Virco Mfg Corporation 10-Q for FY2022 Q1
Virco Mfg Corporation (VIRC)
10-Q
2021-06-11
For: 2021-04-30
View Original
Added on
April 11, 2026
About this 10-Q
Virco Mfg Corporation filed this 10-Q on June 11, 2021, covering the quarter ended April 30, 2021 (FY2022 Q1).
Headline figures
Quarter ended April 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $28.37M
- up 59.2% from $17.82M a year earlier
- Net loss
- $3.91M
- compared with a net loss of $4.7M a year earlier
- Diluted EPS
- -$0.25
- compared with -$0.30 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM | ||
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For the quarterly period ended April 30, 2021
OR
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For the transition period from to
Commission File number 1-8777
(Exact Name of Registrant as Specified in its Charter) | ||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant’s Telephone Number, Including Area Code: (310 ) 533-0474
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||
| ý | Smaller reporting company | |||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
The number of shares outstanding for each of the registrant’s classes of common stock, as of the latest practicable date:
Common Stock, $.01 par value — 15,918,642 shares as of June 2, 2021.
TABLE OF CONTENTS
| Item 3. Defaults Upon Senior Securities | ||||||||
| Item 4. Mine Safety Disclosures | ||||||||
| Item 5. Other Information | ||||||||
| EX-31.1 | ||||||||
| EX-31.2 | ||||||||
| EX-32.1 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
2
PART I. Financial Information
Item 1. Financial Statements
Virco Mfg. Corporation
Unaudited Condensed Consolidated Balance Sheets
| 4/30/2021 | 1/31/2021 | 4/30/2020 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Assets | |||||||||||||||||
| Current assets | |||||||||||||||||
| Cash | $ | $ | $ | ||||||||||||||
| Trade accounts receivables, net | |||||||||||||||||
| Other receivables | |||||||||||||||||
| Income tax receivable | |||||||||||||||||
| Inventories | |||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||
| Total current assets | |||||||||||||||||
| Non-current assets | |||||||||||||||||
| Property, plant and equipment | |||||||||||||||||
| Land | |||||||||||||||||
| Land improvements | |||||||||||||||||
| Buildings and building improvements | |||||||||||||||||
| Machinery and equipment | |||||||||||||||||
| Leasehold improvements | |||||||||||||||||
| Total property, plant and equipment | |||||||||||||||||
| Less accumulated depreciation and amortization | |||||||||||||||||
| Net property, plant and equipment | |||||||||||||||||
| Operating lease right-of-use assets | |||||||||||||||||
| Deferred tax assets, net | |||||||||||||||||
| Other assets, net | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
Virco Mfg. Corporation
Unaudited Condensed Consolidated Balance Sheets
| 4/30/2021 | 1/31/2021 | 4/30/2020 | |||||||||||||||
| (In thousands, except share and par value data) | |||||||||||||||||
| Liabilities | |||||||||||||||||
| Current liabilities | |||||||||||||||||
| Accounts payable | $ | $ | $ | ||||||||||||||
| Accrued compensation and employee benefits | |||||||||||||||||
| Current portion of long-term debt | |||||||||||||||||
| Current portion operating lease liability | |||||||||||||||||
| Other accrued liabilities | |||||||||||||||||
| Total current liabilities | |||||||||||||||||
| Non-current liabilities | |||||||||||||||||
| Accrued self-insurance retention | |||||||||||||||||
| Accrued pension expenses | |||||||||||||||||
| Income tax payable | |||||||||||||||||
| Long-term debt, less current portion | |||||||||||||||||
| Operating lease liability, less current portion | |||||||||||||||||
| Other long-term liabilities | |||||||||||||||||
| Total non-current liabilities | |||||||||||||||||
| Commitments and contingencies (Notes 6, 7 and 13) | |||||||||||||||||
| Stockholders’ equity | |||||||||||||||||
| Preferred stock: | |||||||||||||||||
Authorized | |||||||||||||||||
| Common stock: | |||||||||||||||||
Authorized | |||||||||||||||||
| Additional paid-in capital | |||||||||||||||||
| Accumulated deficit | ( | ( | ( | ||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ( | ||||||||||||||
| Total stockholders’ equity | |||||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | $ | ||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
Virco Mfg. Corporation
Unaudited Condensed Consolidated Statements of Operations
| Three months ended | |||||||||||
| 4/30/2021 | 4/30/2020 | ||||||||||
| (In thousands, except per share data) | |||||||||||
| Net sales | $ | $ | |||||||||
| Costs of goods sold | |||||||||||
| Gross profit | |||||||||||
| Selling, general and administrative expenses | |||||||||||
| Operating loss | ( | ( | |||||||||
| Pension expense | |||||||||||
| Interest expense | |||||||||||
| Loss before income taxes | ( | ( | |||||||||
| Income tax benefits | ( | ( | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Net loss per common share: | |||||||||||
| Basic | $ | ( | $ | ( | |||||||
| Diluted | $ | ( | $ | ( | |||||||
| Weighted average shares of common stock outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
5
Virco Mfg. Corporation
Unaudited Condensed Consolidated Statements of Comprehensive Loss
| Three months ended | |||||||||||
| 4/30//2021 | 4/30/2020 | ||||||||||
| (In thousands) | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Other comprehensive income: | |||||||||||
Pension adjustments (net of tax expense of $ | |||||||||||
| Net comprehensive loss | $ | ( | $ | ( | |||||||
See accompanying notes to unaudited condensed consolidated financial statements.
