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Item 8. Financial Statements and Supplementary Data

2026-04-08 compared with 2025-04-14 · 202 added, 158 removed, 669 unchanged (35% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (Moss Adams LLP Los Angeles, CA, PCAOB ID:

Report of Independent Registered Public Accounting Firm (Baker Tilly US LLP Los Angeles, CA PCAOB ID:

Consolidated Balance Sheets as of January 31, 202 6 and 2025

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As described in Note 1 to the consolidated financial statements, the Company’s inventories balance was $56.7 million as of January 31, 2026.

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.

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

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.

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◦ Performing a sensitivity analysis to determine the percentage increase or decrease that would materially impact the value recorded.

/s/ Moss Adams LLP

/s/ Baker Tilly US LLP

Los Angeles, California

2 unchanged sentences

Consolidated Balance Sheets

(In thousands, except share and par value data)

(In thousands)

Current assets

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Accrued compensation and employee benefits 11,434 11,064

Income tax payable — 145

Current portion of long-term debt 269 258

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

issued and outstanding 16,087,082 shares in 2025 and 16,347,314 shares in 2024

issued and outstanding 15,761,141 shares at January 31, 2026, 16,087,082 shares at January 31, 2025

Additional paid-in capital 113,761 117,549

Accumulated deficit ( 7,875 ) ( 8,867 )

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

Accumulated other comprehensive (loss) income ( 112 ) 422

Total stockholders’ equity 105,931 109,265

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Net income $ 2,568 $ 21,644

Other comprehensive income

Pension adjustments (net of $ 584 tax expense in 2025 and $ 365 tax expense in 2024)

Other comprehensive (loss) income

Pension adjustments (net of tax adjustments of $( 179 ) in 2026 and $ 584 in 2025)

( 534 ) 1,732

Comprehensive income $ 2,034 $ 23,376

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Comprehensive

Income (Loss) Total Stockholders' Equity

(Loss) Income Total Stockholders' Equity

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

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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 $ 2,568 $ 21,644

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

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

Depreciation and amortization 6,140 5,690

Non-cash lease expense 3,994 1,022

Provision for credit losses 53 —

Amortization of debt issuance costs 139 72

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

Deferred income taxes 563 230

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Income taxes 224 ( 4,133 )

Prepaid expenses and other current assets ( 370 ) ( 46 )

Prepaid expenses and other assets ( 699 ) ( 370 )

Accounts payable and accrued liabilities ( 11,509 ) ( 1,087 )

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

Net cash (used in) provided by operating activities ( 841 ) 33,128

Investing activities

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Repayment of long-term debt ( 258 ) ( 23,414 )

Common stock repurchase ( 3,810 ) —

Common stock repurchased ( 4,000 ) ( 3,810 )

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

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Net cash used in financing activities ( 5,854 ) ( 5,984 )

Net increase in cash 21,581 4,229

Net (decrease) increase in cash ( 12,430 ) 21,581

Cash at beginning of year $ 26,867 $ 5,286

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Supplemental disclosures of cash flow information:

Cash paid during the year for:

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

Property, plant and equipment acquired and not yet paid at end of period $ 197 $ 1,754

Cash paid during the period for interest, net of interest income $ 300 $ 349

Cash paid during the period for income taxes, net of refunds $ 108 $ 10,707

Noncash investment in right-of-use assets in exchange for a lease liability $ 542 $ 34,456

See accompanying notes to consolidated financial statements.

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The educational sales market is extremely seasonal.

Historically, Virco ships approximately 50 % of its annual revenue in the months of June, July, and August.

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

In fiscal 2025, the Company started to return to the traditional seasonality and delivered approximately 47 % of annual sales in June, July, and August.

Historically, the Company ships approximately 50 % of its annual revenue in the months of June, July and August.

In fiscal 2025 the Company benefited from a large series of one-time, disaster recovery shipments that resulted in approximately $ 23.0 million of additional shipments, most of which were counter-seasonal.

In fiscal 2026, the Company returned to traditional seasonality and delivered approximately 49 % of annual sales in June, July, and August.

Restrictions imposed by the terms of the Company’s credit facility may limit the Company’s operating and financial flexibility (see Note 3 ).

