2023 (In thousands) Finished goods $ 28,183 $ 18,861 $ 34,370 Work in process 27,588 25,047 32,918 Raw materials 15,562 14,463 18,352 Total inventories 71,333 $ 58,371 $ 85,640 10 Note 6. Leases The Company has operating leases on real property, equipment, and automobiles, expiring at various dates through 2026. 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. The Company uses the implicit rate when readily determinable, or the incremental borrowing rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using Company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term. 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 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. In addition, the Company leases trucks and automobiles under operating leases that include certain fleet management and maintenance services. Certain of the leases contain renewal or purchase options and require payment for property taxes and insurance. The Company records lease expense on a straight-line basis based on the contractual lease payments. The Company recognizes the present value of the future lease commitments as an operating lease liability, and a corresponding right-of-use asset (“ROU asset”), net of tenant allowances. Tenant improvements and related tenant allowances are recorded as a reduction to the ROU asset. The Company elected to account for leases with an original term of 12 months or less that do not contain a purchase option as short-term leases. Additionally, certain of the leases provide for variable payment for property taxes, insurance, and common area maintenance payments, among others. The Company recognizes variable lease expenses for these leases in the period incurred. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The quantitative information regarding our leases is as follows: Three Months Ended 4/30/2024 4/30/2023 (In thousands, except lease term and discount rate) Operating lease cost $ 1,419 $ 1,269 Short-term lease cost 104 108 Sublease income ( 10 ) ( 10 ) Variable lease (benefit) cost ( 72 ) 261 Total lease cost $ 1,441 $ 1,628 Other operating leases information: Cash paid for amounts included in the measurement of lease liabilities $ 1,621 $ 1,433 Right-of-use assets obtained in exchange for new lease liabilities $ 954 $ 292 Weighted-average remaining lease term (years) 1.2 2.2 Weighted-average discount rate 6.36 % 6.33 % 11 Minimum future lease payments for operating leases in effect as of April 30, 2024, are as follows: Operating Lease For the year ending January 31, (In thousands) Remaining of 2025 $ 4,862 2026 2,194 2027 441 2028 6 2029 — Thereafter — Remaining balance of lease payments 7,503 Short-term lease liabilities 6,221 Long-term lease liabilities 915 Total lease liabilities 7,136 Difference between undiscounted cash flows and discounted cash flows $ 367 Note 7. Debt Outstanding balances for the Company’s long-term debt were as follows: 4/30/2024 1/31/2024 4/30/2023 (In thousands) Revolving credit line $ 2,693 $ — $ 30,121 Other 4,323 4,384 4,564 Total debt 7,016 4,384 34,685 Less current portion 250 248 20,362 Non-current portion $ 6,766 $ 4,136 $ 14,323 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, 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 12 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 $ 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 %. In addition to the outstanding debt balance of $ 2.7 million on the Company's revolving credit line, the Company also carries a mortgage on a manufacturing building in Conway Arkansas. 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 $ 4.3 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: i. 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 ii. 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. Note 8. Income Taxes 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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. 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 $ 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. 13 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. Note 9. 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 (loss) $ 2,140 $ ( 1,442 ) Weighted average shares of common stock outstanding - basic 16,264 16,211 Dilutive effect of common stock equivalents from equity incentive plans 129 — Weighted average shares of common stock outstanding - diluted 16,393 16,211 Net income (loss) per share - basic $ 0.13 $ ( 0.09 ) Net income (loss) per share - diluted $ 0.13 $ ( 0.09 ) Note 10. 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 1,000,000 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. 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 (In thousands) Cost of goods sold $ 28 $ 28 Selling, general and administrative expenses 144 75 Total stock-based compensation expense $ 172 $ 103 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. Note 11. 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 14 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”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2024, benefit accruals under the VIP Plan were frozen since December 31, 2003. There is no service cost incurred under the VIP Plan. 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 (In thousands) Service cost $ — $ — Interest cost 311 360 Expected return on plan assets ( 169 ) ( 199 ) Plan settlement — — Amortization of prior service cost ( 35 ) — Recognized net actuarial loss — — Benefit cost $ 107 $ 161 401(k) Retirement Plan The Company’s retirement plan, which covers all U.S. employees, allows participants to defer from 1 % to 75 % of their eligible compensation through a 401(k) retirement program. The plan includes Virco stock as one of the investment options. 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. . Note 12. Warranty Accrual Effective February 1, 2014 the Company modified its warranty to a limited lifetime warranty. The warranty was effective February 1, 2014, is not anticipated to have a significant effect on warranty expense. Effective January 1, 2017, the Company modified the standard warranty offered on products sold after January 1, 2017 to provide specific warranty periods by product component, with no warranty period longer than ten years . The Company’s warranty is not a guarantee of service life, which depends upon events outside the Company’s control and may be different from the warranty period. The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred. The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2024 and 2023: Three Months Ended 4/30/2024 4/30/2023 (In thousands) Beginning balance $ 500 $ 600 Provision 30 41 Costs incurred ( 30 ) ( 41 ) Ending balance $ 500 $ 600 Note 13. 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 15 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. The Company and its subsidiaries are defendants in various legal proceedings resulting from operations in the normal course of business. It is the opinion of management, in consultation with legal counsel, that the ultimate outcome of all such matters will not materially affect the Company’s financial position, results of operations or cash flows. Note 14. Delivery Costs 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. Note 15. Subsequent Events 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. 16