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Item 8. Financial Statements and Supplementary Data

2025-04-14 compared with 2024-04-12 · 212 added, 153 removed, 615 unchanged (37% of the section changed)

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To the Stockholders and the Board of Directors of

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Virco Mfg.

Corporation (the “Company”) as of January 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the years then ended, and the related notes and schedules (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Corporation (the “Company”) as of January 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the years then ended, and the related notes and schedule (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of January 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting included in Item 9A.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of slow-moving and obsolete inventories

As described in Note 1 to the financial statements, the Company’s inventories balance was $58.4 million as of January 31, 2024.

As described in Note 1 to the consolidated financial statements, the Company’s inventories balance was $55.6 million as of January 31, 2025.

Inventories are 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.

The valuation adjustments of 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.

We identified the auditing of the inventory valuation of slow-moving and obsolete inventories as of January 31, 2024 as a critical audit matter.

The Company’s determination of the valuation of slow-moving and obsolete inventory required a high degree of management judgment and subjectivity, which in turn led to especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

The primary procedures we performed to address this critical audit matter included:

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

The Company’s determination of the valuation of slow-moving and obsolete inventories required a high degree of management judgment and subjectivity, which in turn led to especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

We have identified auditing this estimate as a critical audit matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included evaluating the design and testing the operating effectiveness of internal controls related to the Company’s valuation of slow-moving and obsolete inventories.

Our audit procedures related to the valuation of slow-moving and obsolete inventories included the following, among others:

• Testing management’s process for determining the valuation of inventories, including:

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◦ Evaluating the reasonableness of the significant assumptions used by management, including those related to forecasted inventory usage and backlog.

◦ Testing the completeness, accuracy, and relevance of the underlying data of the system-generated reports used by management.

◦ Testing the mathematical accuracy and calculations related to the application of Company policies specific to inventory write-down methodologies and percentages by inventory categories.

◦ Performing inquiries with non-financial personnel, including sales and production employees, regarding obsolete or discontinued inventory models, cancelled sales orders and other factors to corroborate management’s assumptions regarding qualitative judgments about discontinued, slow moving and obsolete inventories.

◦ Testing the completeness, accuracy, and relevance of the underlying data of the system-generated information produced and used by management.

◦ Testing the mathematical accuracy and calculations related to specific inventory write-down methodologies and percentages by inventory categories

◦ Performing inquiries with non-financial personnel, including sales and production employees, regarding obsolete or discontinued inventory, cancelled sales orders, and other factors to corroborate management’s assumptions regarding qualitative judgments about discontinued, slow moving, and obsolete inventories.

• Testing the reasonableness of management’s assumptions used in determining the valuation of slow-moving and obsolete inventories by:

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13,004 23,161

Other receivables 20 68

Income tax receivable 4,060 —

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Total current assets 102,173 89,026

Property, plant, and equipment

Land 3,731 3,731

Land improvements 694 686

Buildings and building improvements 51,576 51,310

Machinery and equipment 114,400 113,662

Leasehold improvements 523 983

Total property, plant, and equipment 170,924 170,372

Less accumulated depreciation and amortization 136,356 135,810

Net property, plant, and equipment 34,568 34,562

Property, plant, and equipment, net 36,428 34,568

Operating lease right-of-use assets 35,593 6,508

Deferred income tax assets 6,634 7,800

Deferred income tax assets, net 5,821 6,634

Other assets 11,931 9,709

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Non-current liabilities

Accrued self-insurance 650 1,050

Accrued retirement benefits 9,429 10,676

Income tax payable 128 79

Accrued self-insurance retention 780 650

Accrued pension expenses 6,746 9,429

Income tax payable, less current portion 200 128

Long-term debt, less current portion 3,878 4,136

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Accumulated deficit ( 8,867 ) ( 29,048 )

Accumulated other comprehensive loss ( 1,310 ) ( 2,360 )

Accumulated other comprehensive income (loss) 422 ( 1,310 )

Total stockholders’ equity 109,265 91,179

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Income before income taxes 28,424 29,240

Income tax expense (benefit) 7,330 ( 8,504 )

Income tax expense 6,780 7,330

Net income $ 21,644 $ 21,910

Cash dividends declared per common share:

$ 0.09 $ 0.02

Net income per common share:

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Comprehensive

Loss Total Stockholders' Equity

Income (Loss) Total Stockholders' Equity

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

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— — — — 1,050 1,050

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

Cash dividends — — — ( 327 ) — ( 327 )

Shares vested and others 136,329 2 ( 112 ) — — ( 110 )

Stock compensation expense — — 595 — — 595

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Stock compensation expense — — 395 — — 395

Stock repurchased ( 342,026 ) ( 4 ) ( 3,806 ) — — ( 3,810 )

Balance at January 31, 2025 16,087,082 $ 161 $ 117,549 $ ( 8,867 ) $ 422 $ 109,265

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Net income $ 21,644 $ 21,910

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

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

Depreciation and amortization 5,690 5,097

Amortization of debt issuance costs 72 115

Non-cash lease income ( 694 ) ( 543 )

Provision for doubtful accounts — 56

(Gain) loss on sale of property, plant and equipment 4 ( 2 )

Non-cash lease expense (income) 1,022 ( 694 )

Deferred income taxes 230 800

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Defined benefit plan, recognized net loss due to settlements — 375

Amortization of net actuarial (gain) loss for pension plans ( 4 ) 437

Amortization of net actuarial gain for pension plans ( 142 ) ( 4 )

Decrease in non-cash surrender value of life insurance policies ( 982 ) ( 14 )

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Trade accounts receivable 10,157 ( 4,726 )

Other receivables 48 50

Inventories 2,724 9,035

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Accounts payable and accrued liabilities ( 1,087 ) ( 4,012 )

Net cash provided by (used in) operating activities 26,960 ( 3,788 )

Net cash provided by operating activities 33,128 26,960

Investing activities

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Repayment of long-term debt ( 23,414 ) ( 59,396 )

Common stock repurchase ( 3,810 ) —

Tax withholding payments on share-based compensation ( 412 ) ( 110 )

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Cash dividend paid ( 1,463 ) ( 327 )

Net cash (used in) provided by financing activities ( 17,972 ) 6,818

Net increase (decrease) in cash 4,229 ( 302 )

Net cash used in financing activities ( 5,984 ) ( 17,972 )

Net increase in cash 21,581 4,229

Cash at beginning of year $ 5,286 $ 1,057

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Cash paid during the year for:

Interest $ 2,679 $ 1,979

Income tax $ 6,316 $ 67

Interest, net $ 349 $ 2,679

Income tax paid $ 10,707 $ 6,316

Property, plant and equipment acquired and not yet paid at end of year $ 1,754 $ 493

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The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.

Sales to the Company’s recurring customers are generally made on open account with terms consistent with the industry.

Sales to the Company’s recurring customers are generally made on open accounts with terms consistent with the industry.

Credit is extended based on an evaluation of the customer’s financial condition and payment history.

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A substantial percentage of the Company’s receivables come from low-risk government entities.

No customer accounted for more than 10% of the Company's accounts receivable at January 31, 2024 and 2023.

The Company had two customers with balances greater than 10% of the Company's accounts receivable at January 31, 2025.

The majority of their outstanding balances were paid off subsequent to year ended January 31, 2025.

There were no customers accounted for more than 10% of the Company's accounts receivable at January 31, 2024.

Because of the short time between shipment and collection, the net carrying value of receivables approximates the fair value for these assets.

No customer exceeded 10% of the Company’s net sales for fiscal years ended January 31, 2024 and 2023.

No customer exceeded 10% of the Company’s net sales for fiscal years ended

January 31, 2025 and 2024.

Foreign net sales were approximately 12.3 % and 4.7 % of the Company’s net sales for fiscal years 2025 and 2024, respectively.

Cash and Cash Equivalents

Cash consists of cash on hand, and the Company has approximately $ 26.9 million in cash and cash equivalents as of January 31, 2025.

Outstanding checks, representing a book overdraft, are classified in accounts payable on the accompanying consolidated balance sheets and in operating activities in the accompanying consolidated statements of cash flows.

The Company classifies highly liquid investments with original maturities of three months or less as cash and cash equivalents.

Significant concentrations of credit risk may arise from the Company’s cash maintained at PNC bank, as from time to time cash balances may exceed the FDIC limits.

Outstanding checks are classified as a reduction in cash.

Fair Values of Financial Instruments

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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.