6
Virco Mfg. Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
| Three months ended | |||||||||||
| 4/30/2021 | 4/30/2020 | ||||||||||
| (In thousands) | |||||||||||
| Operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Non-cash lease expense | ( | ||||||||||
| Provision for doubtful accounts | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Stock-based compensation | |||||||||||
| Amortization of net actuarial loss for pension plans | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Trade accounts receivable | ( | ||||||||||
| Other receivables | ( | ||||||||||
| Inventories | ( | ( | |||||||||
| Income taxes | ( | ||||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Accounts payable and accrued liabilities | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities: | |||||||||||
| Borrowing from long-term debt | |||||||||||
| Repayment of long-term debt | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Net increase (decrease) in cash | ( | ||||||||||
| Cash at beginning of period | |||||||||||
| Cash at end of period | $ | $ | |||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
7
Virco Mfg. Corporation
Unaudited Consolidated Statements of Changes in Stockholders' Equity
| Three-Month Period Ended April 30, 2021 | ||||||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||
| In thousands, except share data | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholder's Equity | ||||||||||||||||||||||||||||||||
| Balance at February 1, 2021 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Cash dividends | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Pension adjustments, net of tax effect of $ | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Shares vested and others | — | — | ||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Balance at April 30, 2021 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Three-Month Period Ended April 30, 2020 | ||||||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||
| In thousands, except share data | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholder's Equity | ||||||||||||||||||||||||||||||||
| Balance at February 1, 2020 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Cash dividends | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Pension adjustments, net of tax effect of $ | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Shares vested and others | — | — | ||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Balance at April 30, 2020 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
8
VIRCO MFG. CORPORATION
Notes to unaudited Condensed Consolidated Financial Statements
April 30, 2021
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021 (“Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended April 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2022. The balance sheet at January 31, 2021 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All references to the “Company” refer to Virco Mfg. Corporation and its subsidiaries.
Principles of Consolidation and Reclassification
The consolidated financial statements include the accounts of Virco Mfg. Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The classification of certain prior year sales allowances of approximately $218,000 , representing the replacement of damaged goods, previously presented in net sales, is presented in costs of goods sold in the accompanying prior period statement of operations, which conforms to current period presentation.
Liquidity
Management evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern over the next 12 months through June 30, 2022. The Company has experienced an overall decline in net sales and net income for the fiscal year ended January 31, 2021. For the first three-months of fiscal 2022 the Company experienced a material increase in orders and shipments as schools received funding to support a return to classroom instruction.
As a result of the reduced revenue in the prior fiscal year, the Company was not in compliance with its fixed-charge coverage ratio under its revolving and secured credit agreement with PNC Bank, as of July 31, 2020, prior to an amendment and waiver negotiated to satisfy the event of default that also reduced the ratio required for the rolling four-quarter period ended October 31, 2020 from 1.10 :1.00 to 1.00 :1.00. However, the Company was not in compliance with this amended fixed-charge ratio of 1.00:1.00 as of October 31, 2020 due to the continuing decline in net sales and net income. The Company successfully negotiated a waiver and amendment on December 11, 2020 to the agreement to satisfy the event of default and amend the fixed-charge coverage ratio covenant. The amended covenant allows the Company to add back certain COVID-19 related costs incurred between May 1, 2020 through April 30, 2021, not to exceed $2 million, to adjusted EBITDA and retains a minimum fixed-charge coverage ratio of 1.10 :1.00 beginning with the quarter ended January 31, 2021 (see Note 7).
