UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended October 31, 2010
 OR
 o
    
    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
 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)
  
 o o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a
smallerreporting
company)
 o o




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##### 



VIRCO MFG. CORPORATION
 INDEX
 Part I. Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Condensed consolidated balance sheets  October 31, 2010, January 31, 2010 and October 31, 2009
    
    
    3Unaudited condensed consolidated statements of income  Three months ended October 31, 2010 and 2009
    
    
    5Unaudited condensed consolidated statements of operations  Nine months ended October 31, 2010 and 2009
    
    
    6Unaudited condensed consolidated statements of cash flows  Nine months ended October 31, 2010 and 2009
    
    
    7Notes to unaudited condensed consolidated financial statements  October 31, 2010
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    16Part II. Other Information
    
    
    18Item 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    18Item 6. Exhibits
    
    
    18Exhibit 10.1 Amendment No. 6 to Second Amended and Restated Credit Agreement, dated as of October 29,
2010, between Virco Mfg. Corporation and Wells Fargo Bank, National Association.Exhibit 31.1  Certification of Robert A. Virtue, Principal Executive Officer, 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, Principal; Financial Officer, 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  Certifications 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.
  2




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 
 VIRCO MFG. CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 10/31/2010
    
    
    1/31/2010
    
    
    10/31/2009(In thousands, except share data)Unaudited
    
    
    
    
    
    
    Unaudited(Note 1)
    
    
    
    
    
    
    (Note 1)AssetsCurrent assets:Cash
    
    $
    2,260
    
    
    $
    1,045
    
    
    $
    2,127Trade accounts receivable, net
    
    
    19,411
    
    
    
    14,127
    
    
    
    19,455Other receivables
    
    
    98
    
    
    
    141
    
    
    
    53Income tax receivable
    
    
    834
    
    
    
    259
    
    
    
    332Inventories:Finished goods, net
    
    
    7,208
    
    
    
    10,683
    
    
    
    11,211Work in process, net
    
    
    9,447
    
    
    
    18,653
    
    
    
    9,298Raw materials and supplies, net
    
    
    9,064
    
    
    
    7,334
    
    
    
    7,12525,719
    
    
    
    36,670
    
    
    
    27,634Deferred tax assets, net
    
    
    3,773
    
    
    
    3,150
    
    
    
    2,270Prepaid expenses and other current assets
    
    
    1,161
    
    
    
    1,514
    
    
    
    1,172Total current assets
    
    
    53,256
    
    
    
    56,906
    
    
    
    53,043Property, plant and equipment:Land and land improvements
    
    
    3,329
    
    
    
    3,329
    
    
    
    3,329Buildings and building improvements
    
    
    47,796
    
    
    
    47,796
    
    
    
    47,884Machinery and equipment
    
    
    117,785
    
    
    
    116,425
    
    
    
    116,169Leasehold improvements
    
    
    2,754
    
    
    
    2,688
    
    
    
    1,846171,664
    
    
    
    170,238
    
    
    
    169,228Less accumulated depreciation and
amortization
    
    
    129,439
    
    
    
    125,804
    
    
    
    124,932Net property, plant and equipment
    
    
    42,225
    
    
    
    44,434
    
    
    
    44,296Deferred tax assets, net
    
    
    10,129
    
    
    
    10,502
    
    
    
    9,280Other assets
    
    
    6,371
    
    
    
    6,258
    
    
    
    6,289Total assets
    
    $
    111,981
    
    
    $
    118,100
    
    
    $
    112,908
  3




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##### 



VIRCO MFG. CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 10/31/2010
    
    
    1/31/2010
    
    
    10/31/2009(In thousands, except share data)Unaudited
    
    
    
    
    
    
    Unaudited(Note 1)
    
    
    
    
    
    
    (Note 1)LiabilitiesCurrent liabilities:Checks released but not yet cleared bank
    
    $
    4,042
    
    
    $
    2,360
    
    
    $
    2,219Accounts payable
    
    
    8,307
    
    
    
    11,641
    
    
    
    8,389Accrued compensation and employee benefits
    
    
    3,998
    
    
    
    4,396
    
    
    
    4,278Current portion of long-term debt
    
    
    12
    
    
    
    12
    
    
    
    22Other accrued liabilities
    
    
    6,355
    
    
    
    4,517
    
    
    
    6,183Total current liabilities
    
    
    22,714
    
    
    
