##### 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, 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)
  
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



Part I. Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Condensed consolidated balance sheets  July 31, 2010, January 31, 2010 and July 31, 2009
    
    
    3Unaudited condensed consolidated statements of income  Three months ended July 31, 2010 and 2009
    
    
    5Unaudited condensed consolidated statements of operations  Six months ended July 31, 2010 and 2009
    
    
    6Unaudited condensed consolidated statements of cash flows  Six months ended July 31, 2010 and 2009
    
    
    7Notes to unaudited condensed consolidated financial statements  July 31, 2010
    
    
    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 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    16Item 6. Exhibits
    
    
    16Exhibit 10.1 Amendment No. 5 to Second Amended and Restated Credit Agreement, dated as of July 31, 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.EX-10.1EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 7/31/2010
    
    
    1/31/2010
    
    
    7/31/2009(In thousands, except share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)AssetsCurrent assets:Cash
    
    $
    2,956
    
    
    $
    1,045
    
    
    $
    1,614Trade accounts receivable, net
    
    
    40,808
    
    
    
    14,127
    
    
    
    41,511Other receivables
    
    
    79
    
    
    
    141
    
    
    
    473Income tax receivable
    
    
    339
    
    
    
    259
    
    
    
    Inventories:Finished goods, net
    
    
    18,801
    
    
    
    10,683
    
    
    
    23,903Work in process, net
    
    
    11,655
    
    
    
    18,653
    
    
    
    8,542Raw materials and supplies, net
    
    
    10,626
    
    
    
    7,334
    
    
    
    8,73241,082
    
    
    
    36,670
    
    
    
    41,177Deferred tax assets, net
    
    
    3,150
    
    
    
    3,150
    
    
    
    2,867Prepaid expenses and other current assets
    
    
    1,599
    
    
    
    1,514
    
    
    
    1,917Total current assets
    
    
    90,013
    
    
    
    56,906
    
    
    
    89,559Property, plant and equipment:Land and land improvements
    
    
    3,329
    
    
    
    3,329
    
    
    
    3,336Buildings and building improvements
    
    
    47,796
    
    
    
    47,796
    
    
    
    47,888Machinery and equipment
    
    
    117,316
    
    
    
    116,425
    
    
    
    115,184Leasehold improvements
    
    
    2,712
    
    
    
    2,688
    
    
    
    1,902171,153
    
    
    
    170,238
    
    
    
    168,310Less accumulated depreciation and amortization
    
    
    128,208
    
    
    
    125,804
    
    
    
    124,242Net property, plant and equipment
    
    
    42,945
    
    
    
    44,434
    
    
    
    44,068Deferred tax assets, net
    
    
    10,990
    
    
    
    10,502
    
    
    
    9,257Other assets
    
    
    6,310
    
    
    
    6,258
    
    
    
    6,289Total assets
    
    $
    150,258
    
    
    $
    118,100
    
    
    $
    149,173
  3




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VIRCO MFG. CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 7/31/2010
    
    
    1/31/2010
    
    
    7/31/2009(In thousands, except share data)Unaudited (Note 1)
    
    
    
    
    
    Unaudited (Note 1)LiabilitiesCurrent liabilities:Checks released but not yet cleared bank
    
    $
    4,527
    
    
    $
    2,360
    
    
    $
    2,717Accounts payable
    
    
    15,693
    
    
    
    11,641
    
    
    
    15,247Accrued compensation and employee benefits
    
    
    4,345
    
    
    
    4,396
    
    
    
    4,687Current portion of long-term debt
    
    
    22,467
    
    
    
    12
    
    
    
    17,080Other accrued liabilities
    
    
    7,978
    
    
    
    4,517
    
    
    
    7,940Total current liabilities
    
    
    55,010
    
    
    
    22,926
    
    
    
    47,671Non-current liabilities:Accrued self-insurance retention and other
    
    
    5,832
    
    
    
    4,918
    
    
    
    4,579Accrued pension expenses
    
    
    17,633
    
    
    
    17,286
    
    
    
    19,273Deferred income taxes
    
    
    1,149
    
    
    
    1,120
    
    
    
    1,161Long-term debt, less current portion
    
    
    7,529
    
    
    
    6,912
    
    
    
    10,036Total non-current liabilities
    
    
    32,143
    
    
    
    30,236
    
    
    
    35,049Commitments 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 14,204,998 shares
at 7/31/2010; 14,163,044 shares
at 1/31/10; and 14,240,531 shares at 7/31/2009
    
    
    142
    
    
    
    142
    
    
    
    142Additional paid-in capital
    
    
    114,068
    
    
    
    114,152
    
    
    
    114,007Accumulated deficit
    
    
    (41,534
    )
    
    
    (39,785
    )
    
    
    (38,314
    )Accumulated comprehensive loss
    
    
    (9,571
    )
    
    
    (9,571
    )
    
    
    (9,382
    )Total stockholders equity
    
    
    63,105
    
    
    
    64,938
    
    
    