Note 2. Seasonality and Management Use of Estimates
9
The market for educational furniture is marked by extreme seasonality, with approximately 50 % of the Company’s total sales typically occurring from June to August each year, the Company’s peak season. Hence, the Company typically builds and carries significant amounts of inventory during and in anticipation of this peak summer season to facilitate the rapid delivery requirements of customers in the educational market. This requires a large up-front investment in inventory, labor, storage and related costs as inventory is built in anticipation of peak sales during the summer months. As the capital required for this build-up generally exceeds cash available from operations, the Company has generally relied on third-party bank financing to meet cash flow requirements during the build-up period immediately preceding the peak season. In addition, the Company typically is faced with a large balance of accounts receivable during the peak season. This occurs for two primary reasons. First, accounts receivable balances typically increase during the peak season as shipments of products increase. Second, many customers during this period are educational institutions and government entities, which tend to pay accounts receivable slower than commercial customers.
The Company’s working capital requirements during and in anticipation of the peak summer season require management to make estimates and judgments that affect assets, liabilities, revenues and expenses, and related contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to market demand, labor costs and stocking inventory. Significant estimates made by management include, but are not limited to, valuation of inventory; deferred tax assets and liabilities; useful lives of property, plant and equipment; liabilities under pension, warranty, self-insurance and environmental claims; and the accounts receivable allowance for doubtful accounts. Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after April 30, 2021, including those resulting from the continuing impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.
Note 3. New Accounting Pronouncements
Recently Issued Accounting Updates
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption date, as modified by the recently issued ASU 2019-10, will be for the fiscal year ending after December 15, 2022 and interim periods therein. The Company is currently evaluating the effect the standard will have on the consolidated financial statements and related disclosures.
Other recently issued accounting updates are not expected to have a material impact on the Company’s consolidated financial statements.
Note 4. Revenue Recognition
The Company manufactures, markets and distributes a wide variety of school and office furniture to wholesalers, distributors, educational institutions and governmental entities. Revenue is recorded for promised goods or services when control is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.
The Company's sales generally involve a single performance obligation to deliver goods pursuant to customer purchase orders. Prices for our products are based on published price lists and customer agreements. The Company has determined that the performance obligations are satisfied at a point in time when the Company completes delivery per the customer contract. The majority of sales are free on board ("FOB") destination where the destination is specified per the customer contract and may include delivering the furniture into the classroom, school site or warehouse. Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics to the ultimate customer. Once a product has been delivered per the shipping terms, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The Company considers control to have transferred upon shipment or delivery in accordance with shipping terms because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.
Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. The Company offers sales incentives and discounts through various regional and national programs to our customers. These programs include product rebates, product returns allowances and trade promotions. Variable consideration for these programs
10
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.
We do not consider our revenue generated through direct-to-customers and resellers to be meaningfully different revenue streams given similarities in the nature of the products, performance obligation and distribution processes. Sales are predominately in the United States and to a similar class of customer. We do not manage or evaluate the business based on product line or any other discernable category.
Note 5. Inventories
Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or net realizable value and includes material, labor and factory overhead. The Company maintains valuation allowances for estimated slow-moving and obsolete inventory to reflect the difference between the cost of inventory and the estimated net realizable value. Valuation allowances for slow-moving and obsolete inventory are determined through a physical inspection of the product in connection with a physical inventory, a review of slow-moving product 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 significant obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional valuation allowances may be required. Due to reductions in sales volume in the past years, the Company’s manufacturing facilities are operating at reduced levels of capacity. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.
The following table presents a breakdown of the Company’s inventories as of April 30, 2021, January 31, 2021 and April 30, 2020:
| 4/30/2021 | 1/31/2021 | 4/30/2020 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Finished goods | $ | $ | $ | |||||||||||||||||
| WIP | ||||||||||||||||||||
| Raw materials | ||||||||||||||||||||
| Total inventories | $ | $ | $ | |||||||||||||||||
Note 6. Leases
The Company has operating leases on real property, equipment, and automobiles that expire at various dates. 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, as a lessee. The Company uses the implicit rate when readily determinable, or the incremental borrowing rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term.
