Table of Contents


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

FORM 10-Q
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 20122013


OR

¨
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

(Exact Name of Registrant as Specified in its Charter)

VIRCO MFG. CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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)

Registrant’s Telephone Number, Including Area Code: (310) 533-0474

No change

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  xý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  xý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer 
¨ (Do not check if a smaller reporting company)
 Smaller reporting company xý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  xý

The number of shares outstanding for each of the registrant’s classes of common stock, as of the latest practicable date:

Common Stock, $.01 par value — 14,550,37114,730,319 shares as of September 10, 2012.

3, 2013.



Table of Contents


VIRCO MFG. CORPORATION

INDEX

16

18

19

Item 5. Other Information

19

20

20

20

20EX-31.1 

Item 6. Exhibits

20EX-31.2 

EX-10.1

EX-32.1
 

EX-10.3

EX-31.1

EX-31.2

EX-32.1

EX-101 INSTANCE DOCUMENT

 

EX-101 SCHEMA DOCUMENT

 

EX-101 CALCULATION LINKBASE DOCUMENT

 

EX-101 LABELS LINKBASE DOCUMENT

 

EX-101 PRESENTATION LINKBASE DOCUMENT

 


2



PART I — FINANCIAL INFORMATION


Item 1. Financial Statements

VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

   7/31/2012   1/31/2012   7/31/2011 
   (In thousands, except share data) 
   Unaudited (Note 1)       Unaudited (Note 1) 

Assets

      

Current assets:

      

Cash

  $3,347    $2,897    $1,521  

Trade accounts receivable, net

   32,570     12,743     34,781  

Other receivables

   41     401     33  

Income tax receivable

   298     324     351  

Inventories:

      

Finished goods, net

   14,439     6,273     14,510  

Work in process, net

   13,718     10,623     15,287  

Raw materials and supplies, net

   9,527     10,895     13,712  
  

 

 

   

 

 

   

 

 

 
   37,684     27,791     43,509  

Prepaid expenses and other current assets

   1,897     1,652     1,829  
  

 

 

   

 

 

   

 

 

 

Total current assets

   75,837     45,808     82,024  

Property, plant and equipment:

      

Land

   1,671     1,671     1,671  

Land improvements

   1,213     1,213     1,214  

Buildings and building improvements

   47,794     47,797     47,796  

Machinery and equipment

   119,591     120,181     119,432  

Leasehold improvements

   2,456     2,549     2,533  
  

 

 

   

 

 

   

 

 

 
   172,725     173,411     172,646  

Less accumulated depreciation and amortization

   134,892     134,203     131,825  
  

 

 

   

 

 

   

 

 

 

Net property, plant and equipment

   37,833     39,208     40,821  

Deferred tax assets, net

   2,005     2,200     2,573  

Other assets

   6,972     7,009     6,408  
  

 

 

   

 

 

   

 

 

 

Total assets

  $122,647    $94,225    $131,826  
  

 

 

   

 

 

   

 

 

 

 7/31/2013 1/31/2013 7/31/2012
 (In thousands, except share data)
 Unaudited (Note 1)   Unaudited (Note 1)
Assets     
Current assets:     
Cash$2,443
 $853
 $3,347
Trade accounts receivable, net32,088
 8,835
 32,670
Other receivables107
 108
 41
Income tax receivable304
 259
 298
Inventories     
Finished goods, net14,137
 4,968
 14,439
Work in process, net12,243
 11,041
 13,718
Raw materials and supplies, net10,460
 9,308
 9,527
 36,840
 25,317
 37,684
Prepaid expenses and other current assets1,724
 1,665
 1,897
Total current assets73,506
 37,037
 75,937
Property, plant and equipment:     
Land1,671
 1,671
 1,671
Land improvements1,213
 1,213
 1,213
Buildings and building improvements47,263
 47,703
 47,794
Machinery and equipment116,335
 119,407
 119,591
Leasehold improvements2,417
 2,452
 2,456
 168,899
 172,446
 172,725
Less accumulated depreciation and amortization132,204
 135,564
 134,892
Net property, plant and equipment36,695
 36,882
 37,833
Deferred tax assets, net1,404
 1,484
 2,005
Other assets6,722
 6,835
 6,972
Total assets$118,327
 $82,238
 $122,747
See Notes to Unaudited Condensed Consolidated Financial Statements


