##### Table of Contents



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 July 31, 2009
 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)
 (310) 533-0474
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



Part I. Financial Information
    3Item 1. Financial Statements
    3Condensed consolidated balance sheets  July 31, 2009, January 31, 2009 and July 31, 2008
    3Unaudited condensed consolidated statements of income  Three months ended July 31, 2009 and 2008
    5Unaudited condensed consolidated statements of income  Six months ended July 31, 2009 and 2008
    6Unaudited condensed consolidated statements of cash flows  Six months ended July 31, 2009 and 2008
    7Notes to unaudited condensed consolidated financial statements  July 31, 2009
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    14Item 4. Controls and Procedures
    15Part II. Other Information
    16Item 1. Legal Proceedings
    16Item 1A. Risk Factors
    16Item 4. Submission of Matters to a Vote of Security Holders
    16Item 6. Exhibits
    16Exhibit 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.EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I
 
 Item 1.
    
    Financial Statements
 VIRCO MFG. CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 7/31/2009
    
    1/31/2009
    
    7/31/2008(In thousands, except share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)AssetsCurrent assets:Cash
    
    $
    1,614
    
    
    $
    4,387
    
    
    $
    1,851Trade accounts receivable
    
    
    41,774
    
    
    
    14,393
    
    
    
    43,314Less allowance for doubtful accounts
    
    
    263
    
    
    
    200
    
    
    
    258Net trade accounts receivable
    
    
    41,511
    
    
    
    14,193
    
    
    
    43,056Other receivables
    
    
    473
    
    
    
    768
    
    
    
    80Inventories:Finished goods, net
    
    
    23,903
    
    
    
    10,720
    
    
    
    14,759Work in process, net
    
    
    8,542
    
    
    
    14,848
    
    
    
    18,641Raw materials and supplies, net
    
    
    8,732
    
    
    
    7,417
    
    
    
    12,79141,177
    
    
    
    32,985
    
    
    
    46,191Deferred tax assets, net
    
    
    2,867
    
    
    
    3,808
    
    
    
    3,698Prepaid expenses and other current assets
    
    
    1,917
    
    
    
    1,658
    
    
    
    1,295Total current assets
    
    
    89,559
    
    
    
    57,799
    
    
    
    96,171Property, plant and equipment:Land and land improvements
    
    
    3,336
    
    
    
    3,379
    
    
    
    3,630Buildings and building improvements
    
    
    47,888
    
    
    
    47,888
    
    
    
    49,558Machinery and equipment
    
    
    115,184
    
    
    
    116,559
    
    
    
    116,686Leasehold improvements
    
    
    1,902
    
    
    
    1,911
    
    
    
    1,487168,310
    
    
    
    169,737
    
    
    
    171,361Less accumulated depreciation and amortization
    
    
    124,242
    
    
    
    125,122
    
    
    
    125,398Net property, plant and equipment
    
    
    44,068
    
    
    
    44,615
    
    
    
    45,963Goodwill and other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    2,291Deferred tax assets, net
    
    
    9,257
    
    
    
    9,372
    
    
    
    5,652Other assets
    
    
    6,289
    
    
    
    6,289
    
    
    
    6,238Total assets
    
    $
    149,173
    
    
    $
    118,075
    
    
    $
    156,315
  3




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VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 7/31/2009
    
    1/31/2009
    
    7/31/2008(In thousands, except share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)LiabilitiesCurrent liabilities:Checks released but not yet cleared bank
    
    $
    2,717
    
    
    $
    4,996
    
    
    $
    4,006Accounts payable
    
    
    15,247
    
    
    
    10,728
    
    
    
    13,710Accrued compensation and employee benefits
    
    
    4,687
    
    
    
    5,136
    
    
    
    5,012Current portion of long-term debt
    
    
    17,080
    
    
    
    69
    
    
    
    14,671Other accrued liabilities
    
    
    8,863
    
    
    
    6,735
    
    
    
    9,869Total current liabilities
    
    
    48,594
    
    
    