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Repair and maintenance expense were $ 2.3 million and $ 1.8 million for fiscal years ended January 31, 2025 and 2024, respectively.

Property, plant, and equipment purchased during the year that remains unpaid were $ 493,000 and $ 634,000 as of January 31, 2024 and 2023, respectively.

Property, plant, and equipment purchased during the year that remains unpaid were $ 1.8 million and $ 0.5 million as of January 31, 2025 and 2024, respectively.

The Company has established asset retirement obligations related to leased manufacturing facilities.

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Balance at beginning of period $ 212 $ 205

Decrease in obligation — —

Increase in obligation 200 —

Accretion expense 33 7

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Net Income per Share

For fiscal year 2024, net income per share is calculated by dividing net income by the diluted weighted-average number of common shares outstanding.

The Company computes net income per share attributable to common stockholders by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares, determined using the treasury-stock method.

For purposes of the diluted income per share calculation, restricted stock units are considered to be potential common shares.

There were no anti-dilutive shares included in the calculation of net income per share for fiscal periods disclosed.

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

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Environmental Costs

The Company is subject to numerous environmental laws and regulations in the various jurisdictions in which it operates that (a) govern operations that may have adverse environmental effects, such as the discharge of materials into the environment, as well as handling, storage, transportation and disposal practices for solid and hazardous wastes, and (b) impose liability for

response costs and certain damages resulting from past and current spills, disposals or other releases of hazardous materials.

Normal, recurring expenses related to operating the Company's factories in a manner that meets or exceeds environmental laws and regulations are matched to the cost of producing inventory.

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The Company recorded warranty reserves of $ 350,000 as of January 31, 2025 and 2024, as other long-term liabilities in the accompanying consolidated balance sheets.

The current portion of the warranty reserve were $ 150,000 and $ 250,000 as of January 31, 2024 and 2023, respectively, and included in other accrued liabilities in the accompanying consolidated balance sheets.

The current portion of the warranty reserve were $ 150,000 as of January 31, 2025 and 2024, and included in other accrued liabilities in the accompanying consolidated balance sheets.

Self-Insurance

In fiscal 2025 and 2024, the Company was self-insured for product liability losses up to $ 250,000 per occurrence, workers’ compensation losses up to $ 250,000 per occurrence, general liability losses up to $ 50,000 per occurrence and auto liability losses up to $ 50,000 per occurrence.

Actuaries assist the Company in determining its liability for the self-insured component of claims, which have been discounted to their net present value utilizing a discount rate of 4.00 % in both fiscal 2024 and fiscal 2023.

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 of $ 770,000 at January 31, 2024 in the accompanying consolidated balance sheets.

The actuarial estimated liability for the self-insured component of claims was discounted to their net present value utilizing a discount rate of 4.0 % in both fiscal 2025 and fiscal 2024.

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 of $ 900,000 and $ 770,000 at January 31, 2025 and 2024, respectively, in the accompanying consolidated balance sheets.

The current portion of the self-insurance reserve was $ 120,000 as of January 31, 2025 and included in other accrued liabilities in the accompanying consolidated balance sheets.

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The Company recognizes stock-based compensation cost for shares that are expected to vest, on a straight-line basis, over the requisite service period of the award.

Between 1983 and 2003, the Company issued approximately $ 122.0 million in stock dividends for which the reductions in retained earnings were offset by increases to additional paid-in capital.

Accumulated Other Comprehensive Loss, Net of Tax

The following table summarizes the changes in accumulated balances of other comprehensive loss (in thousands) for the years ended January 31, 2024 and 2023:

Accumulated Other Comprehensive Income (Loss), Net of Tax

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) (in thousands) for the years ended January 31, 2025 and 2024:

Balance as of beginning of year $ ( 1,310 ) $ ( 2,360 )

Other comprehensive income before reclassifications 1,874 679

Amounts reclassified from accumulated comprehensive loss 371 507

Amounts reclassified from accumulated comprehensive (income) loss ( 142 ) 371

Net current period other comprehensive income 1,732 1,050

Balance as of end of year $ 422 $ ( 1,310 )

The reclassifications out of accumulated other comprehensive loss of $ 371,000 and $ 507,000 for the years ended January 31, 2024 and 2023, respectively, related to amortization of actuarial losses and settlements (See Note 4) .