11
| Three-Months Ended | |||||||||||
| 4/30/2021 | 4/30/2020 | ||||||||||
| (in thousands, except lease term and discount rate) | |||||||||||
| Operating lease cost | $ | $ | |||||||||
| Short-term lease cost | |||||||||||
| Short-term sublease income | ( | ( | |||||||||
| Variable lease cost | |||||||||||
| Total lease cost | $ | $ | |||||||||
| Other operating leases information: | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for new lease liabilities | $ | $ | |||||||||
| Weighted-average remaining lease term (years) | |||||||||||
| Weighted-average discount rate | % | % | |||||||||
Minimum future lease payments for operating leases in effect as of April 30, 2021, are as follows:
| Operating Lease | |||||
| (in thousands) | |||||
| Remaining of 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Thereafter | |||||
| Remaining balance of lease payments | $ | ||||
| Short-term lease liabilities | $ | ||||
| Long-term lease liabilities | |||||
| Total lease liabilities | $ | ||||
| Difference between undiscounted cash flows and discounted cash flows | $ | ||||
Note 7. Debt
Outstanding balances for the Company’s long-term debt were as follows:
| 4/30/2021 | 1/31/2021 | 4/30/2020 | |||||||||||||||
(in thousands) | |||||||||||||||||
| Revolving credit line | $ | $ | $ | ||||||||||||||
| Other | |||||||||||||||||
| Total debt | |||||||||||||||||
| Less current portion | |||||||||||||||||
| Non-current portion | $ | $ | $ | ||||||||||||||
12
The Company (the “Borrowers”) has a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”). The Credit Agreement has been amended twenty-two times since it’s origination in 2011 through fiscal 2021, which, among other things, extended the maturity date of the Credit Agreement for three years until March 19, 2023.
The Credit Agreement is an asset-based loan consisting of (i) a revolving line of credit with a Maximum Revolving Advance Amount of $65,000,000 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 $15,000,000 from January through July of each year, minus undrawn amounts of letters of credit and reserves and (ii) an equipment loan of $2,000,000 . The Credit Agreement is secured by substantially all of the Company's, as defined, personal property and certain of the Company's real property. The principal amount outstanding under the Credit Agreement and any accrued and unpaid interest is due no later than March 19, 2023, and the Credit Agreement is subject to certain prepayment penalties upon earlier 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 $10,000,000 for a period of 30 consecutive days during the fourth quarter of each fiscal year. The Credit Agreement also contains certain financial covenants, including a fixed charge coverage ratio beginning on February 1st, 2020 of not less than 1.10 to 1.00, and capital expenditures not to exceed $8,000,000 . The Company was in violation with its financial covenants as of July 31, 2020. On September 8, 2020, the Company entered into Amendment No. 21 to the Credit Agreement (“Amendment No. 21”) with its lender, PNC Bank. Amendment No. 21 provided a limited waiver of the Company’s violation of the covenant to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the four fiscal quarter period ended July 31, 2020, and amended the fixed charge coverage ratio as follows: (i) 1.00 to 1.00 for the consecutive four fiscal quarter period ended October 31, 2020, and (ii) 1.10 to 1.00 for each consecutive four fiscal quarter period ending thereafter. In connection with Amendment No. 21, the Company also agreed to pay to PNC Bank a non-refundable fee of $75,000 . However, the Company was not in compliance with this amended fixed-charge ratio of 1.00 :1.00 as of October 31, 2020 due to the continuing decline in net sales and net income. The Company successfully negotiated and entered into Amendment No. 22 on December 11, 2020 to the Revolving Credit and Security Agreement (“Amendment No. 22”) with its lender, PNC Bank. Amendment No. 22 provided a limited waiver of the fixed-charge coverage Ratio for the four fiscal quarter period ended October 31, 2020 and amended the fixed-charge coverage calculation to allow for the add back of certain COVID-19 related costs incurred from May 1, 2020 through April 30, 2021 not to exceed $2 million to adjusted EBITDA beginning with the four fiscal quarter period ended January 31, 2021, and retains the required minimum coverage ratio of 1.10 :1.00. In connection with Amendment No. 22, the Company also agreed to pay PNC Bank a non-refundable fee of $40,000 . The Company was in compliance with the covenants as of April 30, 2021.
The Credit Agreement bears interest, at the Borrowers’ option, at either the Alternate Base Rate (as defined in the Credit Agreement) or the Eurodollar Currency Rate (as defined in the Credit Agreement), in each case plus an applicable margin. The applicable margin for Alternate Base Rate loans is a percentage within a range of 1.25 % to 1.75 %, and the applicable margin for Eurodollar Currency Rate loans is a percentage within a range of 2.25 % to 2.75 %, in each case based on the EBITDA of the Borrower's at the end of each fiscal quarter and may be increased at PNC's option by 2.0 % during the continuance of an event of default. The interest rate as of April 30, 2021 was 5.0 %. The Company also incurs a fee on the unused portion of the revolving line of credit at a rate of 0.375 %.
