##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
 FORM 10-Q
 For Quarter Ended October 31, 2007
 Commission File Number 1-8777
 VIRCO MFG. CORPORATION
  Delaware
    
    95-1613718(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)2027 Harpers Way, Torrance, CA
    
    90501(Address of principal executive offices)
    
    (Zip Code)
    þ o
  o þ o
 o þ




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##### 



Part
I.
    
    Financial
InformationItem 1.
    
    Financial StatementsCondensed consolidated balance sheets  October 31, 2007, January 31, 2007 and October 31, 2006Condensed consolidated statements of income  Three months ended October 31, 2007 and 2006Condensed consolidated statements of income  Nine months ended October 31, 2007 and 2006Condensed consolidated statements of cash flows  Nine months ended October 31, 2007 and 2006Notes to condensed consolidated financial statements  October 31, 2007Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures about Market RiskItem 4.
    
    Controls and ProceduresPart II.
    
    Other InformationItem 1A.
    
    Risk FactorsItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 6.
    
    ExhibitsExhibit 31.1  Certification of Robert A. Virtue, President, pursuant to Rules 13a-14 and
15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley
Act of 2002.Exhibit 31.2  Certification of Robert E. Dose, Vice President, Finance, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.Exhibit 32.1  Certification of Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1




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PART I
 
 Item 1. Financial Statements
 
   10/31/2007
    
    1/31/2007
    
    10/31/2006(In thousands, except share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)AssetsCurrent assets:Cash
    
    $
    4,382
    
    
    $
    1,892
    
    
    $
    2,158Trade accounts receivable
    
    
    24,032
    
    
    
    18,796
    
    
    
    28,994Less allowance for doubtful accounts
    
    
    209
    
    
    
    200
    
    
    
    234Net trade accounts receivable
    
    
    23,823
    
    
    
    18,596
    
    
    
    28,760Other receivables
    
    
    102
    
    
    
    228
    
    
    
    160Inventories:Finished goods, net
    
    
    10,063
    
    
    
    11,651
    
    
    
    7,786Work in process, net
    
    
    11,881
    
    
    
    19,690
    
    
    
    10,257Raw materials and supplies, net
    
    
    6,801
    
    
    
    6,496
    
    
    
    7,11828,745
    
    
    
    37,837
    
    
    
    25,161Deferred tax assets, net
    
    
    3,809
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    1,034
    
    
    
    1,479
    
    
    
    802Total current assets
    
    
    61,895
    
    
    
    60,032
    
    
    
    57,041Property, plant and equipment:Land and land improvements
    
    
    3,596
    
    
    
    3,596
    
    
    
    3,596Buildings and building improvements
    
    
    49,555
    
    
    
    49,555
    
    
    
    49,555Machinery and equipment
    
    
    112,917
    
    
    
    109,730
    
    
    
    108,385Leasehold improvements
    
    
    1,475
    
    
    
    1,323
    
    
    
    1,323167,543
    
    
    
    164,204
    
    
    
    162,859Less accumulated depreciation and
amortization
    
    
    121,004
    
    
    
    116,116
    
    
    
    114,417Net property, plant and equipment
    
    
    46,539
    
    
    
    48,088
    
    
    
    48,442Goodwill and other intangible assets, net
    
    
    2,301
    
    
    
    2,311
    
    
    
    2,314Deferred tax assets, net
    
    
    6,612
    
    
    
    
    
    
    
    Other assets
    
    
    6,046
    
    
    
    5,846
    
    
    
    8,728Total assets
    
    $
    123,393
    
    
    $
    116,277
    
    
    $
    116,525




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10/31/2007
    
    1/31/2007
    
    10/31/2006(In thousands, except share and per share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)LiabilitiesCurrent liabilitiesChecks released but not yet cleared bank
    
    $
    2,662
    
    
    $
    2,563
    
    
    $
    2,222Accounts payable
    
    
    11,205
    
    
    
    14,463
    
    
    
    11,856Accrued compensation and employee benefits
    
    
    8,796
    
    
    
    8,094
    
    
    
    6,435Current portion of long-term debt
    
    
    74
    
    
    
    5,074
    
    
    
    5,012Other accrued liabilities
    
    
    7,357
    
    
    
    6,844
    
    
    
    5,587Total current liabilities
    
    
    30,094
    
    
    
    37,038
    
    
    
    31,112Non-current liabilitiesAccrued self-insurance retention and other
    
    
    4,359
    
    
    
    3,962
    
    
    
    3,815Accrued pension expenses
    
    
    14,175
    
    
    
    15,949
    
    
    
    15,671Long-term debt, less current portion
    
    
    135
    
    
    
    10,190
    
    
    
    10,877Total non-current liabilities
    
    
    18,669
    
    
    
    30,101
    
    
    
    30,363Deferred income taxes
    
    
    
    
    
    
    260Commitments and contingenciesStockholders equityPreferred stockAuthorized 3,000,000 shares, $.01 par
value; none issued or outstanding
    
    
    
    
    
    
    
    
    