The reclassifications out of accumulated other comprehensive (income) loss of $( 142,000 ) and $ 371,000 for the years ended January 31, 2025 and 2024, respectively, related to amortization of actuarial losses and settlements (See Note 4) .

The reclassifications were included in pension expense in the accompanying consolidated statements of income.

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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.

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.

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

For product produced by and sourced from third parties, management has determined that it is the principal in all cases, since it (i) bears primary responsibility for fulfilling the promise to the customer;

For product produced by and sourced from third parties, management has determined that it is the principal, since it (i) bears primary responsibility for fulfilling the promise to the customer;

(ii) bears inventory risk before and/or after the good or service is transferred to the customer;

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New Accounting Pronouncements

Recently Issued Accounting Pronouncements

ASU 2023-07 "Segment Reporting (Topic 280):

New Accounting Pronouncements Recently Adopted

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

Improvements to Reportable Segment Disclosures.

This ASU requires additional disclosures about reportable segments' expenses and other items on an interim and annual basis.

This guidance will be effective for annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025.

We do not believe it will have a material impact on our future financial statements.

Accounting Standard Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

In December 2023, the FASB issued ASU 2023-09, which requires more detailed income tax disclosures.

The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction.

The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively.

The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

We are evaluating the disclosure requirements related to the new standard.

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.

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.

The Company adopted ASU 2023-07 during the year ended January 31, 2025.

Refer to Note 11 for required disclosures.

Recently Issued Accounting Pronouncements

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

ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

In November 2024, the FASB issued this ASU which requires a public entity to disclose additional information about specific expense categories in the notes to financial statements on an annual and interim basis.

The amendments are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.

A public entity should apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements.

We are currently evaluating the impact that this guidance will have 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.

Outstanding balances (in thousands) for the Company’s long-term debt were as follows:

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Non-current portion $ 3,878 $ 4,136

The Company and Virco Inc., its wholly-owned subsidiary (the “Borrowers”) has a Revolving Credit and Security Agreement (the “Restated 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 May 19, 2023.

The Restated 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 $ 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 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 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;

The Company and Virco Inc., its wholly-owned subsidiary (collectively, the “Borrowers”) have 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 November 22, 2024.

The Credit Agreement as currently in effect permits the Company to issue cash dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $ 8.0 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 $ 60.0 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 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 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 January 31, 2025.

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

Approximately $ 30.0 million and $ 12.9 million were available for borrowing as of January 31, 2024 and 2023, respectively.

Interest rates were 10.50 % and 9.25 % as of January 31, 2024 and 2023, respectively.

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

As of January 31, 2024 and 2023, the Company's outstanding debt balance on the revolving credit line were zero and 17.1 million, respectively.

Approximately $ 28.0 million was available for borrowing as of January 31, 2025.

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 Company did not have an outstanding amount under the

Credit Agreement as of January 31, 2025.

The Company also incurred a fee on the unused portion of the revolving line of credit at a rate of 0.375 % through September 30, 2024 and 0.250 % thereafter.

On November 22, 2024, the Company entered into Amendment No.

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

5”) with PNC, with an effective date of October 1, 2024.

Amendment No.

5 amended the Credit Agreement and the secured revolving line of credit provided to the Company by PNC to reflect the following material changes:

Reduced the facility fee on the unused portion of the revolving line of credit to 0.250 % from 0.375 % per annum, commencing October 1, 2024;

Increased limits on permitted acquisitions (as defined in the Credit Agreement) from $ 5 million to $ 8 million during the term of the Credit Agreement;

Increased limits on cash dividends and common stock repurchase payments from $ 5 million to $ 8 million in the aggregate during any fiscal year.

On April 9, 2025, the Company entered into Amendment No.

6 to the Credit Agreement with PNC Bank, which established a new category of permitted share repurchases in an amount up to $ 7.5 million, which is in addition to the dollar limits on permitted share repurchases under the Credit Agreement discussed above.

The share repurchases under the new category must occur during the fiscal year ended January 31, 2026, may not occur while any Default or Event of Default exists or would result from such repurchases, and must be made solely from cash on hand and not from the proceeds of advances under the Credit Facility.

The permitted share repurchases under this new category are also not counted as “Restricted Payments” when calculating the Company’s compliance with the Fixed Charge Coverage Ratio covenants in the Credit Agreement.