3



VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

   7/31/2012  1/31/2012  7/31/2011 
   (In thousands, except share data) 
   Unaudited (Note 1)     Unaudited (Note 1) 

Liabilities

    

Current liabilities:

    

Accounts payable

  $18,596   $11,684   $18,565  

Accrued compensation and employee benefits

   4,051    3,797    4,018  

Current portion of long-term debt

   20,843    5,497    28,304  

Deferred tax liability

   1,221    1,221    1,398  

Other accrued liabilities

   7,620    4,641    8,077  
  

 

 

  

 

 

  

 

 

 

Total current liabilities

   52,331    26,840    60,362  

Non-current liabilities:

    

Accrued self-insurance retention

   2,281    1,915    2,619  

Accrued pension expenses

   25,248    25,069    17,902  

Income tax payable

   505    488    740  

Long-term debt, less current portion

   6,000    6,011    —    

Other accrued liabilities

   2,836    3,006    2,941  
  

 

 

  

 

 

  

 

 

 

Total non-current liabilities

   36,870    36,489    24,202  

Commitments and Contingencies

    

Stockholders’ 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 14,550,371 shares at 7/31/2012; 14,354,046 shares at 1/31/12; and 14,354,046 shares at 7/31/2011

   145    144    143  

Additional paid-in capital

   115,388    115,060    114,706  

Accumulated deficit

   (66,759  (68,980  (57,845

Accumulated comprehensive loss

   (15,328  (15,328  (9,742
  

 

 

  

 

 

  

 

 

 

Total stockholders’ equity

   33,446    30,896    47,262  
  

 

 

  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $122,647   $94,225   $131,826  
  

 

 

  

 

 

  

 

 

 

 7/31/2013 1/31/2013 7/31/2012
 (In thousands, except share data)
 Unaudited (Note 1)   Unaudited (Note 1)
Liabilities     
Current liabilities:     
Accounts payable$17,282
 $11,864
 $18,596
Accrued compensation and employee benefits4,143
 3,426
 4,051
Current portion of long-term debt22,668
 4,053
 20,843
Deferred tax liability572
 572
 1,221
Other accrued liabilities8,110
 4,596
 8,120
Total current liabilities52,775
 24,511
 52,831
Non-current liabilities:     
Accrued self-insurance retention2,614
 2,585
 2,281
Accrued pension expenses26,567
 26,385
 25,248
Income tax payable98
 142
 505
Long-term debt, less current portion6,000
 
 6,000
Other accrued liabilities1,372
 1,595
 2,436
Total non-current liabilities36,651
 30,707
 36,470
Commitments and Contingencies
 
 
Stockholders’ 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 14,730,319 shares at 7/31/2013; and 14,550,371 shares at 1/31/2013 and 7/31/2012147
 146
 145
Additional paid-in capital115,817
 115,670
 115,388
Accumulated deficit(71,077) (72,810) (66,759)
Accumulated comprehensive loss(15,986) (15,986) (15,328)
Total stockholders’ equity28,901
 27,020
 33,446
Total liabilities and stockholders’ equity$118,327
 $82,238
 $122,747
See Notes to Unaudited Condensed Consolidated Financial Statements



4



VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

INCOME

Unaudited (Note 1)

   Three months ended 
   7/31/2012   7/31/2011 
   (In thousands, except per share data) 

Net sales

  $60,392    $62,817  

Costs of goods sold

   37,525     42,935  
  

 

 

   

 

 

 

Gross profit

   22,867     19,882  

Selling, general and administrative expenses

   15,145     16,714  

Interest expense

   463     393  
  

 

 

   

 

 

 

Income before income taxes

   7,259     2,775  

Income tax provision

   206     43  
  

 

 

   

 

 

 

Net income

  $7,053    $2,732  
  

 

 

   

 

 

 

Net income per common share:

    

Basic

  $0.49    $0.19  

Diluted

  $0.49    $0.19  

Weighted average shares outstanding:

    

Basic

   14,369     14,274  

Diluted

   14,395     14,292  

 Three Months Ended
 7/31/2013 7/31/2012
 (In thousands, except per share data)
Net sales$56,933
 $60,392
Costs of goods sold35,347
 37,525
Gross profit21,586
 22,867
Selling, general and administrative expenses14,417
 15,145
Restructuring charges412
 