    66,453Total liabilities and stockholders equity
    
    $
    150,258
    
    
    $
    118,100
    
    
    $
    149,173
  4




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VIRCO MFG. CORPORATION
 
 UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
  Three months ended7/31/2010
    
    
    7/31/2009(In thousands, except share data)Net sales
    
    $
    72,363
    
    
    $
    74,623Costs of goods sold
    
    
    49,391
    
    
    
    48,847Gross profit
    
    
    22,972
    
    
    
    25,776Selling, general, administrative & other expenses
    
    
    17,599
    
    
    
    18,242Interest expense
    
    
    395
    
    
    
    441Income before income taxes
    
    
    4,978
    
    
    
    7,093Income tax provision
    
    
    941
    
    
    
    3,047Net income
    
    $
    4,037
    
    
    $
    4,046Net income per common share:Basic
    
    $
    0.28
    
    
    $
    0.29Diluted
    
    $
    0.28
    
    
    $
    0.29Weighted average shares outstanding:Basic
    
    
    14,168
    
    
    
    14,151Diluted
    
    
    14,174
    
    
    
    14,154
  5




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VIRCO MFG. CORPORATION
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Six months ended7/31/2010
    

    7/31/2009(In thousands, except per share data)Net sales
    
    $
    97,223
    
    
    $
    101,672Costs of goods sold
    
    
    67,980
    
    
    
    67,596Gross profit
    
    
    29,243
    
    
    
    34,076Selling, general, administrative & other expenses
    
    
    30,131
    
    
    
    31,254Interest expense
    
    
    628
    
    
    
    616(Loss) income before income taxes
    
    
    (1,516
    )
    
    
    2,206(Benefit) provision for income taxes
    
    
    (472
    )
    
    
    1,147Net (loss) income
    
    $
    (1,044
    )
    
    $
    1,059Dividend declaredCash
    
    $
    0.05
    
    
    $
    0.05Net (loss) income per common share:Basic
    
    $
    (0.07
    )
    
    $
    0.07Diluted
    
    $
    (0.07
    )
    
    $
    0.07Weighted average shares outstanding:Basic
    
    
    14,162
    
    
    
    14,170Diluted
    
    
    14,162
    
    
    
    14,170
   6




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VIRCO MFG. VIRCO MFG. CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six months ended7/31/2010
    

    7/31/2009(In thousands)Operating activitiesNet (loss) income
    
    $
    (1,044
    )
    
    $
    1,059Adjustments to reconcile net (loss) income to net cash used in operating activitiesDepreciation and amortization
    
    
    2,713
    
    
    
    2,652Provision for doubtful accounts
    
    
    15
    
    
    
    100Gain on sale of property, plant and equipment
    
    
    (2
    )
    
    
    (5
    )Deferred income taxes
    
    
    (459
    )
    
    
    941Stock based compensation
    
    
    399
    
    
    
    457Changes in operating assets and liabilitiesTrade accounts receivable
    
    
    (26,696
    )
    
    
    (27,418
    )Other receivables
    
    
    62
    
    
    
    461Inventories
    
    
    (4,412
    )
    
    
    (8,192
    )Income tax receivable
    
    
    (80
    )
    
    
    (51
    )Prepaid expenses and other current assets
    
    
    (138
    )
    
    
    (259
    )Accounts payable and accrued liabilities
    
    
    10,754
    
    
    
    3,683Net cash used in operating activities
    
    
    (18,888
    )
    
    
    (26,572
    )Investing activitiesCapital expenditures
    
    
    (1,254
    )
    
    
    (2,110
    )Proceeds from sale of property, plant and equipment
    
    
    33
    
    
    
    10Net cash used in investing activities
    
    
    (1,221
    )
    
    
    (2,100
    )Financing activitiesProceeds from long-term debt
    
    
    23,078
    
    
    
    27,042Repayment of long-term debt
    
    
    (6
    )
    
    
    (37
    )Purchase of treasury stock
    
    
    (344
    )
    
    
    (397
    )Cash dividend paid
    
    
    (708
    )
    
    
    (709
    )Net cash provided by financing activities
    
    
    22,020
    
    
    
    25,899Net increase (decrease) in cash
    
    
    1,911
    
    
    
    (2,773
    )Cash at beginning of period
    
    
    1,045
    
    
    
    4,387Cash at end of period
    
    $
    2,956
    
    
    $
    1,614
  7




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VIRCO MFG. CORPORATION
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 July 31, 2010
 Note 1. Basis of Presentation
  Note 2. Seasonality
    Note 3. New Accounting Standards
   Note 4. Inventories
  8




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Note 5. Debt
      Note 6. Income Taxes
     9




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Note 7. Net Loss per Share
 Three Months Ended
    
    
    Six Months Ended7/31/2010
    

    7/31/2009
    

    7/31/2010
    

    7/31/2009(In thousands, except per share data)Net income (loss)
    
    $
    4,036
    
    
    $
    4,046
    
    
    $
    (1,044
    )
    
    $
    1,059Average shares outstanding
    
    
    14,168
    
    
    
    14,151
    
    
    
    14,162
    
    
    
    14,170Net effect of dilutive stock options
based on the treasury stock method
using average market price
    