In addition to the Company's revolving credit line, the Company also carries a mortgage on a manufacturing building in Conway Arkansas.

4 unchanged sentences

Thereafter 2,735

Management believes that the carrying value of debt approximated fair value at January 31, 2024 and 2023, as majority of the long-term debt bears interest at variable rates based on prevailing market conditions.

The Company also carries a mortgage on a manufacturing building in Conway Arkansas at an annual fixed rate of 4.00 %.

As of January 31, 2025 and 2024, the Company had no loan balance under the revolving credit facility with PNC Bank.

The PNC facility bears variable interest rates based on prevailing market conditions.

Management believes that the carrying value of debt would approximate fair value at January 31, 2025 and 2024 if we had outstanding loan balances under the PNC facility.

Retirement Plans

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The Company and its subsidiaries cover all employees hired prior to December 31, 2003 under the Employee Plan, which is a qualified noncontributory defined benefit retirement plan.

Benefits under the Employee Plan are based on years of service and

career average earnings.

Benefits under the Employee Plan are based on years of service and career average earnings.

Benefit accruals under the Employee Plan were frozen effective December 31, 2003.

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Substantially all assets, consisting of life insurance contracts, equity investments, and cash equivalents, securing the VIP Plan are held in a rabbi trust.

The cash surrender values of the life insurance policies are included in other assets and money market funds in the accompanying consolidated balance sheets.

The cash surrender values of the life insurance policies are included in other assets and money market funds in the accompanying

consolidated balance sheets.

The cash surrender values of the life insurance policies securing the VIP Plan were $ 562,000 and $ 620,000 at January 31, 2025 and 2024, respectively.

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Because the Company’s future benefit accruals for both benefit plans were frozen in 2003, the compensation increase assumption had no impact on pension expense, accumulated benefit obligation or projected benefit obligation for the years ended January 31, 2025 or 2024.

The assumed rate of return on plan assets represents an estimate of long-term returns available to investors who hold a mixture of stocks, bonds, and cash equivalent securities.

When setting its expected return on plan asset assumptions, the Company considers long-term rates of return on various asset classes (both historical and forecasted, using data collected from various sources generally regarded as authoritative) in the context of expected long-term average asset allocations for its defined benefit pension plan.

The assumed rate of return for both benefit plan assets represents an estimate of long-term returns available to investors who hold a mixture of stocks, bonds, and cash equivalent securities.

The Company maintains a trust for and funds the pension obligations for the Employee Plan.

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The Retirement Plan Committee has established target asset allocations for its investment advisors, who invest the trust assets in a variety of institutional collective trust funds.

The Company’s investment advisors have developed a funding strategy that moves fund asset allocation from equity and other investments to fixed income instruments designed to mirror the changes in discount rates as the Plan becomes more fully funded.

At January 31, 2025, approximately 25.5 % of the trust assets were held in these investments.

The Retirement Plan Committee receives quarterly reports addressing investment returns, funded status of the plan and progress on the glidepath to fully funded status from the investment advisors and meets periodically with them to discuss investment performance.

At January 31, 2024 and 2023, the amount of the plan assets invested in bond or short-term investment funds was 26 % and 29 %, respectively, and the balance of the trust was held in equity funds or other investments.

The Retirement Plan Committee receives quarterly reports addressing investment returns, funded status of the Retirement Plan and progress on the glidepath to fully funded status from the investment advisors and meets periodically with them to discuss investment performance.

At January 31, 2025 and 2024, the amount of the Retirement Plan assets invested in bond or short-term investment funds was 26.3 % and 26.0 %, respectively, and the balance of the trust was held in equity funds or other investments.

The trust does not hold any Company stock.

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Contributions during fiscal 2026 will depend upon actual investment results and benefit payments but are anticipated to be approximately $ 389,000 .

At January 31, 2024, accumulated other comprehensive loss of approximately $ 1.3 million, net of tax, is attributable to the pension plans.

At January 31, 2025, accumulated other comprehensive gain of approximately $ 422,000 , net of tax, is attributable to the pension plans.