Interest expense472
 463
Income (loss) before income taxes6,285
 7,259
Income tax expense (benefits)75
 206
Net income (loss)$6,210
 $7,053
Net income (loss) per common share:   
Basic$0.43
 $0.49
Diluted$0.42
 $0.49
Weighted average shares outstanding:   
Basic14,570
 14,369
Diluted14,647
 14,395

See Notes to Unaudited Condensed Consolidated Financial Statements



5




VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

INCOME

Unaudited (Note 1)

   Six months ended 
   7/31/2012   7/31/2011 
   (In thousands, except per share data) 

Net sales

  $84,060    $87,073  

Costs of goods sold

   54,226     60,413  
  

 

 

   

 

 

 

Gross profit

   29,834     26,660  

Selling, general and administrative expenses

   26,674     28,650  

Interest expense

   718     607  
  

 

 

   

 

 

 

Income (loss) before income taxes

   2,442     (2,597

Provision for income taxes

   222     71  
  

 

 

   

 

 

 

Net income (loss)

  $2,220    $(2,668
  

 

 

   

 

 

 

Dividend declared

    

Cash

  $—      $0.05  

Net income (loss) per common share (a) :

    

Basic

  $0.15    $(0.19

Diluted

  $0.15    $(0.19

Weighted average shares outstanding:

    

Basic

   14,333     14,240  

Diluted

   14,358     14,240  

(a)Net income per share for the six months ended July 31, 2012 was calculated based on diluted shares outstanding. Net loss per share for the six months ended July 31, 2011 was calculated based on basic shares outstanding due to the anti-dilutive effect on the inclusion of common stock equivalent shares.


 Six Months Ended
 7/31/2013 7/31/2012
 (In thousands, except per share data)
Net sales$76,823
 $84,060
Costs of goods sold48,828
 54,226
Gross profit27,995
 29,834
Selling, general and administrative expenses24,919
 26,674
Restructuring charges475
 
Interest expense800
 718
Income (loss) before income taxes1,801
 2,442
Income tax expense (benefits)38
 222
Net income (loss)$1,763
 $2,220
Dividend declared:   
Cash$0.12
 $0.15
Net income (loss) per common share:$0.12
 $0.15
Basic   
Diluted14,506
 14,333
Weighted average shares outstanding:14,591
 14,358
See Notes to Unaudited Condensed Consolidated Financial Statements



6



VIRCO MFG. CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited (Note 1)

   Three months ended 
   7/31/2012   7/31/2011 
   (In thousands) 

Net Income

  $7,053    $2,732  

Other comprehensive income (loss)

   —       —    
  

 

 

   

 

 

 

Comprehensive income

  $7,053    $2,732  
  

 

 

   

 

 

 

 Three Months Ended
 7/31/2013 7/31/2012
 (In thousands)
Net income (loss)$6,210
 $7,053
Other comprehensive income (loss)
 
Comprehensive income (loss)$6,210
 $7,053
See Notes to Unaudited Condensed Consolidated Financial Statements



7



VIRCO MFG. CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited (Note 1)

   Six months ended 
   7/31/2012   7/31/2011 
   (In thousands) 

Net Income (loss)

  $2,220    $(2,668

Other comprehensive income (loss)

   —       —    
  

 

 

   

 

 

 

Comprehensive income (loss)

  $2,220    $(2,668
  

 

 

   

 

 

 

 Six Months Ended
 7/31/2013 7/31/2012
 (In thousands)
Net income (loss)$1,763
 $2,220
Other comprehensive income (loss)
 
Comprehensive income (loss)$1,763
 $2,220
See Notes to Unaudited Condensed Consolidated Financial Statements



8



VIRCO MFG. CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited (Note 1)

   Six months ended 
   7/31/2012  7/31/2011 
   (In thousands) 

Operating activities

   

Net income (loss)

  $2,220   $(2,668

Adjustments to reconcile net income (loss) to net cash used in operating activities:

   

Depreciation and amortization

   2,278    2,583  

Provision for doubtful accounts

   (20  30  

(Gain) loss on sale of property, plant and equipment

   (1  —    

Deferred income taxes

   195    49  

Stock based compensation

   415    381  

Changes in operating assets and liabilities:

   

