##### 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 October 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
    
    (I.R.S. EmployerIncorporation or Organization)
    
    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 þNon-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  October 31, 2009, January 31, 2009 and October 31, 2008
    
    
    3Unaudited condensed consolidated statements of income  Three months ended October 31, 2009 and 2008
    
    
    5Unaudited condensed consolidated statements of income  Nine months ended October 31, 2009 and 2008
    
    
    6Unaudited condensed consolidated statements of cash flows  Nine months ended October 31, 2009 and 2008
    
    
    7Notes to unaudited condensed consolidated financial statements  October 31, 2009
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    16Part II. Other Information
    
    
    17Item 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 6. Exhibits
    
    
    17Exhibit 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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##### Table of Contents



PART I
 
 Item 1. Financial Statements
 VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 10/31/2009
    
    1/31/2009
    
    10/31/2008(In thousands, except share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)AssetsCurrent assets:Cash
    
    $
    2,127
    
    
    $
    4,387
    
    
    $
    3,474Trade accounts receivable
    
    
    19,738
    
    
    
    14,393
    
    
    
    25,805Less allowance for doubtful accounts
    
    
    283
    
    
    
    200
    
    
    
    258Net trade accounts receivable
    
    
    19,455
    
    
    
    14,193
    
    
    
    25,547Other receivables
    
    
    385
    
    
    
    768
    
    
    
    152Inventories:Finished goods, net
    
    
    11,211
    
    
    
    10,720
    
    
    
    8,953Work in process, net
    
    
    9,298
    
    
    
    14,848
    
    
    
    10,841Raw materials and supplies, net
    
    
    7,125
    
    
    
    7,417
    
    
    
    6,25127,634
    
    
    
    32,985
    
    
    
    26,045Deferred tax assets, net
    
    
    2,270
    
    
    
    3,808
    
    
    
    1,091Prepaid expenses and other current assets
    
    
    1,172
    
    
    
    1,658
    
    
    
    1,249Total current assets
    
    
    53,043
    
    
    
    57,799
    
    
    
    57,558Property, plant and equipment:Land and land improvements
    
    
    3,329
    
    
    
    3,379
    
    
    
    3,379Buildings and building improvements
    
    
    47,884
    
    
    
    47,888
    
    
    
    47,511Machinery and equipment
    
    
    116,169
    
    
    
    116,559
    
    
    
    115,518Leasehold improvements
    
    
    1,846
    
    
    
    1,911
    
    
    
    1,487169,228
    
    
    
    169,737
    
    
    
    167,895Less accumulated depreciation and amortization
    
    
    124,932
    
    
    
    125,122
    
    
    
    123,791Net property, plant and equipment
    
    
    44,296
    
    
    
    44,615
    
    
    
    44,104Goodwill and other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    2,288Deferred tax assets, net
    
    
    9,280
    
    
    
    9,372
    
    
    
    5,652Other assets
    
    
    6,289
    
    
    
    6,289
    
    
    
    6,288Total assets
    
    $
    112,908
    
    
    $
    118,075
    
    
    $
    115,890
  3




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VIRCO MFG. CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 10/31/2009
    
    1/31/2009
    
    10/31/2008(In thousands, except share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)LiabilitiesCurrent liabilities:Checks released but not yet cleared bank
    
    $
    2,219
    
    
    $
    4,996
    
    
    $
    2,417Accounts payable
    
    
    8,389
    
    
    
    10,728
    
    
    
    10,057Accrued compensation and employee benefits
    
    
    4,278
    
    
    
    5,136
    
    
    
    4,904Current portion of long-term debt
    
    
    22
    
    
    
    69
    
    
    
    74Other accrued liabilities
    
    
    7,736
    
    
    
    6,735
    
    
    
    7,023Total current liabilities
    
    
    22,644
    
    
    
    27,664
    
    
    
    24,475Non-current liabilities:Accrued self-insurance retention and other
    
    
    3,532
    
    
    
    3,263
    
    
    
    4,571Accrued pension expenses
    
    
    16,814
    
    
    
    19,777
    
    
    
    13,341Deferred income taxes
    
    
    1,161
    
    
    
    1,161
    
    
    
    Long-term debt, less current portion
    
    
    38
    
    
    
    47
    
    
    
    60Total non-current liabilities
    
    
    21,545
    
    
    
    24,248
    
    
    
    17,972Stockholders 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
14,199,087 shares at 10/31/2009, 14,238,994 at 1/31/09;
and 14,426,884 shares at 10/31/2008
    
    
    142
    
    
    
    142
    
    
    
    144Additional paid-in capital
    
    
    114,080
    
    
    
    114,067
    
    
    
    114,442Accumulated deficit
    
    
    (36,121
    )
    
    
    (38,664
    )
    
    
    (36,053
    )Accumulated comprehensive loss
    
    
    (9,382
    )
    
    
    (9,382
    )
    
    
    (5,090
    )Total stockholders equity
    
    
    68,719
    
    
    
    66,163
    
    
    