The following tables set forth (in thousands) the combined funded status of the Company’s pension plans at January 31, 2025 and 2024:

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Plan settlement — —

Benefits paid ( 6,895 ) ( 2,004 )

Benefits paid (a) ( 1,047 ) ( 6,895 )

Benefit obligation at end of year 26,824 27,385

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Settlements — —

Benefits paid ( 6,895 ) ( 2,004 )

Benefits paid (a) ( 1,047 ) ( 6,895 )

Fair value at end of year 21,039 19,111

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Accrued benefit liability $ ( 5,785 ) $ ( 8,274 )

Accumulated other compensation loss 495 1,910

Accumulated other compensation (gain) loss ( 1,822 ) 495

Net amount recognized $ ( 7,607 ) $ ( 7,779 )

Items not yet Recognized as a Component of Net Periodic Pension Expense, included in AOCI

Unrecognized net actuarial loss $ 495 $ 1,910

Items not yet Recognized as a Component of Net Periodic Pension (Income) Expense, included in AOCI

Unrecognized net actuarial (gain) loss $ ( 1,822 ) $ 495

Unamortized prior service costs — —

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$ ( 1,822 ) $ 495

(a) During the third quarter ended October 2023, the Company sold approximately $ 5.3 million of the investment assets held in the Trust and the proceeds from the sale was used to purchase annuities on behalf of 49 participants currently receiving monthly benefits and 89 vested terminated participants.

Combined Employee Retirement Plans

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Prior service cost — —

Amortization of gain (loss) 4 ( 507 )

Amortization of gain 142 4

Recognized loss due to settlement — ( 375 )

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Prior service cost $ — $ —

Net actuarial loss (gain) $ ( 141 ) $ 6

Net actuarial gain $ ( 363 ) $ ( 141 )

$ ( 363 ) $ ( 141 )

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Amortization of prior service cost — —

Recognized net actuarial loss 12 521

Recognized net actuarial (gain) loss ( 125 ) 12

Benefit cost $ 451 $ 1,008

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Discount rate 5.55 % - 5.60 %

5.15 % - 5.20 %

Rate of compensation increase N/A N/A

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Federated Herme Gove Oblig 260 327

PNC Govt Money Fund — —

Vanguard INTM Term Investment 771 675

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Ishares Emerging Markets 17 15

Ishares MCSI RAFE 39 1,857

Ishares MCSI EAFE 42 39

Ishares S&P Index 19 15

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Total Level 1 Investments $ 18,564 $ 16,970

During the third quarter ended October 2023, the Company sold approximately $ 5.3 million of the investment assets held in the Trust and the proceed from the sale was used to purchase annuities on behalf of 49 participants currently receiving monthly benefits and 89 vested terminated participants.

In addition to the holdings above, the Employee Plan has a holding in a mutual fund investment, Managed Investment Fund.

The mutual fund investment is valued using the net asset value (“NAV”) as a practical expedient and is not required to be categorized in the fair value hierarchy table.

The total fair value of this investment was $ 2.2 million as of January 31, 2024 and 2023, and is not included in the table above.

The total fair value of this investment was $ 2.5 million and $ 2.2 million as of January 31, 2025 and 2024, and is not included in the table above.

In relation to this investment, there is no unfunded commitments, and the shares can be redeemed on a daily basis with minimal restrictions.

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At January 31, 2025 and 2024, the plan held 1,058,400 shares and 1,286,586 shares of the Company’s common stock, respectively.

Effective January 1, 2022, the Company initiated a discretionary employer match, in the Company Stock Fund, limited to 100 % of first 1 % and 50 % of next 5 % of the amount deferred by the employee.

The Company may make a discretionary employer match in the Company Stock Fund.

The Company may also make additional employer contributions to the Plan at its sole discretion.

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The Company has purchased split-dollar life insurance on the lives of the remaining covered participants.

Death benefits due to participants are approximately $ 1.6 million.

Death benefits due to participants are approximately $ 1.3 million at January 31, 2025.

Cash surrender values of these policies, which are included in other assets in the accompanying consolidated balance sheets, were $ 0.9 million and $ 1.1 million at January 31, 2025 and 2024, respectively.

Death benefits payable under the policies were approximately $ 2.2 million and $ 2.8 million at January 31, 2025 and 2024, respectively.

Death benefits received under the Plan in excess of the benefit obligation will be retained in the trust and used to secure and fund

benefits payable under the VIP Pension Plan.

Death benefits received under the Plan in excess of the benefit obligation will be retained in the trust and used to secure and fund benefits payable under the VIP Pension Plan.