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Estimates made by management include, but are not limited to, valuation of inventory;

recoverability of deferred tax assets and liabilities;

deferred tax assets and liabilities;

useful lives of property, plant and equipment;

liabilities under pension, warranty, self-insurance, and environmental claims;

liabilities under pension, warranty and self-insurance;

and the accounts receivable allowance for credit losses.

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

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.

As of January 31, 2026, three customers accounted for approximately 14 %, 11 % and 10 % of total accounts receivable.

The majority of the outstanding balances from these customers were collected subsequent to year end.

As of January 31, 2025, two customers each accounted for approximately 11 % of total accounts receivable.

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

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Fair Values of Financial Instruments

The fair values of the Company’s cash, accounts receivable, accounts payable and current portion of debt approximate their carrying amounts due to their short-term nature.

For fair value of debt, see Note 3 .

The fair values of the Company’s cash, accounts receivable, accounts payable and current portion of debt approximate their carrying amounts due to their short-term nature (see Note 3) .

Financial assets and liabilities measured at fair value on a recurring basis are classified in one of the three following categories, which are described below:

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Level 3 — Valuations based on inputs that are unobservable and involve management judgment and our own assumptions about market participants and pricing.

Financial assets measured at fair value on a recurring basis include assets associated with the Virco Employees Retirement Plan, and assets held in the Rabbi Trust securing the Company's Important Performers Retirement Plan (“VIP Plan”) and Split-dollar life insurance benefit program (see Note 4 ).

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

Financial assets measured at fair value on a recurring basis include assets associated with the Virco Employees Retirement Plan, and assets held in the rabbi trust securing the Company's Important Performers Retirement Plan (“VIP Plan”) and Split-dollar life insurance benefit program.

Money market funds and marketable securities held in a rabbi trust that are being used to satisfy the Company's obligations under its VIP Plan are treated as investments and are recorded in prepaid expenses and other current assets or other assets on the accompanying consolidated balance sheets based on the expected timing of settlement of the related obligations (see Note 4) .

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

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

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

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

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

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

The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.

The following table presents an updated breakdown of the Company’s net inventory (in thousands) as of January 31, 2025 and 2024 :

The following table presents a breakdown of the Company’s inventories:

(In thousands)

Finished goods $ 21,923 $ 19,599

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Inventories $ 56,735 $ 55,647

Property, Plant, and Equipment

Property, Plant and Equipment, Net

Property, plant and equipment are stated at cost, less accumulated depreciation and amortization.

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Repairs and maintenance that do not extend the life of an asset are expensed as incurred.

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 $ 1.8 million and $ 0.5 million as of January 31, 2025 and 2024, respectively.

Repair and maintenance expense was $ 1.3 million and $ 2.3 million for fiscal years ended January 31, 2026 and 2025, respectively.

Property, plant and equipment purchased during the year that remains unpaid were $ 197,000 and $ 1.8 million as of January 31, 2026 and 2025, respectively.

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

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Impairment is recorded based on the excess of the carrying amount of the impaired asset over the fair value.

Generally, fair value represents the Company’s expected future cash flows from the use of an asset or group of assets, discounted at a rate commensurate with the risks involved.

Generally, fair value represents the Company’s expected future cash flow from the use of an asset or group of assets, discounted at a rate commensurate with the risks involved.

There were no impairments for fiscal years ended January 31, 2026 and 2025.

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The Company recorded warranty reserves of $ 350,000 as of January 31, 2026 and 2025, as other long-term 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.

The current portion of the warranty reserves were $ 150,000 as of January 31, 2026 and 2025, and included in other accrued liabilities in the accompanying consolidated balance sheets.

Self-Insurance

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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 $ 850,000 and $ 900,000 at January 31, 2026 and 2025, 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.

The current portion of the self-insurance reserve was $ 120,000 as of January 31, 2026 and 2025, and is included in other accrued liabilities in the accompanying consolidated balance sheets.

Stock-Based Compensation Plans

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.

