What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-04-14 compared with 2024-04-12 · 48 added, 44 removed, 206 unchanged (31% of the section changed)

9 unchanged sentences

Sustained declines in the per-student funding levels provided for in state and local budgets in the future could have a materially adverse impact on our business, financial condition, and results of operations as they have in the past.

In addition, public health emergencies such as COVID-19, geopolitical uncertainties, terrorist attacks, acts of war, natural disasters, increases in energy and other costs or combinations of such factors and other factors that are outside of our control could at any time have a significant effect on the economy, which in turn would affect government revenues and allocations of government spending.

In addition, public health emergencies such as epidemics or pandemics, geopolitical uncertainties, terrorist attacks, acts of war, natural disasters, increases in energy and other costs or combinations of such factors and other factors that are outside of our control could at any time have a significant effect on the economy, which in turn would affect government revenues and allocations of government spending.

The occurrence of any of these or similar events in the future could cause demand for our products to decline or competitive pricing pressures to increase, any of which would likely adversely affect our business, operating results, cash flows and financial condition.

26 unchanged sentences

Contracts with most of our suppliers are short-term.

These suppliers may not continue to provide raw materials and components to us at attractive prices, or at all,

and we may not be able to obtain the raw materials we need in the future from these or other providers on the scale and within the time frames we require.

In a deteriorating economic environment, including the current economic disruption caused by COVID-19 and global supply chain disruptions, many of the Company's suppliers may experience difficulty obtaining financing and may go out of business.

These suppliers may not continue to provide raw materials and components to us at attractive prices, or at all, and we may not be able to obtain the raw materials we need in the future from these or other providers on the scale and within the time frames we require.

In a deteriorating economic environment, including the economic disruption caused by the pandemic, tariffs, and global supply chain disruptions, many of the Company's suppliers may experience difficulty obtaining financing and may go out of business.

The Company may have difficulty replacing these suppliers, especially if the supplier fails as the Company is entering the seasonal summer shipping season.

1 unchanged sentence

In addition, because we purchase components from international sources, primarily China, we are subject to tariffs, fluctuations in currency exchange rates as well as the impact of natural disasters, war and other factors that may disrupt the transportation systems, ports, or shipping lines used by our suppliers, and other uncontrollable factors such as changes in foreign regulation or economic conditions.

In fiscal 2022, the cost of raw materials and components, including steel and plastic, was extremely volatile and unfavorably impacted our results of operations.

In addition, the current conflict in Ukraine and global sanctions recently placed on Russia have increased the cost and negatively impacted the availability of fuel, plastic and other materials.

In fiscal 2024 the cost of commodities was relatively stable.

In fiscal 2025 and 2024, the cost of commodities was relatively stable.

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

1 unchanged sentence

Cost and availability of third-party freight can adversely affect our profitability and results of operations.

Approximately 80% our sales are FOB destination and include freight from Virco’s facilities to the customer location.

Approximately 75% of our sales are FOB destination and include freight from Virco’s facilities to the customer location.

Virco depends upon third-party carriers for more than 90% of customer deliveries.

1 unchanged sentence

Further, there may be a lack of available trained and licensed drivers, which may reduce the availability of transportation services.

Inability to obtain adequate third-party freight on a timely basis during the summer delivery season can adversely affect cost to deliver products to customers and the level of customer service, which can in turn adversely impact future sales.

Inability to obtain adequate third-party freight on a timely basis during the summer delivery season can adversely affect the cost to deliver products to customers and the level of customer service, which can in turn adversely impact future sales.

The Company imports component parts from international sources (primarily China).

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

The cost of ocean freight declined during fiscal 2023, nearly returning to more typical levels and remained stable in 2024.

The cost of ocean freight was relatively stable in 2025 and 2024.

Ongoing disruptions in the cost or availability of ocean freight or disruptions in port operations, may adversely impact the Company’s ability to obtain adequate component parts on a cost-effective basis to support sales, particularly in the busy summer season, which could have an adverse effect on our sales and profitability.

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

There can be no assurance that our suppliers in China will not experience material disruptions in the future.

The majority of our sales are priced through one contract, under which we are the exclusive supplier of classroom furniture.

13 unchanged sentences

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

With respect to any of the contracts described above, if the costs

of providing our products or services increase between the date the orders are received and the shipping date, we will likely not be able to implement corresponding increases in our sales prices for such products or services to offset the related increased costs.

With respect to any of the contracts described above, if the costs of providing our products or services increase between the date the orders are received and the shipping date, we will likely not be able to implement corresponding increases in our sales prices for such products or services to offset the related increased costs.