Trade accounts receivable

   (19,807  (24,349

Other receivables

   360    135  

Inventories

   (9,894  (8,139

Income taxes

   43    16  

Prepaid expenses and other current assets

   (245  (210

Accounts payable and accrued liabilities

   10,456    12,423  
  

 

 

  

 

 

 

Net cash used in operating activities

   (14,000  (19,749

Investing activities

   

Capital expenditures

   (902  (1,340

Proceeds from sale of property, plant and equipment

   2    1  
  

 

 

  

 

 

 

Net cash used in investing activities

   (900  (1,339

Financing activities

   

Proceeds from long-term debt

   28,423    29,245  

Repayment of long-term debt

   (13,075  (7,455

Common stock issued

   2    —    

Cash dividend paid

   —      (710
  

 

 

  

 

 

 

Net cash provided by financing activities

   15,350    21,080  

Net increase (decrease) in cash

   450    (8

Cash at beginning of period

   2,897    1,529  
  

 

 

  

 

 

 

Cash at end of period

  $3,347   $1,521  
  

 

 

  

 

 

 

 Six Months Ended
 7/31/2013 7/31/2012
 (In thousands)
Operating activities   
Net income (loss)$1,763
 $2,220
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:   
Depreciation and amortization2,046
 2,278
Provision for doubtful accounts50
 (20)
(Gain) loss on sale of property, plant and equipment(13) (1)
Deferred income taxes
 195
Stock based compensation275
 415
Changes in operating assets and liabilities:   
Trade accounts receivable(23,304) (19,807)
Other receivables1
 360
Inventories(11,523) (9,894)
Income taxes(8) 43
Prepaid expenses and other current assets53
 (245)
Accounts payable and accrued liabilities9,477
 10,456
Net cash provided by (used in) operating activities(21,183) (14,000)
Investing activities   
Capital expenditures(1,861) (902)
Proceeds from sale of property, plant and equipment19
 2
Net cash provided by (used in) investing activities(1,842) (900)
Financing activities   
Proceeds from long-term debt28,851
 28,423
Repayment of long-term debt(4,236) (13,075)
Common stock issued
 2
Cash dividend paid
 
Net cash provided by (used in) financing activities24,615
 15,350
Net increase (decrease) in cash1,590
 450
Cash at beginning of period853
 2,897
Cash at end of period$2,443
 $3,347
See Notes to Unaudited Condensed Consolidated Financial Statements.



9



VIRCO MFG. CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2012

2013

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended July 31, 2012,2013, are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2013.2014. The balance sheet at January 31, 2012,2013, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 20122013 (“Form 10-K”). All references to the “Company” refer to Virco Mfg. Corporation and its subsidiaries.


Note 2. Seasonality

The market for educational furniture is marked by extreme seasonality, with over approximately 50% of the Company’s total sales typically occurring from June to SeptemberAugust each year, which is the Company’s peak season. Hence, the Company typically builds and carries significant amounts of inventory during and in anticipation of this peak summer season to facilitate the rapid delivery requirements of customers in the educational market. This requires a large up-front investment in inventory, labor, storage and related costs as inventory is built in anticipation of peak sales during the summer months. As the capital required for this build-up generally exceeds cash available from operations, the Company has historically relied on third-party bank financing to meet cash flow requirements during the build-up period immediately preceding the peak season. In addition, the Company typically is faced with a large balance of accounts receivable during the peak season. This occurs for two primary reasons. First, accounts receivable balances typically increase during the peak season as shipments of products increase. Second, many customers during this period are government institutions, which tend to pay accounts receivable more slowly than commercial customers.

The Company’s working capital requirements during and in anticipation of the peak summer season require management to make estimates and judgments that affect assets, liabilities, revenues and expenses, and related contingent assets and liabilities. On an on-goingongoing basis, management evaluates its estimates, including those related to market demand, labor costs, and stocking inventory.


Note 3. New Accounting Standards

In May 2011,January 2013, the FASBFinancial Accounting Standards Board ("FASB") issued ASU No. 2011-04, “Fair Value Measurement (Topic 820) – Amendmentsauthoritative guidance that requires an entity to Achieve Common Fair Value Measurement and Disclosure Requirementsprovide information about the amounts reclassified out of accumulated other comprehensive income (loss) by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in U.S. GAAP and IFRS”, which amends ASC 820 providing consistent guidance on fair value measurement and disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 is effective for fiscal years beginning after December 15, 2011. The adoptionthe notes, significant amounts reclassified out of ASU 2011-04 did not have a material impact on our consolidated financial statements.