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:

Accumulated Other Comprehensive (Loss) Income, Net of Tax

The following table summarizes the changes in accumulated balances of other comprehensive (loss) income, net of income tax:

(In thousands)

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

Other comprehensive income before reclassifications 1,874 679

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

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

Other comprehensive (loss) income before reclassifications ( 197 ) 1,874

Amounts reclassified from accumulated comprehensive loss ( 337 ) ( 142 )

Net current period other comprehensive (loss) income ( 534 ) 1,732

Balance as of end of year $ ( 112 ) $ 422

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 out of accumulated other comprehensive income of $ 337,000 and $ 142,000 for the years ended January 31, 2026 and 2025, respectively, related primarily 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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New Accounting Pronouncements Recently Adopted

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

Improvements to Reportable Segment Disclosures.

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

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

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

Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740):

Improvements to Tax Disclosures.

In December 2023, the FASB issued this ASU amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation.

We adopted this ASU for the year ended January 31, 2026 and applied the amendments prospectively.

Adoption of the new standard did not impact our consolidated income statements, balance sheets, or statements of cash flows.

Refer to Note 6 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.

The Company evaluates all ASU's 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 2025-05, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.

In July 2025, the FASB issued this ASU which provides a practical expedient to assume that the conditions as of the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers.

This guidance is effective for annual reporting periods beginning after December 15, 2025, and for interim periods within those annual reporting periods, with early adoption permitted.

The amendments in ASU 2025-05 should be applied prospectively.

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

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

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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:

Outstanding balances for the Company’s long-term debt are as follows:

(In thousands)

Revolving credit line $ — $ —

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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.

The Credit Agreement was amended numerous times since its origination in December 2011, most recently on December 5, 2025.

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 ("FCCR") 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 FCCR, 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.

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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;

(i) a revolving line of credit with a Maximum Revolving Advance Amount 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 $ 10.0 million from January through June 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;

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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.

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

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.

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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.

The Company did not have an outstanding amount under the Credit Agreement as of January 31, 2026.

The interest rate at January 31, 2026 was 8.5 %.

The Company also incurred a fee on the unused portion of the revolving line of credit at a rate of 0.250 %.

On December 5, 2025, the Company entered into Amendment No.

7 to the Credit Agreement with PNC.

Amendment No.

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

Modify the stock repurchase window (originally from February 1, 2025 to January 31, 2026) such that the window is now from November 1, 2024 to October 31, 2025 for the $ 7.5 million of permitted share repurchases that are excluded from a) the FCCR testing, b) the Payment Conditions governing stock repurchases, and c) the trailing twelve months ("TTM") $ 8.0 million aggregate limit on stock repurchases and dividends.

Commencing with respect to the fiscal quarter ending October 31, 2025, modify the definition of Earnings Before Interest, Taxes, Depreciation, and Amortization as it relates to the FCCR testing to add back non-cash lease expense or subtract non-cash lease income for each TTM reporting period.

Reduce the Revolving Line of Credit limit by $ 10.0 million, except for the months of October, December, and January.

The maximum Revolving Line of Credit limit during June through August was reduced from $ 70.0 million to $ 60.0 million.

Reduce the $ 15.0 million seasonal over-advance to $ 10.0 million and limit to the months of January through June (removing access in the month of July).

In connection with this amendment, the Company paid fees totaling $ 20,000 which were capitalized as deferred financing costs and are included in other assets on the accompanying consolidated balance sheets.

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

6 to the Credit Agreement with PNC, 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.

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

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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.

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

The Company also carries a mortgage on a manufacturing building in Conway, Arkansas.

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

The outstanding amount under this note was $ 3.9 million as of January 31, 2026.

The long-term debt repayments are approximately as follow as of January 31, 2025 (in thousands):

Long-term debt repayments as of January 31, 2026 (in thousands) are as follows:

Year ending January 31,

Thereafter 2,420

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.

Management believes that the carrying value of debt approximated fair value at January 31, 2026 and 2025, as all of the long-term debt bears interest at variable rates based on prevailing market conditions, except the mortgage for the manufacturing building in Conway, Arkansas.

Retirement Plans

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

In September 2025, the Company's Board of Directors approved the termination of the VIP Plan.

The termination became effective on November 1, 2025.