Last year the impact of COVID-19 on liquidity was to moderate the seasonal increase in accounts receivable and production of inventory for summer delivery. Seasonal increases in accounts receivable and inventory are traditionally financed through the Company’s line of credit with PNC Bank. Reductions in inventory were substantially offset by a reduction in borrowing under the revolving line with PNC Bank.
In addition to the financial covenants, the Credit Agreement contains events of default as disclosed in Note 3 to our Annual Report on Form 10-K for the year-ended January 31, 2021. 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 Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $22,121,000 was available for borrowing as of April 30, 2021.
Management believes that the carrying value of debt approximated fair value at April 30, 2021 and 2020, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.
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Note 8. Income Taxes
In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carrybacks, tax-planning strategies, and results of recent operations (including cumulative losses in recent years), to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. On the basis of 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 that its U.S. federal deferred tax assets are more-likely-than-not to be realizable, but that valuation allowances of $996,000 , $1,064,000 and $1,075,000 as of April 30, 2021, January 31, 2021 and April 30, 2020, respectively, are needed for certain state NOL’s to reduce the carrying amount of deferred tax assets to an amount that is more-likely-than-not to be realized.
For the first quarter ended April 30, 2021 and 2020, the effective tax rates were 23.3 % and 41.1 %, respectively. Effective tax rate for the first quarter ended April 30, 2021 is less than the prior year, primarily due to the change in 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.
On March 27, 2020, the then President signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The Company has performed an analysis of the impact of the CARES Act and have determined that the impact would not be significant. The CARES Act provides single-employer pension companies additional time to meet the funding obligations. Consequently, the tax deduction related to such contributions will be deferred until the funding payment is made. The CARES Act also modifies the limitation for business interest expense deduction. The new limitation has increased from 30 to 50 percent of adjusted taxable income.
The January 31, 2016 and subsequent years remain open for examination by the IRS and state tax authorities. The Company is not currently under any state examination. The Company is currently under IRS examination for its fiscal year ended January 31, 2016 Federal tax return.
Note 9. Net loss per Share
| Three Months Ended | |||||||||||
| 4/30/2021 | 4/31/2020 | ||||||||||
| (In thousands, except per share data) | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Weighted average shares of common stock outstanding | |||||||||||
| Net effect of dilutive shares - based on the treasury stock method using average market price | |||||||||||
| Totals | |||||||||||
| Net loss per share - basic | $ | ( | $ | ( | |||||||
| Net loss per share - diluted (a) | $ | ( | $ | ( | |||||||
(a) At April 30, 2021 and 2020, approximately 155,000 and 75,000 shares of common stock equivalents were excluded in the computation of diluted net loss per share, as the effect would be anti-dilutive since the Company reported a net loss.
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Note 10. Stock-Based Compensation
Stock Incentive Plan
The Company's two stock incentive plans are the 2019 Employee Stock Incentive Plan (the “2019 Plan”) and the 2011 Employee Incentive Stock Plan (the “2011 Plan”).
Under 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 units and 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 the three-month period ended April 30, 2021, the Company granted 0 awards to non-employee directors, vested 0 shares according to their terms and forfeited 0 shares under the 2019 Plan. As of April 30, 2021, there were approximately 677,305 shares available for future issuance under the 2019 Plan.
Under the 2011 Plan, the Company may grant an aggregate of 2,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards. Restricted stock units and awards granted under the 2011 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 the three-month period ended April 30, 2021, the Company granted 0 restricted awards to non-employee directors and 0 units to its employees; vested 0 stock awards and 0 units according to their terms and forfeited 0 stock units under the 2011 Plan. As of April 30, 2021, there were approximately 32,892 shares available for future issuance under the 2011 Plan.
During the three months ended April 30, 2021, stock-based compensation expense related to restricted stock units and awards recognized in cost of goods sold and selling, general and administrative expenses was $55,000 and $198,000 , respectively. During the three months ended April 30, 2020, stock-based compensation expense related to restricted stock units and/or awards recognized in cost of goods sold and selling, general and administrative expenses was $63,000 and $191,000 , respectively.
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Note 11. Retirement Plans
The Company and its subsidiaries cover certain employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”). As more fully described in the Form 10-K, benefit accruals under the Employees Retirement Plan were frozen effective December 31, 2003. There is no service cost incurred under this plan.
The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2021, benefit accruals under this plan were frozen since December 31, 2003. There is no service cost incurred under this plan.