The Company maintains a rabbi trust to hold assets related to the Dual Option Life Insurance Plan.

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Stock Incentive Plans

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

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

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

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

During fiscal year 2024, the Company granted zero awards to non-employee directors, vested 93,600 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of January 31, 2024, there were approximately 537,925 shares available for future issuance under the 2019 Plan.

During fiscal year 2025, the Company granted 16,066 awards to non-employee directors, vested 164,110 shares according to their terms and forfeited 0 shares under the 2019 Plan.

As of January 31, 2025, there were 521,859 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 statement of operations during fiscal years ended January 31, is as follows:

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These amounts are presented as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

The income tax expense (benefit) for fiscal years ended January 31, 2024 and 2023 is reconciled to the statutory federal income tax rates of 21 % for the tax years ended January 31, is as follows (in thousands):

The income tax expense for fiscal years ended January 31, 2025 and 2024 is reconciled to the statutory federal income tax rates of 21 % for the tax years ended January 31, is as follows (in thousands):

Statutory $ 6,011 $ 6,140

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Return to provision true-up 11 118

Income tax expense (benefit) $ 7,330 $ ( 8,504 )

Significant components of the expense (benefit) for income taxes attributed to continuing operations are as follows for the years ended January 31, is as follows (in thousands):

Income tax expense $ 6,780 $ 7,330

Significant components of the expense for income taxes attributed to continuing operations are as follows for the years ended January 31, is as follows (in thousands):

Federal $ 5,142 $ 5,567

3 unchanged sentences

Change in valuation allowance ( 15 ) ( 613 )

800 ( 8,711 )

Income tax expense (benefit) $ 7,330 $ ( 8,504 )

Income tax expense $ 6,780 $ 7,330

Deferred tax assets and liabilities are comprised of the following as of January 31, respectively, as follows (in thousands):

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federal tax purposes and $ 6.3 million for state income tax purposes, expiring at various dates through January 31, 2041.

During the fiscal year ended January 31, 2023, the Company was profitable and returned to a cumulative 3-year profit in the fourth quarter.

The Company benefited from continued growth in order rates, growth in sales volume, and improvements in gross margin.

The Company utilized a material portion of its federal and certain state net operating loss carryforwards (“NOL”) in fiscal 2023 and anticipates that all federal NOL may be utilized by the end of fiscal 2024.

During the fourth quarter of the year ended January 31, 2023, based on this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined the realization of a majority of the net deferred tax assets met the more-likely-than-not criteria and reversed a majority of its valuation allowances against its net deferred tax assets.

At January 31, 2023, the Company recorded a partial valuation allowances of $ 864,000 on certain state NOL to reduce the carrying amount of deferred tax assets to an amount that is more-likely-than-not to be realized.

The net change in the valuation allowance for the year ended January 31, 2023, was a decrease of $ 10.5 million.

At January 31, 2023, the Company has NOL of approximately $ 2.7 million for U.S.

federal tax purposes, with no expirations, and $ 25.1 million for state income tax purposes, expiring at various dates through January 31, 2041.

The net change in the valuation allowance for the year ended January 31, 2024, was a decrease of $ 613,000 .

At January 31, 2024, the Company had no NOL for U.S.

federal tax purposes, and $ 9.0 million for state income tax purposes, expiring at various dates through January 31, 2041.

The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended January 31, respectively, as follows (in thousands):

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The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense which is consistent with the recognition of the items in prior reporting.

The Company had recorded a liability for interest and penalties related to unrecognized tax benefits of $ 37,000 at January 31, 2024, and $ 16,000 at January 31, 2023.

The Company had recorded a liability for interest and

penalties related to unrecognized tax benefits of $ 50,000 at January 31, 2025, and $ 37,000 at January 31, 2024.

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

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Leases and Commitments

The Company has operating leases on real property, equipment, and automobiles, expiring at various dates through 2026.

The Company has operating leases on real property, equipment, and automobiles, expiring at various dates through fiscal 2031.

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

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

Pursuant to ASC 842- Leases, the Company uses the implicit rate when readily determinable, or the incremental borrowing rate.

Pursuant to Accounting Standards Codification (ASC) 842 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.

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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, manufacturing facility and distribution facility located in Torrance, CA, currently with a remaining lease term through April 2025.