The VIP Plan's benefit obligation is expected to be settled by offering lump sum distributions to participants funded by the liquidation of assets held in a rabbi trust during the fourth quarter of fiscal 2027.

Pension settlement charges related to the VIP Plan termination, which include the recognition of VIP Plan gains or losses recorded within accumulated other comprehensive (loss) income on the Company's consolidated balance sheets, are currently expected to be recognized during the fourth quarter of fiscal year 2027.

The Company anticipates that the termination will not materially impact the Company's consolidated financial statements.

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 $ 439,000 and $ 562,000 at January 31, 2026 and 2025, respectively.

Death benefits payable under life insurance policies held by the Plan were approximately $ 0.9 million and $ 1.3 million at January 31, 2025 and 2024, respectively.

Death benefits payable under life insurance policies held by the Plan were approximately $ 736,000 and $ 894,000 at January 31, 2026 and 2025, respectively.

Equity investments held in the rabbi trust to secure retirement benefits were $ 8.7 million and $ 8.4 million as of January 31, 2026 and 2025.

Assets held in the Rabbi Trust were included in the other non-current assets of the accompanying consolidated balance sheets.

As of January 31, 2026, rabbi trust assets of $ 6.8 million are included in prepaid expenses and other current assets on the accompanying balance sheet and are expected to be liquidated to fund the settlement of the VIP Plan pension obligation during the fourth quarter of fiscal year 2027.

Management intends to hold the remaining rabbi trust assets as long-term investments and as such they are included in other non-current assets on the accompanying balance sheet.

As of January 31, 2025, assets held in the rabbi trust were included in other non-current assets on the accompanying consolidated balance sheet.

Accounting policy regarding pensions requires management to make complex and subjective estimates and assumptions relating to amounts which are inherently uncertain.

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Contributions to the Qualified Plan Trust and benefit payments under the VIP Plan totaled $ 357,000 in fiscal 2026 and $ 623,000 in fiscal 2025.

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

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:

Combined Employee Retirement Plans

1/31/2025 1/31/2024

Contributions during fiscal 2027 will depend upon actual investment results and benefit payments but are anticipated to be $ 0 .

At January 31, 2026 and 2025, accumulated other comprehensive (loss) income, net of tax, attributable to the pension plans was approximately $( 112,000 ) and $ 422,000 , respectively.

The following tables set forth the combined funded status of the Company’s pension plans:

Employee Retirement Plans

(In thousands)

Change in Benefit Obligation

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Amendments — —

Actuarial gains ( 765 ) ( 115 )

Actuarial losses (gains) 4 ( 765 )

Plan settlement ( 60 ) —

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

Prior service cost 176 —

Benefits paid ( 2,153 ) ( 1,047 )

Benefit obligation at end of year 26,099 26,824

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Settlements — —

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

Benefits paid ( 2,153 ) ( 1,047 )

Fair value at end of year 19,861 21,039

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Current liabilities $ ( 6,357 ) $ ( 384 )

Non-current liabilities ( 5,401 ) ( 7,960 )

Non-current assets (liabilities) 119 ( 5,401 )

Accrued benefit cost $ ( 6,238 ) $ ( 5,785 )

1 unchanged sentence

Accrued benefit liability $ ( 6,238 ) $ ( 5,785 )

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

Accumulated other comprehensive gain ( 1,109 ) ( 1,822 )

Net amount recognized $ ( 7,347 ) $ ( 7,607 )

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

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

Unrecognized net actuarial gain $ ( 1,285 ) $ ( 1,822 )

Unamortized prior service costs 176 —

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$ ( 1,109 ) $ ( 1,822 )

(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

1/31/2025 1/31/2024

Employee Retirement Plans

(In thousands, except percentages)

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

Net gain $ ( 2,458 ) $ ( 1,044 )

Net loss (gain) $ 200 $ ( 2,458 )

Prior service cost 176 —

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Amortization of prior service cost — —

Recognized net actuarial (gain) loss ( 125 ) 12

Recognized net actuarial gain ( 363 ) ( 125 )

Benefit cost $ 135 $ 451

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Discount rate 5.55 % - 5.60 %

5.15 % - 5.20 %

Expected return on plan assets 6.00 % 6.00 %

1 unchanged sentence

The Employee Plan held no Level 2 or 3 investments at January 31, 2026 and 2025.