Significant cost increases in providing either the services or products during a given contract period could therefore lower our profit margins.

5 unchanged sentences

Under our credit facility, substantially all of our accounts receivable is automatically and promptly swept to repay amounts outstanding under the credit facility upon our receipt.

Due to this automatic liquidating nature, if we breach any covenant, violate any representation or warranty or suffer any deterioration in our ability to borrow pursuant to the borrowing base calculation contained in the credit facility, we may not have access to cash liquidity unless provided by the lender in its discretion.

If the indebtedness under our credit facility were to be accelerated, we cannot be certain that we will have sufficient funds available to pay such indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all.

4 unchanged sentences

If we breach any of our financial covenants without receiving a corresponding waiver or amendment, the Agent and Lender may accelerate our credit facility and impose default interest and other fees, any of which could have a material adverse effect on our financial condition and results of operations.

Health crisis events, such as epidemics or pandemics, have adversely impacted, and may continue to impact, the economy and disrupt our operations and supply chains, which may have an adverse effect on our results of operations.

Health crisis events, including epidemics or pandemics such as COVID-19,and the actions taken by various governments and third parties to combat such events, have caused significant disruptions in our product sales and marketing, manufacturing and distribution operations, and supply chains.

The resurgence of COVID-19 or its variants, as well as an outbreak of other widespread public health epidemics or pandemics, could cause new disruptions to our product sales, manufacturing and distribution operations, supply chains and demand for our products by our customers, which could adversely affect our business, financial condition, and results of operations.

Our recent revenue growth may not be sustainable

The Company’s recent revenue growth since 2023 was partly a result of the recovery from COVID-related school closures and subsequent supply chain disruptions, and future growth rates are unlikely to match those of the past several years.

As with the unpredictable outcomes of school closures and supply chain disruptions, future events beyond the Company’s control, such as tariffs and trade realignments, may have both negative and positive impacts on the Company’s revenue and operating margins.

Management intends to position the Company to respond to these uncertainties by continuing to reinvest in operating systems, employee skills, and customer development and retention.

INDUSTRY AND ECONOMIC RISKS

The COVID-19 pandemic may continue to adversely affect our operations and financial performance.

The COVID-19 pandemic and the actions taken by various governments and third parties to combat the spread of COVID-19, including mandatory quarantines and other suspensions of non-essential business operations, caused significant disruptions in our product sales and marketing, manufacturing and distribution operations, and supply chains during fiscal 2021 and 2022.

While the disruption to demand for our products from the COVID-19 pandemic is currently expected to be temporary, there remains a great deal of uncertainty around the long-term structural effects of the pandemic on in-person learning in the United States.

In addition, the resurgence of COVID-19 or its variants, as well as an outbreak of other widespread public health epidemics or pandemics, could cause new disruptions to our product sales, manufacturing and distribution operations, supply chains and demand for our products by our customers, which could adversely affect our business, financial condition, and results of operations.

Increases in basic commodity, raw material and component costs could adversely affect our profitability.

Fluctuations in the price, availability and quality of the commodities, raw materials and components used in manufacturing our products could have an adverse effect on our costs of sales, profitability and our ability to meet customers' demand.

The price of commodities, raw materials and components, including steel and plastics, our largest raw material categories, have been volatile in prior years, and the cost, quality and availability of such commodities have been significantly affected in recent years by, among other things, changes in global supply and demand, changes in laws and regulations (including tariffs and duties), changes in exchange rates and worldwide price levels, natural disasters, public health issues such as the current COVID-19 pandemic (or other future pandemics), labor disputes, terrorism and political unrest or instability.

The price of commodities, raw materials and components, including steel and plastics, our largest raw material categories, have been volatile in prior years, and the cost, quality and availability of such commodities have been significantly affected in recent years by, among other things, changes in global supply and demand, changes in laws and regulations (including tariffs and duties), changes in exchange rates and worldwide price levels, natural disasters, public health issues, labor disputes, terrorism and political unrest or instability.

These factors could lead to further price increases or supply interruptions in the future.

As discussed above, in the short term, rapid changes in raw

material costs can be very difficult for us to offset with price increases because, in the case of many of our contracts, we have committed to selling prices for goods and services for periods of one year, and occasionally longer.

As discussed above, in the short term, rapid changes in raw material costs can be very difficult for us to offset with price increases because, in the case of many of our contracts, we have committed to selling prices for goods and services for periods of one year, and occasionally longer.