The net periodic pension cost for the Pension Plan and the VIP Plan for the three months ended April 30, 2021 and 2020 were as follows:
| Combined Employee Retirement Plans | |||||||||||
| Three Months Ended | |||||||||||
| 4/30/2021 | 4/30/2020 | ||||||||||
(in thousands) | |||||||||||
Service cost | $ | $ | |||||||||
| Interest cost | |||||||||||
| Expected return on plan assets | ( | ( | |||||||||
| Plan settlement | |||||||||||
| Amortization of prior service cost | |||||||||||
| Recognized net actuarial loss | |||||||||||
Benefit cost | $ | $ | |||||||||
401(k) Retirement Plan
Note 12. Warranty Accrual
The Company provides an assurance type warranty against all substantial defects in material and workmanship. The standard warranty offered on products sold after January 1, 2017 was modified to provide specific warranty periods by product component, with no warranty period longer than ten years . The Company’s warranty is not a guarantee of service life, which depends upon events outside the Company’s control and may be different from the warranty period. The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred.
The following is a summary of the Company’s warranty-claim activity for the three months ended April 30, 2021 and 2020:
| Three Months Ended | |||||||||||||||||||||||
| 4/30/2021 | 4/30/2020 | ||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
| Beginning balance | $ | $ | |||||||||||||||||||||
| Provision | |||||||||||||||||||||||
| Costs incurred | ( | ( | |||||||||||||||||||||
| Ending balance | $ | $ | |||||||||||||||||||||
Note 13. Contingencies
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obtained an actuarial estimate of its total expected future losses for liability claims and recorded a liability equal to the net present value.
The Company and its subsidiaries are defendants in various legal proceedings resulting from operations in the normal course of business. It is the opinion of management, in consultation with legal counsel, that the ultimate outcome of all such matters will not materially affect the Company’s financial position, results of operations or cash flows.
Note 14. Delivery Costs
Note 15. COVID-19
Note 16. Subsequent Events
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The effects of COVID -19
The results of operations for the three-months ended April 30, 2021 have been significantly impacted by economic conditions driven by the COVID-19 pandemic. The majority of our primary customers, the K-12 public school systems, closed school campuses and initiated remote learning on or about March 15, 2020. Most school districts continued with remote learning for the academic year beginning August 2020, with a minority of districts attempting hybrid or on-site learning.
During the first quarter ended April 30, 2021, many school districts announced hybrid or on-site learning beginning approximately April 2021. The Company received a large volume of orders for immediate delivery during the first quarter ended April 30, 2021. Orders received for the quarter increased by 26.7% compared to the same period of the prior year. Sales volume for the quarter increased by 59.2% compared to the same period of the prior year. Backlog of orders at April 30, 2021 were approximately $2.1 million greater than the prior year.
The market for educational furniture is extremely seasonal, but there has traditionally been stability to this seasonal cycle. In the prior year, the timing of orders did not follow the traditional seasonal trends. Orders of educational furniture are traditionally very strong in May and June. In the fiscal 2021, these months were uncharacteristically slow. This reduction adversely impacted both second and third quarter sales revenue in fiscal 2021. In the current year, the Company experienced strong orders in the first quarter. Subsequent to April 30, 2021, the Company continued to experience strong order rates through May 2021. Nevertheless, management is not able to predict whether and to what extent the return to full time classroom learning will result in a return to the traditional seasonal sales cycle for educational furniture.
Due to uncertainty created by COVID-19 during fiscal 2021 the Company moderated production levels to reflect the reduced order activity and maintained conservative inventory levels going into the first quarter ended April 30, 2021. Because the first quarter of the year is a seasonally slow period, sales activity during the first quarter was not significantly affected by supply chain considerations that have impacted the economy.
The Company imports a number of key components from manufacturers in China. The cost and timely delivery of these components has been adversely affected by difficulties at the ports and by cost increases from China. The cost of steel and a variety of other raw materials has been extremely volatile, and the supply chain considerations have been challenging. The severe weather experienced in significant portions of the United States in February 2021 has also interrupted the supply and increased cost for plastic and utilities. The availability of labor, both permanent employees and temporary employees, has been adversely impacted. In response to the labor shortage, and to reward employees who will be working substantial overtime hours during the seasonal summer peak, the Company has announced that for all factory and warehouse hourly employees, all overtime hours will be paid at double time rather than the traditional time and one-half for hours worked between June 1 and Labor Day. This is anticipated to cost the Company an additional $1.5 million during the second and third quarters. The Company anticipates that this increased cost will be offset, in whole or in part, by the increased efficiency of using experienced Virco employees with a substantial reduction in temporary labor. Inventory levels at April 30, 2021 are significantly lower than the prior year, and the Company may incur additional costs for expediting to satisfy customer orders. While these challenges are substantial, the Company believes that the benefits of domestic manufacturing compared to an import model will be realized during the current fiscal year.