    27,664
    
    
    
    47,268Non-current liabilities:Accrued self-insurance retention and other
    
    
    3,656
    
    
    
    3,263
    
    
    
    4,866Accrued pension expenses
    
    
    19,273
    
    
    
    19,777
    
    
    
    13,647Deferred income taxes
    
    
    1,161
    
    
    
    1,161
    
    
    
    Long-term debt, less current portion
    
    
    10,036
    
    
    
    47
    
    
    
    20,079Total non-current liabilities
    
    
    34,126
    
    
    
    24,248
    
    
    
    38,592Commitments and ContingenciesStockholders 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
14,240,531 shares at 7/31/2009; 14,238,994 at 1/31/09;
and 14,522,701 shares at 07/31/2008
    
    
    142
    
    
    
    142
    
    
    
    145Additional paid-in capital
    
    
    114,007
    
    
    
    114,067
    
    
    
    114,509Accumulated deficit
    
    
    (38,314
    )
    
    
    (38,664
    )
    
    
    (39,109
    )Accumulated comprehensive loss
    
    
    (9,382
    )
    
    
    (9,382
    )
    
    
    (5,090
    )Total stockholders equity
    
    
    66,453
    
    
    
    66,163
    
    
    
    70,455Total liabilities and stockholders equity
    
    $
    149,173
    
    
    $
    118,075
    
    
    $
    156,315
  4




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VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Unaudited (Note 1)
 Three months ended7/31/2009
    
    7/31/2008(In thousands, except share data)Net sales
    
    $
    74,623
    
    
    $
    80,216Costs of goods sold
    
    
    48,847
    
    
    
    54,327Gross profit
    
    
    25,776
    
    
    
    25,889Selling, general, administrative & other expenses
    
    
    18,242
    
    
    
    19,610Interest expense
    
    
    441
    
    
    
    565Income before income taxes
    
    
    7,093
    
    
    
    5,714Income tax provision
    
    
    3,047
    
    
    
    2,202Net income
    
    $
    4,046
    
    
    $
    3,512Net income per common share:Basic
    
    $
    0.29
    
    
    $
    0.24Diluted
    
    $
    0.29
    
    
    $
    0.24Weighted average shares outstanding:Basic
    
    
    14,151
    
    
    
    14,423Diluted
    
    
    14,154
    
    
    
    14,451
  5




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VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Unaudited (Note 1)
 Six months ended7/31/2009
    
    7/31/2008(In thousands, except per share data)Net sales
    
    $
    101,672
    
    
    $
    109,410Costs of goods sold
    
    
    67,596
    
    
    
    73,968Gross profit
    
    
    34,076
    
    
    
    35,442Selling, general and administrative expenses
    
    
    31,254
    
    
    
    33,401Interest expense
    
    
    616
    
    
    
    874Income before income taxes
    
    
    2,206
    
    
    
    1,167Provision for income taxes
    
    
    1,147
    
    
    
    511Net income
    
    $
    1,059
    
    
    $
    656Dividend declaredCash
    
    $
    0.05
    
    
    $
    0.05Net income per common share:Basic
    
    $
    0.07
    
    
    $
    0.05Diluted
    
    $
    0.07
    
    
    $
    0.05Weighted average shares outstanding:Basic
    
    
    14,170
    
    
    
    14,426Diluted
    
    
    14,170
    
    
    
    14,443
  6




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VIRCO MFG. VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Unaudited (Note 1)
 Six months ended7/31/2009
    
    7/31/2008(In thousands)Operating activitiesNet income
    
    $
    1,059
    
    
    $
    656Adjustments to reconcile net income to net cash used in
operating activities:Depreciation and amortization
    
    
    2,652
    
    
    
    2,885Provision for doubtful accounts
    
    
    100
    
    
    
    58Gain on sale of property, plant and equipment
    
    
    (5
    )
    
    
    (1
    )Deferred income taxes
    
    
    941
    
    
    
    491Stock based compensation
    
    
    457
    
    
    