The following table sets for the fair value of the Level 1 investments for the Employee Plan as of January 31, 2025 and 2024 (in thousands):

The following table sets forth the fair value of the Level 1 investments for the Employee Plan:

Fair Value Measurements of Plan Assets

Employee Plan

1/31/2025 1/31/2024

(In thousands)

Level 1 Measurement

7 unchanged sentences

Ishares Emerging Markets 23 17

Ishares MCSI EAFE 42 39

Ishares MSCI EAFE 53 42

Ishares S&P Index 22 19

4 unchanged sentences

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 $ 2.5 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.

The total fair value of this investment was $ 133,000 and $ 2.5 million as of January 31, 2026 and 2025, and is not included in the table above.

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

Events that may lead to a restriction to transact with the fund is not considered probable.

8 unchanged sentences

The total amount of Company contributions cannot exceed the amount deductible by the Company for federal income tax purposes.

For the fiscal years ended January 31, 2025 and 2024, the compensation costs incurred for employer match was $ 1.7 million and $ 1.5 million, respectively.

For the fiscal years ended January 31, 2026 and 2025, the compensation costs incurred for employer match were $ 2.0 million and $ 1.7 million, respectively.

Life Insurance

2 unchanged sentences

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

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 due to participants were approximately $ 1.0 million and $ 1.3 million at January 31, 2026 and 2025, respectively.

Cash surrender values of these policies, which are included in other assets in the accompanying consolidated balance sheets, were $ 739,000 and $ 932,000 at January 31, 2026 and 2025, respectively.

Death benefits payable under the policies were approximately $ 1.9 million and $ 2.2 million at January 31, 2026 and 2025, respectively.

1 unchanged sentence

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

All securing assets held in the rabbi trust were included in the other assets of the accompanying consolidated balance sheets.

The following sets forth the Company's change in death benefits payable during the years ended January 31, 2025 and 2024 (in thousands):

1/31/2025 1/31/2024

All securing assets held in the rabbi trust were included in other assets on the accompanying consolidated balance sheets.

The following sets forth the Company's change in death benefits payable:

(In thousands)

Liability, beginning of year $ 1,345 $ 1,468

3 unchanged sentences

Stock-Based Compensation

Stock Incentive Plans

Stock Incentive Plan

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.

1 unchanged sentence

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 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.

During fiscal year 2026, the Company granted 23,003 awards to non-employee directors, vested 16,066 shares according to their terms and forfeited zero shares under the 2019 Plan.

As of January 31, 2026, there were 498,856 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:

The following table summarizes the stock-based compensation expense related to restricted stock awards recognized in the Company's statement of operations:

(In thousands)

2 unchanged sentences

Total stock-based compensation expense $ 208 $ 395

The following table summarizes the Company’s restricted stock unit awards activity, and related information for fiscal years ended January 31:

The following table summarizes the Company’s restricted stock unit awards activity, and related information:

Restricted stock units Weighted- Average Exercise Price Restricted stock units Weighted- Average Exercise Price

8 unchanged sentences

That expense is expected to be recognized over a weighted-average period of 0.3 years.

As of January 31, 2025, there was $ 83,000 of total unrecognized compensation expense related to restricted stock awards.

That expense was recognized during fiscal 2026.

To satisfy employee minimum statutory tax withholding requirements for restricted stock awards that vest, the Company withholds and retires a portion of the vesting common shares, unless an employee elects to pay cash.

In fiscal 2025 and 2024, the Company withheld 27,872 and 27,781 common shares, respectively, with a total value of approximately $ 412,000 and $ 110,000 , respectively.

In fiscal 2026, the Company withheld no common shares.

In fiscal 2025, the Company withheld 27,872 common shares, with a value of approximately $ 412,000 .

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

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):

Our effective tax rate was 25.8 %, and is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets.

The One Big Beautiful Bill ("OBBB") Act did not have a material impact on the Company's effective income tax rate for fiscal 2026, which the Company believes is representative of rates that will affect fiscal 2027.