Our profit margins could be adversely affected if commodity, raw material, and component costs remain high or escalate further, and we are unable to pass along a portion of the higher costs to our customers.

In fiscal 2022, the Company incurred material increases in commodity costs and shortages in commodity availability that were material and adversely impacted the results of operations.

Both availability and volatility in cost moderated in fiscal 2024 and 2023.

Total material costs for fiscal 2025, as a percentage of sales, could be higher than in fiscal 2024.

In early 2025, there have been significant changes and proposed changes to U.S.

trade policies.

On April 2, 2025, President Trump announced new tariffs on foreign imported goods, including a baseline duty of 10% on foreign imports and additional tariffs on imports from China of an additional 34%.

also reinstated the steel import tariff to 25% effective March 12, 2025.

These tariffs are likely to result in increased prices for the Company’s imported components, steel and other material costs.

The Company has increased list prices for its products in fiscal 2025 and 2026 in an effort to recover anticipated increases in material costs.

The increase in cost of obtaining raw materials and components in excess of our ability to pass along such costs to customers, any of which could have a negative impact on our reputation, sales and profitability.

Total material costs for fiscal 2026, as a percentage of sales, could be higher than in fiscal 2025.

Both availability and volatility in cost were moderate in fiscal 2025 and 2024.

We are affected by the cost of petroleum-based products and increases in petroleum prices could reduce our margins and profits.

The profitability of our operations is sensitive to the cost of fuel, which materially affects our transportation costs, the costs of petroleum-based materials (like plastics) and the costs of energy (including electricity and natural gas) used in operating our manufacturing facilities.

Petroleum prices have fluctuated significantly in recent years and are expected to rise from current levels.

Petroleum prices have fluctuated significantly in recent years and could rise from current levels.

Prices and availability of petroleum products are subject to political, economic and market factors that are generally outside our control.

2 unchanged sentences

If our transportation costs increase or, the price of petroleum-based products and cost of operating our manufacturing facilities increase and we are unable to pass a material portion of these increased costs to our customers, our gross margins and profitability would be adversely affected.

Evolving trade policies that increase tariffs may have a material adverse effect on the Company’s business and results of operations.

The occurrence of an international trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for products, costs, customers, suppliers, and the United States economy generally, which could have a material adverse effect on the Company’s business, operating results, and financial condition.

In early 2025, there have been significant changes and proposed changes to U.S.

trade policies, including new tariffs on foreign imported goods announced by President Trump on April 2, 2025.

These tariffs are likely to result in increased prices for imported components and materials supplied locally.

The Company cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes, or other similar restrictions upon the import or export of products in the future, nor can the Company predict their impact on the business.

The Company may be challenged in effectively increasing the prices of its products to offset these factors, and its business and results of operations may be adversely affected.

FINANCING RISKS

1 unchanged sentence

We have historically relied on third-party bank financing to meet our seasonal cash flow requirements.

Our current credit facility with PNC Bank was originally scheduled to mature on March 19, 2023.

Subsequent to fiscal 2022, the Company extended the final maturity date of the credit line with PNC Bank to April 2027.

At various times during the COVID-19 pandemic, we were in non-compliance with certain financial covenants under our credit facility with PNC Bank, and in each case, we received a waiver of such violations from PNC Bank.

In fiscal 2023, our credit facility with PNC Bank was extended to April 2027.

In addition, on an annual basis, we prepare a lender-approved forecast of seasonal working capital requirements and use borrowings under our credit facility with PNC Bank to help meet these seasonal cash flow and working capital requirements.

4 unchanged sentences

This requires management to make estimates and judgments with respect to the Company's working capital requirements during, and in anticipation of, the peak summer season.

Management expends a significant amount of time in the fourth quarter of the prior year and the first quarter of each year developing a stocking plan and estimating the number of temporary summer employees, the amount of raw materials and the types of components and products that will be required during the peak season.

Management expends a significant amount of time in the fourth quarter of the prior year and the first quarter of each year developing a stocking plan and estimating the number of temporary summer employees, the amounts of raw materials and the types of components and products that will be required during the peak season.

If management does not accurately forecast the Company's requirements, the Company's results of operations could be adversely affected.

3 unchanged sentences

Our capital requirements depend on many factors, including capital improvements, tooling and new product development.

To the extent that our existing capital is insufficient to meet these requirements and cover any losses, we may need to raise

additional funds through financings or curtail our growth and reduce our assets.

To the extent that our existing capital is insufficient to meet these requirements and cover any losses, we may need to raise additional funds through financings or curtail our growth and reduce our assets.