    413Changes in operating assets and liabilitiesTrade accounts receivable
    
    
    (27,418
    )
    
    
    (27,640
    )Other receivables
    
    
    461
    
    
    
    204Inventories
    
    
    (8,192
    )
    
    
    (3,183
    )Income taxes
    
    
    (51
    )
    
    
    14Prepaid expenses and other current assets
    
    
    (259
    )
    
    
    198Accounts payable and accrued liabilities
    
    
    3,683
    
    
    
    (1,944
    )Net cash used in operating activities
    
    
    (26,572
    )
    
    
    (27,849
    )Investing activitiesCapital expenditures
    
    
    (2,110
    )
    
    
    (2,487
    )Proceeds from sale of property, plant and equipment
    
    
    10
    
    
    
    1Net cash used in investing activities
    
    
    (2,100
    )
    
    
    (2,486
    )Financing activitiesProceeds from long-term debt
    
    
    27,042
    
    
    
    30,941Repayment of long-term debt
    
    
    (37
    )
    
    
    (37
    )Purchase of treasury stock
    
    
    (397
    )
    
    
    (63
    )Cash dividend paid
    
    
    (709
    )
    
    
    (721
    )Net cash provided by financing activities
    
    
    25,899
    
    
    
    30,120Net decrease in cash
    
    
    (2,773
    )
    
    
    (215
    )Cash at beginning of period
    
    
    4,387
    
    
    
    2,066Cash at end of period
    
    $
    1,614
    
    
    $
    1,851
  7




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VIRCO MFG. CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 July 31, 2009
 Note 1. Basis of Presentation
  Note 2. Seasonality
    Note 3. New Accounting Standards
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles
  8




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Note 4. Inventories
  Note 5. Debt
     9




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Note 6. Income Taxes
    Note 7. Net Income per Share
 Three Months Ended
    
    Six Months Ended7/31/2009
    

    7/31/2008
    



    7/31/2009
    
    7/31/2008(In thousands, except per share data)Net income
    
    $
    4,046
    
    
    $
    3,512
    
    
    $
    1,059
    
    
    $
    656Average shares outstanding
    
    
    14,151
    
    
    
    14,423
    
    
    
    14,170
    
    
    
    14,426Net effect
of dilutive stock options based on the treasury stock method using average market price
    
    
    3
    
    
    
    28
    
    
    
    
    
    
    
    17Totals
    
    
    14,154
    
    
    
    14,451
    
    
    
    14,170
    
    
    
    14,443Net income
per share  basic
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.07
    
    
    $
    0.05Net income
per share  diluted
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.07
    
    
    $
    0.05
 Note 8. Stock Based Compensation
 Stock Incentive Plans
   Restricted Stock and Stock Unit Awards
 Accounting for the Plans
  10




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##### Table of Contents



UnrecognizedCompensationExpense for 3 months ended
    
    Expense for 6 months ended
    
    Cost at7/31/2009
    
    7/31/2008
    
    7/31/2009
    
    7/31/2008
    
    7/31/20092007 Stock Incentive PlanGrants of 49,854 Shares
of Restricted Stock,
issued 6/16/2009,
vesting over 1 year
    
    $
    29,000
    
    
    $
    
    
    
    $
    29,000
    
    
    $
    
    
    
    $
    146,000Grants of 382,500 Shares
of Restricted Stock,
issued 6/16/2009,
vesting over 5 years
    
    
    45,000
    
    
    
    
    
    
    
    45,000
    
    
    
    
    
    
    
    1,294,000Grants of 262,500
Restricted Stock Units,
issued 6/19/2007,
vesting over 5 years
    
    
    89,000
    
    
    
    89,000
    
    
    
    178,000
    
    
    
    177,000
    
    
    
    1,010,000Grants of 35,644 Shares
of Restricted Stock,
issued 6/17/2008,
vesting over 1 year
    
    
    14,000
    
    
    
    29,000
    
    
    
    58,000
    
    
    
    29,000
    
    
    