A summary reconciliation of the effective tax rate by amount and percentage is as follows:

(In thousands, except percentages)

federal statutory rate $ 727 21.0 %

State income taxes, net of federal income tax effect (1) 150 4.3

Effect of changes in tax laws or rates enacted in current period:

Rate adjustment - state — —

Effect of cross-border tax laws:

Foreign-derived intangible income — —

Change in valuation allowance — —

Nontaxable or nondeductible items:

Meals and entertainment 39 1.1

Change in unrecognized tax benefits 21 0.6

Other ( 46 ) ( 1.3 )

Income tax expense $ 895 25.8 %

(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California and Arkansas.

A summary reconciliation of the effective tax rate is as follows:

(In thousands)

Statutory $ 6,011

8 unchanged sentences

Income tax expense $ 6,780

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):

Significant components of the expense for income taxes attributed to continuing operations are as follows:

(In thousands)

Federal $ 193 $ 5,142

1 unchanged sentence

Federal 476 ( 75 )

State 320 1,112

Change in valuation allowance ( 5 ) ( 15 )

Income tax expense $ 895 $ 6,780

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

Deferred tax assets and liabilities are comprised of the following:

(In thousands)

Deferred tax assets

4 unchanged sentences

Net operating loss carryforwards 471 439

Right of use liability 9,505 1,935

Inventory 1,709 1,878

Operating lease liability 9,172 9,505

Inventories 1,700 1,709

Other 476 580

14,860 16,549

Deferred tax liabilities

7 unchanged sentences

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible.

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

At January 31, 2025, the Company recorded a partial valuation allowances of $ 236,000 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.

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

At January 31, 2026, the Company recorded a partial valuation allowance of $ 231,000 on certain state net operating losses ("NOLs") 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, 2026, was a decrease of $ 5,000 .

At January 31, 2025, the Company had no NOL for U.S.

At January 31, 2026, the Company had no NOLs for U.S.

federal tax purposes and $ 8.2 million for state income tax purposes, expiring at various dates through January 31, 2045.

The net change in the valuation allowance for the year ended January 31, 2025, was a decrease of $ 15,000 .

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

At January 31, 2025, the Company had no NOLs for U.S.

federal tax purposes, and $ 6.3 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):

The following table summarizes the activity related to our gross unrecognized tax benefits:

(In thousands)

Beginning balances as of January 31, $ 157 $ 92

6 unchanged sentences

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 $ 50,000 at January 31, 2025, and $ 37,000 at January 31, 2024.

The Company had recorded a liability for interest and penalties related to unrecognized tax benefits of $ 59,000 at January 31, 2026, and $ 50,000 at January 31, 2025.

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

2 unchanged sentences

As of January 31, 2026, it is reasonably possible that unrecognized tax benefits will decrease by $ 4,600 within the next 12 months due to the expiration of the statute of limitations.

Leases and Commitments

State taxes in California, Texas, Alabama and Maryland made up the majority (greater than 50%) of the Company's state and local taxes for the year ended January 31, 2026.

A summary of income taxes paid is as follows:

(In thousands)

South Carolina 8

In the current year, the jurisdictions with cash taxes paid that equaled or exceeded 5% of total income taxes paid were Alabama, Texas, Virginia, Maryland and South Carolina.

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

14 unchanged sentences

The Company elected to account for leases with an original term of 12 months or less that do not contain a purchase option as short-term leases.

Additionally, certain of the leases provide for variable payment for property taxes, insurance, and common area maintenance payments among others.

Additionally, certain of the leases provide for variable payment of property taxes, insurance, and common area

maintenance payments among others.

The Company recognizes variable lease expenses for these leases in the period incurred.