Any equity or debt financing, if available at all, may be on terms that are not favorable to us.

9 unchanged sentences

and (iii) increase our future contribution requirements.

Because the recent economic environment was characterized by historically low interest rates, we may be required to make additional cash contributions to the Employee Plan and recognize further increases in our net pension cost to satisfy our funding requirements.

Because the recent economic environment was characterized by historically low interest rates, we may be required to make additional cash contributions to the Employee Plan

and recognize further increases in our net pension cost to satisfy our funding requirements.

A significant decrease in investment returns or the market value of plan assets or a significant decrease in interest rates could increase our net periodic pension costs and adversely affect our results of operations.

These factors are further complicated by the substantial intervention in the U.S.

credit markets by the Federal Reserve Board and Treasury Department in response to the COVID-19 pandemic, which could have the effect of artificially affecting market interest rates.

credit markets by the Federal Reserve Board and Treasury Department, which could have the effect of artificially affecting market interest rates.

LEGAL AND REGULATORY RISKS

7 unchanged sentences

If third parties claim that we infringe upon their intellectual property rights, we may incur liability and costs and may have to redesign or discontinue the infringing products.

We face the risk of claims that we have infringed third parties' intellectual property rights.

We face the risk of claims that we have infringed a third party’s intellectual property rights.

Companies operating in the furniture industry routinely seek protection of the intellectual property for their product designs, and our principal competitors may have large intellectual property portfolios.

Our efforts to identify and avoid infringing third parties' intellectual property rights may not be successful.

Our efforts to identify and avoid infringing a third party’s intellectual property rights may not be successful.

Any claims of intellectual property infringement, even those without merit, could (i) be expensive and time-consuming to defend;

9 unchanged sentences

Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures by us, some of which may be material.

If new environmental laws and regulations are introduced and enforced domestically, but not implemented or enforced internationally, we will operate at a competitive disadvantage

compared to competitors who source product primarily from international sources.

If new environmental laws and regulations are introduced and enforced domestically, but not implemented or enforced internationally, we will operate at a competitive disadvantage compared to competitors who source product primarily from international sources.

In addition, in the past we have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) for remediation costs associated with waste disposal sites previously used by us.

26 unchanged sentences

Various aspects of our business, including our manufacturing operations, suppliers, and customers, may be negatively affected by severe weather events tied to climate change, including extreme storms, flooding, wildfires, extreme temperatures, and chronic changes in meteorological patterns.

The frequency and severity of severe weather conditions affecting our business

may be impacted by climate change, although it is currently impossible to predict with accuracy the scale of such impact.

The frequency and severity of severe weather conditions affecting our business may be impacted by climate change, although it is currently impossible to predict with accuracy the scale of such impact.

These impacts could have a material adverse effect on our business, results of operations and financial condition.

2 unchanged sentences

The Company is unable to predict what climate change or environmental criteria, or requirements may be adopted or supported by governments and private sector entities in the future, or the impacts of such initiatives on its financial condition, results of operations, access to and cost of capital and cash flows.

In addition, the SEC has published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and Board of Directors.

GENERAL RISK FACTORS

1 unchanged sentence

The success of our operations is highly dependent upon our ability to attract and retain qualified employees and upon the ability of our senior management and other key employees to implement our business strategy.

We believe there are only a limited number of qualified executives in the industry in which we compete.

We believe there are only a limited

number of qualified executives in the industry in which we compete.

The loss of the services of key members of our management team could seriously harm our efforts to successfully implement our business strategy.

17 unchanged sentences

In November 2020, California voters passed the California Privacy Rights and Enforcement Act of 2020, which further expands the California Consumer Privacy Act with additional data privacy compliance requirements that may impact our business, and establishes a regulatory agency dedicated to enforcing those requirements.

Aspects of these new laws and their interpretation and enforcement remain uncertain, and their potential effects are far-reaching and may require us to modify our data processing practices and policies and incur substantial costs and expenses in order to

These new laws may also lead other states to pass comparable legislation, with potentially greater penalties and more rigorous compliance requirements relevant to our business.

1 unchanged sentence

There has been significant volatility in the market price and trading volume of equity securities, which may be unrelated to the financial performance of the companies issuing the securities.

The economic impact and uncertainty of the COVID-19 pandemic has exacerbated this volatility in both our common stock and the overall stock markets.

The limited “float” of shares available for purchase or sale of Virco stock can magnify this volatility.

11 unchanged sentences

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 1A. Risk Factors