    
    Common stockAuthorized 25,000,000 shares, $.01 par
value; issued 14,428,667 shares at
10/31/2007, 14,379,506 shares at
1/31/2007; and 10/31/2006
    
    
    144
    
    
    
    143
    
    
    
    144Additional paid-in capital
    
    
    114,119
    
    
    
    113,737
    
    
    
    113,683Retained deficit
    
    
    (32,067
    )
    
    
    (57,436
    )
    
    
    (54,583
    )Accumulated comprehensive loss
    
    
    (7,566
    )
    
    
    (7,566
    )
    
    
    (4,194
    )Total stockholders equity
    
    
    74,630
    
    
    
    48,878
    
    
    
    55,050Total liabilities and stockholders equity
    
    $
    123,393
    
    
    $
    116,277
    
    
    $
    116,525




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Three months ended10/31/2007
    
    10/31/2006(In thousands, except per share data)Net sales
    
    $
    76,977
    
    
    $
    73,678Costs of goods sold
    
    
    49,037
    
    
    
    46,586Gross profit
    
    
    27,940
    
    
    
    27,092Selling, general and administrative
expenses
    
    
    20,814
    
    
    
    20,125Interest expense
    
    
    509
    
    
    
    1,014Income before income taxes
    
    
    6,617
    
    
    
    5,953(Benefit) Provision for income taxes
    
    
    (10,122
    )
    
    
    120Net income
    
    $
    16,739
    
    
    $
    5,833Net income per common shareBasic
    
    $
    1.16
    
    
    $
    0.41Diluted
    
    $
    1.15
    
    
    $
    0.41Weighted average shares outstandingBasic
    
    
    14,416
    
    
    
    14,362Diluted
    
    
    14,535
    
    
    
    14,364




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Nine months ended10/31/2007
    
    10/31/2006(In thousands, except per share data)Net sales
    
    $
    197,030
    
    
    $
    186,788Costs of goods sold
    
    
    123,825
    
    
    
    119,819Gross profit
    
    
    73,205
    
    
    
    66,969Selling, general and administrative
expenses
    
    
    55,625
    
    
    
    53,134Interest expense
    
    
    1,953
    
    
    
    3,197Income before income taxes
    
    
    15,627
    
    
    
    10,638(Benefit) Provision for income taxes
    
    
    (9,742
    )
    
    
    240Net income
    
    $
    25,369
    
    
    $
    10,398Net income per common shareBasic
    
    $
    1.76
    
    
    $
    0.77Diluted
    
    $
    1.75
    
    
    $
    0.77Weighted average shares outstandingBasic
    
    
    14,388
    
    
    
    13,475Diluted
    
    
    14,503
    
    
    
    13,499




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Nine months ended10/31/2007
    
    10/31/2006(In thousands)Operating activitiesNet income
    
    $
    25,369
    
    
    $
    10,398Adjustments to reconcile net income to net cash used
in operating activities:Depreciation and amortization
    
    
    5,035
    
    
    
    5,486Deferred income taxes
    
    
    (10,681
    )
    
    
    Provision for doubtful accounts
    
    
    40
    
    
    
    25(Gain) Loss on sale of property, plant and equipment
    
    
    (17
    )
    
    
    1Stock based compensation
    
    
    479
    
    
    
    645Changes in operating assets and liabilitiesTrade accounts receivable
    
    
    (5,266
    )
    
    
    (11,515
    )Other receivables
    
    
    126
    
    
    
    217Inventories
    
    
    9,092
    
    
    
    6,456Income taxes
    
    
    636
    
    
    
    203Prepaid expenses and other current assets
    
    
    445
    
    
    
    691Accounts payable and accrued liabilities
    
    
    (4,086
    )
    
    
    (3,702
    )Net cash provided by operating activities
    
    
    21,172
    
    
    
    8,905Investing activitiesCapital expenditures
    
    
    (3,444
    )
    
    
    (2,463
    )Proceeds from sale of property, plant and equipment
    
    
    17
    
    
    
    Net investment in life insurance
    
    
    (200
    )
    
    
    Net cash used in investing activities
    
    
    (3,627
    )
    
    
    (2,463
    )Financing activitiesRepayment of long-term debt
    
    
    (15,055
    )
    
    
    (10,580
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    4,807Net cash used in financing activities
    
    
    (15,055
    )
    
    
    (5,773
    )Net increase in cash
    
    
    2,490
    
    
    
    669Cash at beginning of period
    
    
    1,892
    
    
    
    1,489Cash at end of period
    
    $
    4,382
    
    
    $
    2,158




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Three Months Ended
    
    Nine months ended10/31/2007
    
    10/31/2006
    
    10/31/2007
    
    10/31/2006(In thousands, except per share data)Net income
    
    $
    16,739
    
    
    $
    5,833
    
    
    $
    25,369
    
    
    $
    10,398Average shares outstanding
    
    
    14,416
    
    
    
    14,362
    
    
    
    14,388
    
    
    
    13,475Net effect of dilutive stock
options based on the treasury
stock method using average
market price
    
    
    111
    
    
    
    2
    
    
    
    112
    
    
    
    24Totals
    
    
    14,527
    
    
    