In June 2011,accumulated other comprehensive income (loss) by the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 requires the componentsrespective line items of net income and other comprehensive incomebut only if the amount reclassified is required under GAAP to be either presentedreclassified to net income in one continuous statement, referred to asits entirety in the statement of comprehensive income, or in two separate, consecutive statements. While ASU 2011-05 changes the presentation of comprehensive income, there are no changes to the componentssame reporting period. For other amounts that are recognizednot required under GAAP to be reclassified in their entirety to net income, oran entity is required to cross-reference to other comprehensive incomedisclosures required under current accounting guidance. This newGAAP that provide additional detail about those amounts. The Company adopted this guidance is effective February 1, 2013, but had no such reclassifications to report for the Company beginning February 1, 2012 and requires retrospective application. As this guidance only amends the presentation of the components of comprehensive income, the adoption did not have an impact on the Company’s consolidated financial positionthree months or results of operations.

six months ended July 31, 2013.


Note 4. Inventories

Inventories primarily consist of raw materials, work in progress, and finished goods of manufactured products. In addition, the Company maintains an inventory of finished goods purchased for resale. Inventories are stated at lower of cost or market and consist of materials, labor, and overhead. The Company determines the cost of inventory by the first-in,

first-out method. The value of inventory includes any related production overhead costs incurred in bringing the inventory to its present location and condition. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.

Management continually monitors production costs, material costs and inventory levels to determine that interim inventories are fairly stated.



10



Note 5. Debt

The


On December 22, 2011, the Company and Virco Inc., a wholly owned subsidiary of the Company (“Virco Inc.”("Virco" and, together with the Company, the “Borrowers”"Borrowers") are party toentered into a Revolving Credit and Security Agreement (as amended, the “Credit Agreement”(the "Credit Agreement"), dated as of December 22, 2011, with PNC Bank, National Association, as administrative agent and lender ( “PNC”("PNC"). On June 15, 2012, the Borrowers entered into Amendment No. 1 ("Amendment No. 1") to the Credit Agreement which, among other things, increased the borrowing availability thereunder by $3,000,000 for the period from May 1 through July 14 of each year. On July 27, 2012, the Borrowers entered into Amendment No. 2 ("Amendment No. 2") to the Credit Agreement which, among other things, reduced the minimum EBITDA financial covenant contained therein for the five consecutive months ending June 2012 from $1,600,000 to $300,000. On September 12, 2012, the Borrowers entered into Amendment No. 3 ("Amendment No. 3") to the Credit Agreement which, among other things, modified the minimum EBITDA covenant for the balance of the fiscal year. On December 6, 2012, the Borrowers entered into Amendment No. 4 ("Amendment No. 4") to the Credit Agreement which, among other things, waived the violation of the minimum EBITDA and minimum tangible net worth covenants at October 31, 2012 and eliminated the minimum EBITDA covenant at November 30, 2012. On March 1, 2013, the Borrowers entered into Amendment No. 5 ("Amendment No. 5") to the Credit Agreement, which among other things modified the minimum tangible net worth covenant for the periods from January 31, 2013 to January 31, 2014, modified the minimum EBIDTA covenant for certain periods to January 31, 2014 and waived the violation of the minimum EBITDA covenant for the eleven consecutive fiscal month period ending December 31, 2012.

The Credit Agreement provides the Borrowers with a secured revolving line of credit (the “Revolving"Revolving Credit Facility”Facility") of up to $60,000,000,$60,000,000, with seasonal adjustments to the credit limit and subject to borrowing base limitations, and includes a sub-limit of up to $3,000,000$3,000,000 for issuances of letters of credit. The Revolving Credit Facility is an asset-based line of credit that is subject to a borrowing base limitation and generally provides for advances of up to 85% on of eligible accounts receivable, plus a percentage equal to the lesser of 60% of the value of eligible inventory or 85% of the liquidation value of eligible inventory, plus an amount ranging from $6,000,000$4,000,000 to $12,000,000$14,000,000 from March 1February 15 through July 31August 15 of each year, minus undrawn amounts of letters of credit and reserves.reserves as per Amendment No. 5. The Revolving Credit Facility is secured by substantially all of the Borrowers’Borrowers' personal property and certain of the Borrowers’Borrowers' real property. The principal amount outstanding under the Credit Agreement and any accrued and unpaid interest is due no later than December 22, 2014, and the Revolving Credit Facility is subject to certain prepayment penalties upon earlier termination of the Revolving Credit Facility. Prior to the maturity date, principal amounts outstanding under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions.