    22,926
    
    
    
    21,091Non-current liabilities:Accrued self-insurance retention and other
    
    
    5,538
    
    
    
    4,918
    
    
    
    5,085Accrued pension expenses
    
    
    17,645
    
    
    
    17,286
    
    
    
    16,814Deferred income taxes
    
    
    1,093
    
    
    
    1,120
    
    
    
    1,161Long-term debt, less current portion
    
    
    2,243
    
    
    
    6,912
    
    
    
    38Total non-current liabilities
    
    
    26,519
    
    
    
    30,236
    
    
    
    23,098Stockholders equity:Preferred stock:Authorized 3,000,000 shares, $.01 par
value; none issued or outstanding
    
    
    
    
    
    
    
    
    
    
    Common stock:Authorized 25,000,000 shares, $.01 par
value; issued 14,204,998 shares at
10/31/2010, 14,163,044 at 1/31/10;and
14,199,087 shares at 10/31/2009
    
    
    142
    
    
    
    142
    
    
    
    142Additional paid-in capital
    
    
    114,267
    
    
    
    114,152
    
    
    
    114,080Accumulated deficit
    
    
    (42,090
    )
    
    
    (39,785
    )
    
    
    (36,121
    )Accumulated comprehensive loss
    
    
    (9,571
    )
    
    
    (9,571
    )
    
    
    (9,382
    )Total stockholders equity
    
    
    62,748
    
    
    
    64,938
    
    
    
    68,719Total liabilities and stockholders equity
    
    $
    111,981
    
    
    $
    118,100
    
    
    $
    112,908
  4




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##### 



VIRCO MFG. CORPORATION
 UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
  Three months ended10/31/2010
    
    
    10/31/2009(In thousands, except per share data)Net sales
    
    $
    60,779
    
    
    $
    62,920Costs of goods sold
    
    
    43,586
    
    
    
    41,875Gross profit
    
    
    17,193
    
    
    
    21,045Selling, general and administrative expenses and others
    
    
    17,063
    
    
    
    17,204Interest expense
    
    
    253
    
    
    
    296Income (loss) before income taxes
    
    
    (123
    )
    
    
    3,545Provision for income taxes (income tax benefits)
    
    
    (277
    )
    
    
    640Net income
    
    $
    154
    
    
    $
    2,905Dividend declaredCash
    
    $
    0.05
    
    
    $
    0.05Net income per common shareBasic
    
    $
    0.01
    
    
    $
    0.21Diluted
    
    $
    0.01
    
    
    $
    0.20Weighted average shares outstandingBasic
    
    
    14,152
    
    
    
    14,162Diluted
    
    
    14,174
    
    
    
    14,182
  5




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##### 



VIRCO MFG. CORPORATION
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Nine months ended10/31/2010
    
    
    10/31/2009(In thousands, except per share data)Net sales
    
    $
    158,002
    
    
    $
    164,592Costs of goods sold
    
    
    111,566
    
    
    
    109,471Gross profit
    
    
    46,436
    
    
    
    55,121Selling, general and administrative expenses and others
    
    
    47,194
    
    
    
    48,458Interest expense
    
    
    881
    
    
    
    912Income (loss) before income taxes
    
    
    (1,639
    )
    
    
    5,751Provision for income taxes (income tax benefits)
    
    
    (749
    )
    
    
    1,787Net income (loss)
    
    $
    (890
    )
    
    $
    3,964Dividend declaredCash
    
    $
    0.10
    
    
    $
    0.10Net income (loss) per common shareBasic
    
    $
    (0.06
    )
    
    $
    0.28Diluted
    
    $
    (0.06
    )
    
    $
    0.28Weighted average shares outstandingBasic
    
    
    14,123
    
    
    
    14,172Diluted
    
    
    14,123
    
    
    
    14,182
   6




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##### 



VIRCO MFG. VIRCO MFG. CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine months ended10/31/2010
    
    
    10/31/2009(In thousands)Operating activitiesNet income (loss)
    
    $
    (890
    )
    
    $
    3,964Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation and amortization
    
    
    4,063
    
    
    
    3,996Provision for doubtful accounts
    
    
    115
    
    
    
    120Gain on sale of property, plant and equipment
    
    
    (5
    )
    
    
    (5
    )Deferred income taxes
    
    
    (277
    )
    
    
    1,538Stock based compensation
    
    
    599
    
    
    