    14,364
    
    
    
    14,500
    
    
    
    13,499Net income per share  basic
    
    $
    1.16
    
    
    $
    0.41
    
    
    $
    1.76
    
    
    $
    0.77Net income per share  diluted
    
    $
    1.15
    
    
    $
    0.41
    
    
    $
    1.75
    
    
    $
    0.77




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UnrecognizedCompensationExpense for 3 months ended
    
    Expense for 9 months ended
    
    Cost at10/31/2007
    
    10/31/2006
    
    10/31/2007
    
    10/31/2006
    
    10/31/20072007 Incentive Stock Plan262,500 Restricted Stock
Units issued 6/19/2007,
vesting over 5 years
    
    $
    91,000
    
    
    
    
    
    
    $
    149,000
    
    
    
    
    
    
    $
    1,631,00012,887 Grants of
Restricted Stock issued
6/19/2007, vesting over
1 year
    
    
    21,000
    
    
    
    
    
    
    
    36,000
    
    
    
    
    
    
    
    51,0001997 Incentive Stock Plan270,000 Restricted Stock
Units issued 6/30/2004,
vesting over 5 years
    
    
    118,000
    
    
    
    89,000
    
    
    
    265,000
    
    
    
    267,000
    
    
    
    588,00017,640 Grants of
Restricted Stock issued
6/20/2006, vesting over
1 year
    
    
    
    
    
    
    21,000
    
    
    
    29,000
    
    
    
    36,000
    
    
    
    73,881 Restricted Stock
Units issued 1/13/2006,
vesting over 5 months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    342,000
    
    
    
    Totals for the period
    
    $
    230,000
    
    
    $
    110,000
    
    
    $
    479,000
    
    
    $
    645,000
    
    
    $
    2,270,000




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Three Months EndedNon-Employee DirectorsPension Plan
    
    VIP Retirement Plan
    
    Retirement Plan2007
    
    2006
    
    2007
    
    2006
    
    2007
    
    2006Service cost
    
    $
    41
    
    
    $
    43
    
    
    $
    50
    
    
    $
    53
    
    
    $
    6
    
    
    $
    6Interest cost
    
    
    345
    
    
    
    352
    
    
    
    90
    
    
    
    85
    
    
    
    7
    
    
    
    6Expected return on plan assets
    
    
    (224
    )
    
    
    (246
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition
amount
    
    
    (9
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service
cost
    
    
    117
    
    
    
    117
    
    
    
    (134
    )
    
    
    (134
    )
    
    
    6
    
    
    
    22Recognized net actuarial
(Gain) or loss
    
    
    49
    
    
    
    41
    
    
    
    30
    
    
    
    34
    
    
    
    (7
    )
    
    
    (7
    )Settlement and curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    319
    
    
    $
    298
    
    
    $
    36
    
    
    $
    38
    
    
    $
    12
    
    
    $
    27
 Nine Months EndedNon-Employee DirectorsPension Plan
    
    VIP Retirement Plan
    
    Retirement Plan2007
    
    2006
    
    2007
    
    2006
    
    2007
    
    2006Service cost
    
    $
    123
    
    
    $
    129
    
    
    $
    150
    
    
    $
    159
    
    
    $
    18
    
    
    $
    18Interest cost
    
    
    1,035
    
    
    
    1,056
    
    
    
    270
    
    
    
    255
    
    
    
    21
    
    
    
    18Expected return on plan assets
    
    
    (672
    )
    
    
    (738
    )
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Amortization of transition
amount
    
    
    (27
    )
    
    
    (27
    )
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Amortization of prior service
cost
    
    
    351
    
    
    
    351
    
    
    
    (402
    )
    
    
    (402
    )
    
    
    18
    
    
    
    66Recognized net actuarial
(Gain) or loss
    
    
    147
    
    
    
    123
    
    
    
    90
    
    
    
    102
    
    
    
    (21
    )
    
    
    (21
    )Settlement and curtailment
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Net periodic pension cost
    
    $
    957
    
    
    $
    894
    
    
    $
    108
    
    
    $
    114
    
    
    $
    36
    
    
    $
    81
    Three Months Ended
    
    Nine Months Ended10/31/2007
    
    10/31/2006
    
    10/31/2007
    
    10/31/2006(In thousands)Beginning accrued warranty balance
    
    $
    1,800
    
    
    $
    1,500
    
    
    $
    1,800
    
    
    $
    1,500Provision
    
    
    564
    
    
    
    258
    
    
    
    1,050
    
    
    
    660Costs incurred
    
    
    (464
    )
    
    
    (258
    )
    
    
    (950
    )
    
    
    (660
    )Ending accrued warranty balance
    
    $
    1,900
    
    
    $
    1,500
    
    
    $
    1,900
    
    
    $
    1,500




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations




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Item 3. Quantitative and Qualitative Disclosures about Market Risk




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Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Internal Control Over Financial Reporting




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PART II
  
  
   
   
        VIRCO MFG. CORPORATIONDate: December 7, 2007
    By:
    /s/ Robert E. DoseRobert E. DoseVice President  Finance