The Revolving Credit Facility bears interest, at the Borrowers’Borrowers' option, at either the Alternate Base Rate (as defined in the Credit Agreement) or the Eurodollar Currency Rate (as defined in the Credit Agreement), in each case plus an applicable margin. The applicable margin for Alternate Base Rate loans is a percentage within a range of 0.75% to 1.75%, and the applicable margin for Eurodollar Currency Rate loans is a percentage within a range of 1.75% to 2.75%, in each case based on the EBITDA of the Borrowers at the end of each fiscal quarter, and may be increased at PNC’sPNC's option by 2.0% during the continuance of an event of default. Accrued interest with respect to principal amounts outstanding under the Credit Agreement is payable in arrears on a monthly basis for Alternative Base Rate loans, and at the end of the applicable interest period but at most every three months for Eurodollar Currency Rate loans.


The Credit Agreement contains a covenant that forbids the Company from issuing dividends or making payments with respect to the Company’sCompany's capital stock, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, repurchase stock, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers, taken as a whole. The Credit Agreement also requires the Company to maintain certainthe following financial covenants, includingmaintenance covenants: (1) a minimum tangible net worth minimum EBITDA amounts andamount, (2) a minimum fixed charge coverage ratio. ratio, and (3) a minimum EBITDA amount, in each case as of the end of the relevant monthly, quarterly or annual measurement period.

In addition, there isthe Credit Agreement contains a “clean down”clean down provision that requires the Company to reduce borrowings under the line to less than $6,000,000$6,000,000 for a period of 60 consecutive days each fiscal year. The Company believes that normal operating cash flow will allow it to meet the “clean down”clean down requirement with no adverse impact on the Company’sCompany's liquidity. The Company was not in compliance with the minimum EBITDA covenantits covenants at July 31, 2012. The Company has obtained a waiver for such non compliance.

2013.


Events of default (subject to certain cure periods and other limitations) under the Credit Agreement include, but are not limited to, (i) non-payment of principal, interest or other amounts due under the Credit Agreement, (ii) the violation of terms, covenants, representations or warranties in the Credit Agreement or related loan documents, (iii) any event of default under

11

Table of Contents


agreements governing certain indebtedness of the Borrowers and certain defaults by the Borrowers under other agreements that would materially adversely affect the Borrowers, (iv) certain events of bankruptcy, insolvency or liquidation involving the Borrowers, (v) judgments or judicial actions against the Borrowers in excess of $250,000,$250,000, subject to certain conditions, (vi) the failure of the Company to comply with Pension Benefit Plans (as defined in the Credit Agreement), (vii) the invalidity of loan documents pertaining to the Credit Agreement, (viii) a change of control of the Borrowers and (ix) the interruption of operations of any of the Borrowers’Borrowers' manufacturing facilities for five consecutive days during the peak season or fifteen consecutive days during any other time, subject to certain conditions.


Pursuant to the Credit Agreement, substantially all of the Borrowers’Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Revolving Credit Facility upon receipt by the Borrowers. Due to this automatic liquidating nature of the Revolving Credit Facility, if the Borrowers breach any specific covenants,covenant, violate any representation or warranty or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion. In addition, certain of the covenants and representations and warranties set forth in the Credit Agreement contain limited or no materiality thresholds, and many of the representations and warranties must be true and correct in all material respects

upon each borrowing, which the Borrowers expect to occur on an ongoing basis. There can be no assurance that the Borrowers will be able to comply with all such covenants and be able to continue to make such representations and warranties on an ongoing basis.


The Company's line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. The Company anticipatesbelieves that it will be in compliance with the minimum monthly EBITDA covenants for the balance of the year, but there can be no assurance that the Company will meet these covenants.