    73,443Total liabilities and stockholders equity
    
    $
    112,908
    
    
    $
    118,075
    
    
    $
    115,890
  4




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##### Table of Contents



VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Unaudited (Note 1)
 Three months ended10/31/2009
    
    10/31/2008(In thousands, except per share data)Net sales
    
    $
    62,920
    
    
    $
    74,866Costs of goods sold
    
    
    41,875
    
    
    
    50,372Gross profit
    
    
    21,045
    
    
    
    24,494Selling, general and administrative expenses and others
    
    
    17,204
    
    
    
    18,868Gain on sale of property
    
    
    
    
    
    
    (1,131
    )Interest expense
    
    
    296
    
    
    
    370Income before income taxes
    
    
    3,545
    
    
    
    6,387Provision for income taxes
    
    
    640
    
    
    
    2,607Net income
    
    $
    2,905
    
    
    $
    3,780Dividend declaredCash
    
    $
    0.05
    
    
    $
    0.05Net income per common shareBasic
    
    $
    0.21
    
    
    $
    0.26Diluted
    
    $
    0.20
    
    
    $
    0.26Weighted average shares outstandingBasic
    
    
    14,162
    
    
    
    14,467Diluted
    
    
    14,182
    
    
    
    14,485
  5




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##### Table of Contents



VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Unaudited (Note 1)
 Nine months ended10/31/2009
    
    10/31/2008(In thousands, except per share data)Net sales
    
    $
    164,592
    
    
    $
    184,276Costs of goods sold
    
    
    109,471
    
    
    
    124,340Gross profit
    
    
    55,121
    
    
    
    59,936Selling, general and administrative expenses and others
    
    
    48,458
    
    
    
    52,269Gain on sale of property
    
    
    
    
    
    
    (1,131
    )Interest expense
    
    
    912
    
    
    
    1,244Income before income taxes
    
    
    5,751
    
    
    
    7,554Provision for income taxes
    
    
    1,787
    
    
    
    3,118Net income
    
    $
    3,964
    
    
    $
    4,436Dividend declaredCash
    
    $
    0.10
    
    
    $
    0.10Net income per common shareBasic
    
    $
    0.28
    
    
    $
    0.31Diluted
    
    $
    0.28
    
    
    $
    0.31Weighted average shares outstandingBasic
    
    
    14,172
    
    
    
    14,443Diluted
    
    
    14,182
    
    
    
    14,467
  6




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##### Table of Contents



VIRCO MFG. VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Unaudited (Note 1)
 Nine months ended10/31/2009
    
    10/31/2008(In thousands)Operating activitiesNet income
    
    $
    3,964
    
    
    $
    4,436Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    3,996
    
    
    
    4,309Provision for doubtful accounts
    
    
    120
    
    
    
    60Gain on sale of property, plant and equipment
    
    
    (5
    )
    
    
    (1,131
    )Deferred income taxes
    
    
    1,538
    
    
    
    3,098Stock based compensation
    
    
    657
    
    
    
    634Changes in operating assets and liabilitiesTrade accounts receivable
    
    
    (5,382
    )
    
    
    (10,133
    )Other receivables
    
    
    449
    
    
    
    132Inventories
    
    
    5,351
    
    
    
    16,962Income taxes
    
    
    26
    
    
    
    (335
    )Prepaid expenses and other current assets
    
    
    486
    
    
    
    244Accounts payable and accrued liabilities
    
    
    (8,150
    )
    
    
    (10,877
    )Net cash provided by operating activities
    
    
    3,050
    
    
    
    7,399Investing activitiesCapital expenditures
    
    
    (3,675
    )
    
    
    (3,185
    )Proceeds from sale of property, plant and equipment
    
    
    10
    
    
    
    2,392Net investment in life insurance
    
    
    
    
    
    
    (50
    )Net cash used in investing activities
    
    
    (3,665
    )
    
    
    (843
    )Financing activitiesRepayment of long-term debt
    
    
    (55
    )
    
    
    (3,712
    )Purchase of treasury stock
    
    
    (524
    )
    
    
    (352
    )Cash dividend paid
    
    
    (1,066
    )
    
    
    (1,084
    )Net cash used in financing activities
    
    
    (1,645
    )
    
    
    (5,148
    )Net (decrease) or increase in cash
    
    
    (2,260
    )
    
    
    1,408Cash at beginning of period
    
    
    4,387
    
    
    
    2,066Cash at end of period
    
    $
    2,127
    
    
    $
    3,474Supplemental disclosure:Accrual for cash dividends declared but not paid
    
    $
    355
    
    
    $
    361
  7




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VIRCO MFG. CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 October 31, 2009
 Note 1. Basis of Presentation
  Note 2. Seasonality
    Note 3. New Accounting Standards
   Subsequent Events
 8




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The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles
      Note 4. Inventories
  Note 5. Debt
 9




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##### Table of Contents



Note 6. Income Taxes
    Note 7. Net Income per Share
 Three Months Ended
    
    Nine Months Ended10/31/2009
    
    10/31/2008
    
    10/31/2009
    
    10/31/2008(In thousands, except per share data)Net income
    
    $
    2,905
    
    
    $
    3,780
    
    
    $
    3,964
    
    
    $
    4,436Average shares outstanding
    
    
    14,162
    
    
    