The Company has an operating lease for its corporate office, manufacturing facility and distribution facility located in Torrance, CA, currently with a remaining lease term through September 2030.

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

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Year ending January 31,

Thereafter 6,818

Remaining balance of lease payments 50,577

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Difference between undiscounted cash flows and discounted cash flows $ 12,897

On July 23, 2024, the Company entered into a new lease agreement (the “ Lease ”) with Starboard Distribution Center, LLC which extends the Company’s tenancy at its 560,000 sq.

office, manufacturing and warehouse facility in Torrance, California.

The Lease extends the tenancy for 65 months, covering the period from May 1, 2025 through September 30, 2030.

Under the Lease, the monthly base rent will be abated for the initial 5-month period from May 1, 2025 to September 30, 2025, then is set at $ 726,700 for October 1, 2025 through April 30, 2026, with subsequent increases of 3.5 % every 12 months thereafter.

The Lease also provides for a tenant improvement allowance of up to $ 1.7 million to be used by December 31, 2026.

The Landlord has the right to terminate the Lease upon customary events of default.

In connection with this lease agreement, in the second quarter ended July 31, 2024, the Company recorded approximately $ 33.0 million (the present value of the future lease commitments) as an operating lease liability, and a corresponding ROU asset.

Contingencies

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The Company is subject to contingencies pursuant to environmental laws and regulations that in the future may require the Company to take action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the Company or other parties.

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

$ 50,000 per occurrence.

The Company has purchased insurance to cover losses in excess of the retention 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 of $ 770,000 and $ 1.3 million at January 31, 2024 and 2023, respectively, based upon the Company’s estimated payout period of five years using a 4.0 % discount rate for both years.

The actuarial estimate of its total expected future losses for liability claims and recorded a liability equal to the net present value of $ 0.9 million and $ 0.8 million at January 31, 2025 and 2024, respectively, based upon the Company’s estimated payout period of five years using a 4.0 % discount rate for both years.

The estimated liabilities were included in the current and long-term portion of liabilities of the accompanying consolidated balance sheets.

Workers’ compensation, automobile, general and product liability claims may be asserted in the future for events not currently known by management.

2 unchanged sentences

Year ending January 31,

Thereafter 55

Discount to net present value ( 75 )

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Non-current portion $ 350 $ 350

Property, Plant, and Equipment

Property, plant, and equipment consisted of the following (in thousands):

Land $ 3,731 $ 3,731

Land improvements 706 694

Buildings and building improvements 52,030 51,576

Machinery and equipment 119,972 114,400

Leasehold improvements 657 523

Property, plant and equipment, gross 177,096 170,924

Less accumulated depreciation and amortization ( 140,668 ) ( 136,356 )

Property, plant and equipment, net $ 36,428 $ 34,568

Depreciation and amortization expenses related to property, plant, and equipment recorded within cost of goods sold was $ 4.3 million and $ 3.8 million for the years ended January 31, 2025 and 2024, respectively.

Depreciation and amortization expenses related to property, plant, and equipment recorded within selling, general, and administrative expenses was $ 1.3 million for both the fiscal years ended January 31, 2025 and 2024.

Segment Information

The Company operates in one segment and has one reportable segment.

The Company determines operating segments based on how its Chief Operating Decision Maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance.

The Company’s CODM is its Senior Executives, who review its operating results on a consolidated basis.

The Company’s CODM regularly reviews financial information presented on a consolidated basis.

The CODM uses consolidated revenue, gross profit, net income to allocate operating and capital resources and assess performance by comparing actual results to historical results and previously forecasted financial information.

The Company’s measure of segment assets is reported on the consolidated balance sheets as total assets.

Subsequent Events

On February 27, 2024, Virco Mfg.

On March 6, 2025, Virco Mfg.

Corporation (“Virco”) declared a cash dividend for the Company’s first fiscal quarter of $ 0.025 per share on each outstanding share of common stock.

The dividend is payable on April 11, 2025 to stockholders of record of the common stock as of the close of business on March 26, 2025.

On April 9, 2025, the Company entered into Amendment No.

6 to the Credit Agreement with PNC Bank, which established a new category of permitted share repurchases in an amount up to $ 7,500,000 , which is in addition to the dollar limits on permitted share repurchases under the Credit Agreement discussed above.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data