On June 15, 2012, the Borrowers entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement which, among other things, increased the borrowing availability thereunder by $3,000,000 for the period from May 1st through July 14th of each year. On July 27, 2012, the Borrowers entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement which reduced the minimum required EBITDA amount contained therein for the five consecutive months ending June 2012 from $1,600,000 to $300,000. On September 12, 2012, the Company entered into Amendment No. 3 (“Amendment No. 3”) to the credit agreement which among other things, reduced the minimum required EBITDA amount contained therein for each measurement period from July 2012 through January 2013 and reduced the minimum required tangible net worth amount contained therein for the measurement periods ending on October 31, 2012 and January 31, 2012.

At July 31, 2012, availability under the Revolving Credit Facility will provide sufficient liquidity to meet its capital requirements in the next 12 months. Approximately $20,192,000was $20,851,000. Management believes that the carrying valueavailable for borrowing as of debt approximated fair value at July 31, 2012, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

2013.


The descriptiondescriptions set forth herein of the Credit Agreement, Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4 and Amendment No. 35 are qualified in their entirety by the terms of such agreements, each of which has been filed with the Securities and Exchange Commission.


Note 6. Income Taxes

The Company recognizes deferred income taxes under the asset and liability method of accounting for income taxes in accordance with the provisions of ASC No. 740, “Accounting for Income Taxes.” Deferred income taxes are recognized for differences between the financial statement and tax basis of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, the Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. Based on this consideration, the Company determined the realization of a majority of the net deferred tax assets no longer met the more likely than not criteria and a valuation allowance was recorded against the majority of the net deferred tax assets at July 31, 2012.2013. The effective tax rate for both quartersthe quarter ended July 31, 2013 was impacted by the valuation allowance recognized against state deferred tax assets and discrete items associated with non-taxable permanent differences.

The Company is currently under IRS examination for its tax return for the year ended January 31, 2011.

The years ended January 31, 2010 and , January 31, 2012 and January 31, 2013 remain open for examination by the IRS. The Company is not currently under IRS examination. The years ended January 31, 20082009 through January 31, 20122013 remain open for examination by state tax authorities. The Company is currently under examination by Texas for the year ended January 31, 2009. The Company is not currently under any other state examination.

examinations.

The specific timing of when the resolution of each tax position will be reached is uncertain. As of July 31, 2012,2013, we do not believe that there are any positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

Net Income (Loss) per Share


12



Note 7. Net Income (Loss) per Share

   Three Months Ended   Six Months Ended 
   7/31/2012   7/31/2011   7/31/2012   7/31/2011 
   (In thousands, except per share data) 

Net income (loss)

  $7,053    $2,732    $2,220    $(2,668

Average shares outstanding

   14,369     14,274     14,333     14,240  

Net effect of dilutive stock options based on the treasury stock method using average market price

   26     18     25     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Totals

   14,395     14,292     14,358     14,240  

Net income (loss) per share - basic

  $0.49    $0.19    $0.15    $(0.19

Net income (loss) per share - diluted

  $0.49    $0.19    $0.15    $(0.19

Certain exercisable and non-exercisable stock options were not included in the computation of diluted net loss per share at July 31, 2011, because their inclusion would have been anti-dilutive. The number of stock options outstanding, which met this anti-dilutive criterion for the six months ended July 31, 2011, was 22,000.


  Three Months Ended Six Months Ended
  7/31/2013 7/31/2012 7/31/2013 7/31/2012
  (In thousands, except per share data)
Net income (loss) $6,210
 $7,053
 $1,763
 $2,220
Average shares outstanding 14,570
 14,369
 14,506
 14,333
Net effect of dilutive stock options based on the treasury stock method using average market price 77
 26
 85
 25
Totals 14,647
 14,395
 14,591
 14,358
Net income (loss) per share - basic $0.43
 $0.49
 $0.12
 $0.15
Net income (loss) per share - diluted $0.42
 $0.49
 $0.12
 $0.15



Note 8. Stock Based Compensation

Stock Incentive Plans

The Company’s two stock plans are the 2011 Stock Incentive Plan (the “2011 Plan”) and the 2007 Stock Incentive Plan (the “2007 Plan”). Under the 2011 Plan, the Company may grant an aggregate of 1,000,000 shares to its employees and non-employee directors in the form of stock options or awards. The 2007 Plan similarly allows for the issuance of up to 1,000,000 shares. As of July 31, 2012, only 2013, 448,750 and 13,075 shares remained available for issuance under the 2011 Plan and 2007 Plan, respectively. Restricted stock or stock units awarded under both Plansthe 2011 Plan and 2007 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock unit awards and related compensation expense as the difference between the market value of the awards on the date of grant less the exercise price of the awards granted.