    657Changes in operating assets and liabilitiesTrade accounts receivable
    
    
    (5,399
    )
    
    
    (5,382
    )Other receivables
    
    
    46
    
    
    
    449Inventories
    
    
    10,951
    
    
    
    5,351Income taxes
    
    
    (575
    )
    
    
    26Prepaid expenses and other current assets
    
    
    233
    
    
    
    486Accounts payable and accrued liabilities
    
    
    274
    
    
    
    (8,150
    )Net cash provided by operating activities
    
    
    9,135
    
    
    
    3,050Investing activitiesCapital expenditures
    
    
    (1,878
    )
    
    
    (3,675
    )Proceeds from sale of property, plant and equipment
    
    
    33
    
    
    
    10Net cash used in investing activities
    
    
    (1,845
    )
    
    
    (3,665
    )Financing activitiesRepayment of long-term debt
    
    
    (4,669
    )
    
    
    (55
    )Purchase of treasury stock
    
    
    (344
    )
    
    
    (524
    )Cash dividend paid
    
    
    (1,062
    )
    
    
    (1,066
    )Net cash used in financing activities
    
    
    (6,075
    )
    
    
    (1,645
    )Net increase (decrease) in cash
    
    
    1,215
    
    
    
    (2,260
    )Cash at beginning of period
    
    
    1,045
    
    
    
    4,387Cash at end of period
    
    $
    2,260
    
    
    $
    2,127Supplemental disclosure:Accrual for cash dividends declared but not paid
    
    $
    355
    
    
    $
    355
  7




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##### 



VIRCO MFG. CORPORATION
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 October 31, 2010
 Note 1. Basis of Presentation
  Note 2. Seasonality
    Note 3. New Accounting Standards
   8




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##### 



Note 4. Inventories
  Note 5. Debt
      Note 6. Income Taxes
   9




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##### 



Note 7. Net income (loss) per Share
 Three Months Ended
    
    
    Nine Months Ended10/31/2010
    
    
    10/31/2009
    
    
    10/31/2010
    
    
    10/31/2009(In thousands, except per share data)Net income (loss)
    
    $
    154
    
    
    $
    2,905
    
    
    $
    (890
    )
    
    $
    3,964Average shares outstanding
    
    
    14,152
    
    
    
    14,162
    
    
    
    14,123
    
    
    
    14,172Net effect of dilutive stock optionsbased on the treasury stock method
using average market price
    
    
    22
    
    
    
    20
    
    
    
    
    
    
    
    10Totals
    
    
    14,174
    
    
    
    14,182
    
    
    
    14,123
    
    
    
    14,182Net income (loss) per share  basic
    
    $
    0.01
    
    
    $
    0.21
    
    
    $
    (0.06
    )
    
    $
    0.28Net income (loss) per share  diluted
    
    $
    0.01
    
    
    $
    0.20
    
    
    $
    (0.06
    )
    
    $
    0.28
  Note 8. Stock Based Compensation
 Stock Incentive Plans
    10




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##### 



Restricted Stock and Stock Unit Awards
 Accounting for the Plans
  UnrecognizedCompensationExpense for 3 months ended
    
    
    Expense for 9 months ended
    
    
    Cost at10/31/2010
    
    
    10/31/2009
    
    
    10/31/2010
    
    
    10/31/2009
    
    
    10/31/20102007 Stock Incentive PlanGrants of 56,455 Shares
of Restricted Stock,
issued 6/8/2010, vesting
over 1 year
    
    $
    44,000
    
    
    $
    
    
    
    $
    58,000
    
    
    $
    
    
    
    $
    101,000Grants of 49,854 Shares
of Restricted Stock,
issued 6/16/2009,
vesting over 1 year
    
    
    
    
    
    
    44,000
    
    
    
    58,000
    
    
    
    73,000
    
    
    
    Grants of 382,500 Shares
of Restricted Stock,
issued 6/16/2009,
vesting over 5 years
    
    
    67,000
    
    
    
    67,000
    
    
    
    201,000
    
    
    
    112,000
    
    
    
    959,000Grants of 262,500
Restricted Stock Units,
issued 6/19/2007,
vesting over 5 years
    
    
    89,000
    
    
    
    89,000
    
    
    
    267,000
    
    
    
    267,000
    
    
    
    565,000Grants of 35,644 Shares
of Restricted Stock,
issued 6/17/2008,
vesting over 1 year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,000
    