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In accordance with ASC 842, quantitative information regarding our leases is as follows:

1/31/2025 1/31/2024

The quantitative information regarding our leases is as follows:

Years ended January 31,

(In thousands)

5 unchanged sentences

Other operating leases information:

Cash paid for amounts included in the measurement of lease liabilities (in thousands) $ 6,522 $ 5,793

Right-of-use assets obtained in exchange for new lease liabilities (in thousands) $ 34,456 $ 873

Cash paid for amounts included in the measurement of lease liabilities $ 5,394 $ 6,522

Right-of-use assets obtained in exchange for new lease liabilities $ 542 $ 34,456

Weighted-average remaining lease term (years) 4.6 5.5

Weighted-average discount rate 9.84 % 9.80 %

Minimum future lease payments (in thousands) for operating leases in effect as of January 31, 2025, are as follows:

Minimum future lease payments for operating leases in effect as of January 31, 2026 are as follows:

Operating Lease

Year ending January 31,

Thereafter 6,818

Year ending January 31, (In thousands)

Remaining balance of lease payments 45,789

7 unchanged sentences

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 Lease also provides for a tenant improvement allowance of up to $ 1.7 million to be used by December 31, 2026, which remained fully available as of January 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

The Company and other furniture manufacturers are subject to federal, state, and local laws and regulations relating to the discharge of materials into the environment and the generation, handling, storage, transportation and disposal of waste and hazardous materials.

The Company has expended, and expects to continue to spend, significant amounts in the future to comply with environmental laws.

Normal recurring expenses relating to operating the Company factories in a manner that meets or exceeds environmental laws are matched to the cost of producing inventory.

Commitments and Contingencies

hazardous materials.

The Company has expended, and expects to continue to spend in the future, significant amounts to comply with environmental laws.

Recurring expenses relating to operating the Company factories in a manner that meets or exceeds environmental laws are matched to the cost of producing inventory.

Despite the Company’s significant dedication to operating in compliance with applicable laws, there is a risk that the Company could fail to comply with a regulation or that applicable laws and regulations change.

3 unchanged sentences

The Company has purchased insurance to cover losses in excess of the retention up to a limit of $ 30.0 million.

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.

The Company recorded a liability for its actuarially estimated future losses for liability claims at net present value of $ 850,000 and $ 900,000 at January 31, 2026 and 2025, respectively, based upon the Company’s estimated payout period of five years using a 4.0 % discount rate for both years.

The estimated liabilities are 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.

Management does not anticipate that any related settlement, after consideration of the existing reserve for claims incurred and potential insurance recovery, would have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Estimated payments under the self-insurance programs are as follows (in thousands):

Year ending January 31,

Management does not anticipate that any related settlement, after consideration of the existing reserve for claims incurred and potential insurance recovery, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Estimated payments under the self-insurance programs are as follows:

Year ending January 31, (In thousands)

Thereafter 137

3 unchanged sentences

The Company and its subsidiaries are defendants in various legal proceedings resulting from operations in the normal course of business.

It is the opinion of management, in consultation with legal counsel, that the ultimate outcome of all such matters will not materially affect the Company’s financial position, results of operations or cash flows.

It is the opinion of management, in consultation with legal counsel, that the ultimate outcome of all such matters will not materially affect the Company’s consolidated financial position, results of operations or cash flows.

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

4 unchanged sentences

The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred.

The following is a summary of the Company’s warranty-claim activity during for the years ended January 31 (in thousands):

The following is a summary of the Company’s warranty-claim activity:

(In thousands)

Beginning balance $ 500 $ 500

5 unchanged sentences

Non-current portion $ 350 $ 350

Property, Plant, and Equipment

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

Property, Plant, and Equipment, Net

Property, plant, and equipment, net consists of the following:

(In thousands)

Land $ 3,731 $ 3,731

6 unchanged sentences

Property, plant and equipment, net $ 34,578 $ 36,428

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.

Depreciation and amortization expenses related to property, plant and equipment recorded within cost of goods sold were $ 4.6 million and $ 4.3 million for the years ended January 31, 2026 and 2025, respectively.

Depreciation and amortization expenses related to property, plant and equipment recorded within selling, general and administrative expenses were $ 1.5 million and $ 1.3 million for the fiscal years ended January 31, 2026 and 2025, respectively.

Segment Information

3 unchanged sentences

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 CODM uses consolidated revenue, gross profit and 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 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.

On March 5, 2026, the Company's Board of Directors 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 10, 2026 to stockholders of record of the common stock as of the close of business on March 20, 2026.

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