    
    6
    
    
    
    3
    
    
    
    10
    
    
    
    Totals
    
    
    14,174
    
    
    
    14,154
    
    
    
    14,172
    
    
    
    14,170Net income (loss) per share  basic
    
    $
    0.28
    
    
    $
    0.29
    
    
    $
    (0.07
    )
    
    $
    0.07Net income (loss) per share  diluted
    
    $
    0.28
    
    
    $
    0.29
    
    
    $
    (0.07
    )
    
    $
    0.07
  Note 8. Stock Based Compensation
 Stock Incentive Plans
    Restricted Stock and Stock Unit Awards
 Accounting for the Plans
  UnrecognizedCompensationExpense for 3 months ended
    
    
    Expense for 6 months ended
    
    
    Cost at7/31/2010
    
    
    7/31/2009
    
    
    7/31/2010
    
    
    7/31/2009
    
    
    7/31/20102007 PlanGrants of 56,455
Shares of
Restricted Stock,
issued 6/8/2010,
vesting over 1 year
    
    $
    29,000
    
    
    $
    
    
    
    $
    29,000
    
    
    $
    
    
    
    $
    145,000Grants of 49,854
Shares of
Restricted Stock,
issued 6/16/2009,
vesting over 1 year
    
    
    14,000
    
    
    
    29,000
    
    
    
    58,000
    
    
    
    29,000
    
    
    
    Grants of 382,500
Shares of
Restricted Stock,
issued 6/16/2009,
vesting over 5
years
    
    
    67,000
    
    
    
    45,000
    
    
    
    134,000
    
    
    
    45,000
    
    
    
    1,026,000Grants of 262,500
Restricted Stock
Units, issued
6/19/2007, vesting
over 5 years
    
    
    89,000
    
    
    
    89,000
    
    
    
    178,000
    
    
    
    178,000
    
    
    
    654,000Grants of 35,644
Shares of
Restricted Stock,
issued 6/17/2008,
vesting over 1 year
    
    
    
    
    
    
    14,000
    
    
    
    
    
    
    
    58,000
    
    
    
    1997 PlanGrants of 270,000
Restricted Stock
Units, issued
6/30/2004, vesting
over 5 years
    
    
    
    
    
    
    59,000
    
    
    
    
    
    
    
    147,000
    
    
    
    Totals for the period
    
    $
    199,000
    
    
    $
    236,000
    
    
    $
    399,000
    
    
    $
    457,000
    
    
    $
    1,825,000
 10




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Stockholders Rights
  Note 9. Comprehensive Loss and Stockholders Equity
   Note 10. Retirement Plans
     11




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Three Months Ended July 31,Non-Employee DirectorsEmployees Retirement 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
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    Recognized net actuarial (gain)
or loss
    
    
    243
    
    
    
    231
    
    
    
    
    
    
    
    24
    
    
    
    (7
    )
    
    
    (46
    )Net periodic pension cost
    
    $
    333
    
    
    $
    547
    
    
    $
    87
    
    
    $
    30
    
    
    $
    (1
    )
    
    $
    (39
    )
 Six Months Ended July 31,Non-Employee DirectorsEmployees Retirement Plan
    
    
    VIP Plan
    
    
    Retirement Plan2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    704
    
    
    
    735
    
    
    
    174
    
    
    
    170
    
    
    
    12
    
    
    
    14Expected return on plan assets
    
    
    (524
    )
    
    
    (358
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    256
    
    
    
    
    
    
    
    (158
    )
    
    
    
    
    
    
    Recognized net actuarial (gain)
or loss
    
    
    486
    
    
    
    462
    
    
    
    
    
    
    
    48
    
    
    
    (14
    )
    
    
    (92
    )Net periodic pension cost
    
    $
    666
    
    
    $
    1,094
    
    
    $
    174
    
    
    $
    60
    
    
    $
    (2
    )
    
    $
    (78
    )
 Note 11. Warranty
   Three Months Ended
    
    
    Six Months Ended7/31/2010
    

    7/31/2009
    

    7/31/2010
    

    7/31/2009(In thousands)Beginning Accrued Warranty Balance
    
    $
    1,675
    
    
    $
    1,950
    
    
    $
    1,675
    
    
    $
    1,950Provision
    
    
    261
    
    
    
    65
    
    
    
    453
    
    
    
    366Costs Incurred
    
    
    (261
    )
    
    
    (215
    )
    
    
    (453
    )
    
    
    (516
    )Ending Accrued Warranty Balance
    
    $
    1,675
    
    
    $
    1,800
    
    
    $
    1,675
    
    
    $
    1,800
 Note 12. 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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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
    
    
    
    1,053,000
 
 (1)
    
    On June 6, 2008, the Board of Directors approved a $3,000,000 share repurchase program. 
 Item 6. Exhibits
     16




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VIRCO MFG. CORPORATION
 SIGNATURES
  VIRCO MFG. CORPORATIONDate: September 10, 2010
    By:
    /s/ Robert E. DoseRobert E. DoseVice President  Finance 17