    
    
    1997 Stock Incentive PlanGrants of 270,000
Restricted Stock Units,
issued 6/30/2004,
vesting over 5 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,000
    
    
    
    Totals for the period
    
    $
    200,000
    
    
    $
    200,000
    
    
    $
    584,000
    
    
    $
    657,000
    
    
    $
    1,625,000
 Stockholders Rights
  Note 9. Comprehensive Loss and Stockholders Equity
   11




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Note 10. Retirement Plans
     Three Months Ended October 31,Non-Employee DirectorsPension Plan
    
    
    VIP Plan
    
    
    Retirement Plan2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    352
    
    
    
    367
    
    
    
    87
    
    
    
    85
    
    
    
    6
    
    
    
    7Expected return on plan assets
    
    
    (262
    )
    
    
    (179
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    243
    
    
    
    128
    
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    Recognized net actuarial loss or
(gain)
    
    
    
    
    
    
    231
    
    
    
    
    
    
    
    24
    
    
    
    (7
    )
    
    
    (46
    )Net periodic pension cost (benefit)
    
    $
    333
    
    
    $
    547
    
    
    $
    87
    
    
    $
    30
    
    
    $
    (1
    )
    
    $
    (39
    )Nine Months Ended October 31,Non-Employee DirectorsPension Plan
    
    
    VIP Plan
    
    
    Retirement Plan2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    1,056
    
    
    
    1,101
    
    
    
    261
    
    
    
    255
    
    
    
    18
    
    
    
    21Expected return on plan assets
    
    
    (786
    )
    
    
    (537
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    729
    
    
    
    384
    
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    Recognized net actuarial loss or
(gain)
    
    
    
    
    
    
    693
    
    
    
    
    
    
    
    72
    
    
    
    (21
    )
    
    
    (138
    )Net periodic pension cost (benefit)
    
    $
    999
    
    
    $
    1,641
    
    
    $
    261
    
    
    $
    90
    
    
    $
    (3
    )
    
    $
    (117
    )
 Note 11. Warranty
  12




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##### 



Three Months Ended
    
    
    Nine Months Ended10/31/2010
    
    
    10/31/2009
    
    
    10/31/2010
    
    
    10/31/2009(In thousands)Beginning Accrued Warranty
Balance
    
    $
    1,675
    
    
    $
    1,800
    
    
    $
    1,950
    
    
    $
    1,950Provision
    
    
    753
    
    
    
    354
    
    
    
    931
    
    
    
    720Costs Incurred
    
    
    (303
    )
    
    
    (354
    )
    
    
    (756
    )
    
    
    (870
    )Ending Accrued Warranty Balance
    
    $
    2,125
    
    
    $
    1,800
    
    
    $
    2,125
    
    
    $
    1,800
 Note 12. Subsequent Events
  13




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VIRCO MFG. CORPORATION
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
           14




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##### 



Liquidity and Capital Resources
      Off Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
  Forward-Looking Statements
  15




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##### 



Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
       16




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##### 



Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
  ,
 Internal Control over Financial Reporting
  17




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##### 



PART II  OTHER INFORMATION
 VIRCO MFG. CORPORATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
  Total Number of
    
    Maximum Number of $Shares Purchased as
    
    that May Yet BeTotal Number of
    
    Average Price Paid
    
    Part of a Publicly
    
    Expended Under theShares Purchased
    
    Per Share ($)
    
    Announced Program (1)
    
    Program (1) ($)May 1, 2010 through
May 31, 2010
    
    
    
    
    
    
    
    
    
    
    533,542
    
    
    
    1,247,000June 1, 2010
through June 30,
2010
    
    
    57,844
    
    
    
    3.34
    
    
    
    591,386
    
    
    
    1,053,000July 1, 2010
through July 31,
2010
    
    
    
    
    
    
    
    
    
    
    591,386
    
    
    
    1,053,000August 1, 2010
through October 31,
2010
    
    
    
    
    
    
    
    
    
    
    591,386
    
    
    
    1,053,000
 
 (1)
    
    On June 6, 2008, the Board of Directors approved a $3,000,000 share repurchase program. 
 Item 6.
    
    Exhibits
     18




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##### 



VIRCO MFG. CORPORATION
 SIGNATURES
  VIRCO MFG. CORPORATIONDate: December 9, 2010
    By:
    /s/ Robert E. DoseRobert E. DoseVice President  Finance 19