Three Months Ended April 30, 2021
Order rates and sales for the first three months of 2021 increased significantly compared to the prior year, as schools reopen and effects of COVID-19 are moderating. Orders for the first quarter increased by 26.7%, and sales increased by 59.2% compared to the same period of the prior year. Backlog of orders at April 30, 2021 is approximately $2.1 million greater than the prior year.
For the three months ended April 30, 2021, the Company incurred a pre-tax loss of $5,094,000 on sales of $28,367,000 compared to a pre-tax loss of $7,973,000 on sales of $17,817,000 in the prior year.
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Gross Margin for the first quarter was 27.1% of sales compared to 27.5% in the prior year. The gross margin was favorably affected by a modest price increase at the beginning of the year, a favorable change in product mix, and an increase in the proportion of product sold with full service relative to sold FOB factory. These improvements were offset by an increase in the cost of commodities used to manufacture product and reduced levels of production. The Company was required to close the Conway, Arkansas factory for more than one week in February due to severe weather and increased utility bills related to the same severe weather.
Selling, general and administrative expenses for the three months ended April 30, 2021 increased by less than 1% compared to the same period last year and decreased as a percentage of sales to 42.2% from 67.0%. The increase in selling, general and administrative expenses was primarily attributable to increased variable freight expense.
Interest expense decreased by $111,000 for the three months ended April 30, 2021 compared to the same period last year. The Company has borrowed less money to finance seasonal working capital in the first quarter.
Income Taxes for the three-months ended April 30, 2021
Income tax benefit for the first quarter ended April 30, 2021 is less than the prior year, primarily due to the decrease in pre-tax loss.
Liquidity and Capital Resources
Approximately 50% of the Company's annual sales volume is shipped in the months of June through August of each year. The Company traditionally manufactures large quantities of inventory during the first and second quarters of each fiscal year in anticipation of seasonally high summer shipments. In addition, the Company finances a large balance of accounts receivable during the peak season.
Accounts receivable increased by $6,770,000 at April 30, 2021 compared to the same date in the prior year. A portion of the increase was attributable to increased volume of sales, and a portion due to the timing of sales. Sales in the month of April 2021 were more than double sales in April 2020 due to the timing of school closures. Inventory decreased by $15,315,000 at April 30, 2021 compared to the prior year. The reduction was due to cautious inventory management combined with a significant increase in first quarter sales activity. The net reduction in working capital enabled the Company to reduce its borrowing under its revolving line of credit with PNC Bank as of April 30, 2021. Outstanding debt at April 30, 2021 includes an equipment loan from PNC in the amount of $611,000 and a seller financed mortgage on a manufacturing facility in Conway, Arkansas.
Interest expense for the three months ended April 30, 2021 is less than the same period last year due to lower average outstanding borrowings under the Company's revolving line of credit with PNC Bank.
Accrual basis capital expenditures for the three months ended April 30, 2021 was $428,000 compared to $922,000 for the same period last year. The reduction in capital spending was a direct result of management controlling the expenditures to preserve cash due to the adverse impact that the COVID-19 pandemic had on the Company’s operations. Capital expenditures are being financed through the Company's credit facility with PNC Bank and operating cash flow and restricted to not exceed $8,000,000 by covenant.
Due to the adverse impact of the COVID-19 pandemic upon the Company’s operations, the Company violated its fixed-charge coverage ratio contained in the credit agreement with PNC Bank for the quarterly periods ended July 31, 2020 and October 31, 2020. The Company obtained limited waivers and amendments from PNC Bank for both events of default, Amendment No. 21 and 22 (see Note 7 to the condensed consolidated financial statements). Amendment No. 22 amended the ongoing fixed-charge coverage calculation to allow for the add back of certain COVID-19 related costs incurred from May 1, 2020 through April 30, 2021, not to exceed $2,000,000, to adjusted EBITDA and retained the minimum fixed-charge coverage ratio of 1.10:1.00 beginning with the four quarter period ending January 31, 2021. Based on the add back allowance for certain COVID-19 related costs, and the current forecasts through April 30, 2022, management believes the Company will maintain compliance with its financial covenants.