    Grants of 12,887 Shares
of Restricted Stock,
issued 6/19/2007,
vesting over 1 year
    
    
    
    
    
    
    7,000
    
    
    
    
    
    
    
    29,000
    
    
    
    1997 Stock Incentive PlanGrants of 270,000
Restricted Stock Units,
issued 6/30/2004,
vesting over 5 years
    
    
    59,000
    
    
    
    89,000
    
    
    
    147,000
    
    
    
    178,000
    
    
    
    Totals for the period
    
    $
    236,000
    
    
    $
    214,000
    
    
    $
    457,000
    
    
    $
    413,000
    
    
    $
    2,450,000
 Stockholders Rights
  Note 9. Comprehensive Income (Loss)
  Note 10. Retirement Plans
     11




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Three Months EndedNon-Employee DirectorsPension Plan
    
    VIP Retirement Plan
    
    Retirement Plan2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Interest cost
    
    
    367
    
    
    
    388
    
    
    
    85
    
    
    
    90
    
    
    
    7
    
    
    
    8Expected return on plan assets
    
    
    (179
    )
    
    
    (300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    128
    
    
    
    138
    
    
    
    (79
    )
    
    
    (80
    )
    
    
    
    
    
    
    Recognized net actuarial loss or (gain)
    
    
    231
    
    
    
    50
    
    
    
    24
    
    
    
    40
    
    
    
    (46
    )
    
    
    (8
    )Settlement and curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    547
    
    
    $
    276
    
    
    $
    30
    
    
    $
    50
    
    
    $
    (39
    )
    
    $
    5
 Six Months EndedNon-Employee DirectorsPension Plan
    
    VIP Retirement Plan
    
    Retirement Plan2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10Interest cost
    
    
    734
    
    
    
    776
    
    
    
    170
    
    
    
    180
    
    
    
    14
    
    
    
    16Expected return on plan assets
    
    
    (358
    )
    
    
    (600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    256
    
    
    
    276
    
    
    
    (158
    )
    
    
    (160
    )
    
    
    
    
    
    
    Recognized net actuarial loss or (gain)
    
    
    462
    
    
    
    100
    
    
    
    48
    
    
    
    80
    
    
    
    (92
    )
    
    
    (16
    )Settlement and curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    1,094
    
    
    $
    552
    
    
    $
    60
    
    
    $
    100
    
    
    $
    (78
    )
    
    $
    10
 Note 11. Warranty
   Three Months Ended
    
    Six Months Ended7/31/2009
    
    7/31/2008
    
    7/31/2009
    
    7/31/2008(In thousands)Beginning Accrued Warranty Balance
    
    $
    1,950
    
    
    $
    1,950
    
    
    $
    1,950
    
    
    $
    1,750Provision
    
    
    65
    
    
    
    412
    
    
    
    366
    
    
    
    955Costs Incurred
    
    
    (215
    )
    
    
    (362
    )
    
    
    (516
    )
    
    
    (705
    )Ending Accrued Warranty Balance
    
    $
    1,800
    
    
    $
    2,000
    
    
    $
    1,800
    
    
    $
    2,000
 Note 11. Subsequent Events
   12




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VIRCO MFG. CORPORATION
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
          Liquidity and Capital Resources
    13




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Off Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
  Forward-Looking Statements
   
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
     14




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Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
   Internal Control Over Financial Reporting
  15




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##### Table of Contents



PART
II  OTHER INFORMATION
 VIRCO MFG. CORPORATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
    
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
   Votes For
    
    
    Authority WithheldRobert A. Virtue
    
    
    12,611,434
    
    
    
    82,907Robert K. Montgomery
    
    
    9,832,032
    
    
    
    2,862,309Donald A. Patrick
    
    
    12,527,360
    
    
    
    166,981
  
 Item 6.
    
    Exhibits
      VIRCO MFG. CORPORATIONDate: September 9, 2009
    By:
    /s/ Robert E. DoseRobert E. DoseVice President  Finance 16