    14,467
    
    
    
    14,172
    
    
    
    14,443Net effect of dilutive stock options based on the
treasury stock method using average market price
    
    
    20
    
    
    
    18
    
    
    
    10
    
    
    
    24Totals
    
    
    14,182
    
    
    
    14,485
    
    
    
    14,182
    
    
    
    14,467Net income per share  basic
    
    $
    0.21
    
    
    $
    0.26
    
    
    $
    0.28
    
    
    $
    0.31Net income per share  diluted
    
    
    0.20
    
    
    
    0.26
    
    
    
    0.28
    
    
    
    0.31
 Note 8. Stock Based Compensation
 10




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##### Table of Contents



Stock Incentive Plans
   Restricted Stock and Stock Unit Awards
 Accounting for the Plans
  UnrecognizedCompensationExpense for 3 months ended
    
    Expense for 9 months ended
    
    Cost at10/31/2009
    
    10/31/2008
    
    10/31/2009
    
    10/31/2008
    
    10/31/20092007 Stock Incentive PlanGrants of 49,854 Shares of
Restricted Stock, issued 6/16/2009,
vesting over 1 year
    
    $
    44,000
    
    
    $
    
    
    
    $
    73,000
    
    
    $
    
    
    
    $
    102,000Grants of 382,500 Shares of
Restricted Stock, issued 6/16/2009,
vesting over 5 years
    
    
    67,000
    
    
    
    
    
    
    
    112,000
    
    
    
    
    
    
    
    1,227,000Grants of 262,500 Restricted Stock
Units, issued 6/19/2007, vesting
over 5 years
    
    
    89,000
    
    
    
    89,000
    
    
    
    267,000
    
    
    
    266,000
    
    
    
    921,000Grants of 35,644 Shares of
Restricted Stock, issued 6/17/2008,
vesting over 1 year
    
    
    
    
    
    
    44,000
    
    
    
    58,000
    
    
    
    73,000
    
    
    
    Grants of 12,887 Shares of
Restricted Stock, issued 6/19/2007,
vesting over 1 year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,000
    
    
    
    1997 Stock Incentive PlanGrants of 270,000 Restricted Stock
Units, issued 6/30/2004, vesting
over 5 years
    
    
    
    
    
    
    88,000
    
    
    
    147,000
    
    
    
    266,000
    
    
    
    Totals for the period
    
    $
    200,000
    
    
    $
    221,000
    
    
    $
    657,000
    
    
    $
    634,000
    
    
    $
    2,250,000
 Stockholders Rights Plan
  11




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##### Table of Contents



Note 9. Comprehensive Income (Loss)
  Note 10. Retirement Plans
     Three Months Ended October 31,Non-Employee DirectorsPension Plan
    
    VIP 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 (benefit)
    
    $
    547
    
    
    $
    276
    
    
    $
    30
    
    
    $
    50
    
    
    $
    (39
    )
    
    $
    5
 Nine Months Ended October 31,Non-Employee DirectorsPension Plan
    
    VIP Plan
    
    Retirement Plan2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    15Interest cost
    
    
    1,101
    
    
    
    1,164
    
    
    
    255
    
    
    
    270
    
    
    
    21
    
    
    
    24Expected return on plan assets
    
    
    (537
    )
    
    
    (900
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    384
    
    
    
    414
    
    
    
    (237
    )
    
    
    (240
    )
    
    
    
    
    
    
    Recognized net actuarial loss or
(gain)
    
    
    693
    
    
    
    150
    
    
    
    72
    
    
    
    120
    
    
    
    (138
    )
    
    
    (24
    )Settlement and curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic pension cost (benefit)
    
    $
    1,641
    
    
    $
    828
    
    
    $
    90
    
    
    $
    150
    
    
    $
    (117
    )
    
    $
    15
 12




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Note 11. Warranty
   Three Months Ended
    
    Nine Months Ended10/31/2009
    
    10/31/2008
    
    10/31/2009
    
    10/31/2008(In thousands)Beginning Accrued Warranty Balance
    
    $
    1,800
    
    
    $
    2,000
    
    
    $
    1,950
    
    
    $
    1,750Provision
    
    
    354
    
    
    
    354
    
    
    
    720
    
    
    
    1,309Costs Incurred
    
    
    (354
    )
    
    
    (354
    )
    
    
    (870
    )
    
    
    (1,059
    )Ending Accrued Warranty Balance
    
    $
    1,800
    
    
    $
    2,000
    
    
    $
    1,800
    
    
    $
    2,000
 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
          Liquidity and Capital Resources
   14




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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
    15




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Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Internal Control Over Financial Reporting
  16




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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
  
 Item 6. Exhibits
      VIRCO MFG. CORPORATIONDate: December 10, 2009
    By:
    /s/ Robert E. DoseRobert E. DoseVice President  Finance 17