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The Company believes that cash flows from operations, together with the Company's unused borrowing capacity with PNC Bank will be sufficient to fund the Company's debt service requirements, capital expenditures and working capital needs for the next twelve months.
Off Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
The Company's critical accounting policies are outlined in its Annual Report on Form 10-K for the fiscal year ended January 31, 2021.
Forward-Looking Statements
From time to time, including in this Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2021, the Company or its representatives have made and may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, without limitation, reports to stockholders, press releases, oral statements made with the approval of an authorized executive officer of the Company and filings with the Securities and Exchange Commission ("SEC"). The words or phrases “anticipates,” “expects,” “will continue,” “believes,” “estimates,” “projects,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The results contemplated by the Company's forward-looking statements are subject to certain risks and uncertainties that could cause actual results to vary materially from anticipated results, including without limitation, availability of funding for educational institutions, availability and cost of materials, especially steel, availability and cost of labor, demand for the Company's products, competitive conditions affecting selling prices and margins, capital costs and general economic conditions. Such risks and uncertainties are discussed in more detail in the Company's Form 10-K for the fiscal year ended January 31, 2021 under the caption "Risk Factors".
The Company's forward-looking statements represent its judgment only on the dates such statements were made. By making any forward-looking statements, the Company assumes no duty to update them to reflect new, changed or unanticipated events or circumstances.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act as of our second quarter of fiscal 2021 and are not required to provide the information under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Principal Executive Officer along with its Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of April 30, 2021. Based upon the foregoing, the Company's Principal Executive Officer along with the Company's Principal Financial Officer concluded that the Company's disclosure controls and procedures as of such date were effective to ensure that the information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Company management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, Company management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control Over Financial Reporting
The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Principal Executive Officer along with its Principal Financial Officer, of the effectiveness of the design and operation of disclosure controls and procedures. Based upon the foregoing, the Company's Principal Executive Officer along with the Company's Principal Financial Officer concluded that the Company's disclosure controls and procedures (as such term
20
is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
There have been no changes in the Company's internal control over financial reporting during the fiscal quarter covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
21
PART II — Other Information
Virco Mfg. Corporation
Item 1. Legal Proceedings
The Company is a party to various legal actions arising in the ordinary course of business which, in the opinion of the Company, are not material in that management either expects that the Company will be successful on the merits of the pending cases or that any liabilities resulting from such cases will be substantially covered by insurance. While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to these actions, management believes that the aggregate amount of such liabilities will not be material to the results of operations, financial position, or cash flows of the Company.
Item 1A. Risk Factors
You should carefully consider and evaluate the information in this Quarterly Report and the risk factors set forth under the caption “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 (the “Form 10-K”), which was filed with the SEC on April 28, 2021. The risk factors associated with our business have not materially changed compared to the risk factors disclosed in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Number | Document | ||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
Exhibit 101.INS — XBRL Instance Document.
Exhibit 101.SCH — XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document.
Exhibit 101.LAB — XBRL Taxonomy Extension Label Linkbase Document.
22
Exhibit 101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| VIRCO MFG. CORPORATION | ||||||||
| Date: June 11, 2021 | By: | /s/ Robert E. Dose | ||||||
| Robert E. Dose | ||||||||
| Vice President — Finance | ||||||||
| (Principal Financial Officer) | ||||||||
24
Exhibit 31.1
CERTIFICATIONS
I, Robert A. Virtue, certify that:
1. I have reviewed this Form 10-Q of Virco Mfg. Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Robert A. Virtue | |||||
| Robert A. Virtue | |||||
| Date: June 11, 2021 | Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | ||||
Exhibit 31.2
CERTIFICATIONS
I, Robert E. Dose, certify that:
1. I have reviewed this Form 10-Q of Virco Mfg. Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Robert E. Dose | |||||
| Robert E. Dose | |||||
| Date: June 11, 2021 | Vice President — Finance, Secretary and Treasurer (Principal Financial Officer) | ||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned hereby certifies, in his capacity as an officer of Virco Mfg. Corporation (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his own knowledge:
•The Quarterly Report of the Company on Form 10-Q for the period ended April 30, 2021, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
•The information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company.
Date: June 11, 2021
| /s/ Robert A. Virtue | ||
| Robert A. Virtue | ||
Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
| /s/ Robert E. Dose | ||
| Robert E. Dose | ||
| Vice President — Finance, Secretary and Treasurer | ||
| (Principal Financial Officer) | ||
A signed original of this written statement required by Section 906 has been provided to Virco Mfg. Corporation and will be retained by Virco Mfg. Corporation and furnished to the Securities and Exchange Commission or its staff upon request.