There were no unexercised

No options outstandinghave been issued under the 2011 Plan or the 2007 Plan at July 31, 2012.2013. Stock options awarded to employees under the both Plans2011 Plan and 2007 Plan have to be granted at exercise prices equal to the fair market value of the Company’s common stock on the date of grant. Stock options generally have a maximum term of 10 years and generally become exercisable ratably over a five-year period.

The shares of common stock issued upon exercise of a previously granted stock option are considered new issuances from shares reserved for issuance upon adoption of the various plans. While the Company does not have a formal written policy detailing such issuance, it requires that the option holders provide a written notice of exercise to the stock plan administrator and payment for the shares prior to issuance of the shares.

Restricted Stock and Stock Unit Awards

Accounting for the Plans

The following table presents a summary of restricted stock and stock unit awards at July 31, 20122013 and 2011:

                         Unamortized 
                         Compensation 
Date of  Units  Terms of  Expense for 3 months ended   Expense for 6 months ended   Cost at 

Grants

  Granted  Vesting  7/31/2012   7/31/2011   7/31/2012   7/31/2011   7/31/2012 

2011 Stock Incentive Plan

  

6/19/2012

  31,250  1 year  $8,286    $—      $8,286    $—      $41,429  

6/19/2012

  520,000  5 year   28,000     —       28,000     —       804,000  

2007 Stock Incentive Plan

  

6/19/2012

  78,125  1 year   20,714     —       20,714     —       103,571  

3/21/2012

  40,000  Immediate   —       —       80,000     —       —    

6/21/2011

  68,960  1 year   17,000     33,000     67,000     33,000     —    

6/8/2010

  56,455  1 year   —       15,000     —       58,000     —    

6/16/2009

  382,500  5 year   56,000     58,000     113,000     125,000     414,000  

6/19/2007

  262,500  5 year   24,000     75,000     98,000     165,000     —    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      $154,000    $181,000    $415,000    $381,000    $1,363,000  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2012:


13



              Unamortized
Compensation
              
Date of Units Terms of Expense for 3 months ended Expense for 6 months ended Cost at
Grants Granted Vesting 7/31/2013 7/31/2012 7/31/2013 7/31/2012 7/31/2013
2011 Stock Incentive Plan
6/25/2013 83,335 1 year $30,000
 $
 $30,000
 $
 $145,000
6/19/2012 31,250 1 year 4,000
 8,286
 17,000
 8,286
 
6/19/2012 520,000 5 year 40,000
 28,000
 82,000
 28,000
 601,000
2007 Stock Incentive Plan
6/19/2012 78,125 1 year 11,000
 20,714
 41,000
 20,714
 
3/21/2012 40,000 Immediate 
 
 
 80,000
 
6/21/2011 68,960 1 year 
 17,000
 
 67,000
 
6/16/2009 382,500 5 year 49,000
 56,000
 105,000
 113,000
 155,000
6/19/2007 262,500 5 year 
 24,000
 
 98,000
 
      $134,000
 $154,000
 $275,000
 $415,000
 $901,000
               


Stockholders’ Rights

On October 15, 1996, the Board of Directors declared a dividend of one preferred stock purchase right (the “Rights”) for each outstanding share of the Company’s common stock. Each of the Rights entitles a stockholder to purchase for an exercise price of $50.00 ($$50.00 ($20.70, as adjusted for stock splits and stock dividends), subject to adjustment, one one-hundredth of a share of Series A Junior Participating Cumulative Preferred Stock of the Company, or under certain circumstances, shares of common stock of the Company or a successor company with a market value equal to two times the exercise price. The Rights are not exercisable, and would only become exercisable for all other persons when any person has acquired or commences to acquire a beneficial interest of at least 20% of the Company’s outstanding common stock. The Rights have no voting privileges, and may be redeemed by the Board of Directors at a price of $.001$.001 per Right at any time prior to the acquisition of a beneficial ownership of 20% of the outstanding common stock. There are 200,000 shares (483,153(483,153 shares as adjusted by stock splits and stock dividends) of Series A Junior Participating Cumulative Preferred Stock reserved for issuance upon exercise of the Rights. On July 31, 2007, the Company and Mellon Investor Services LLC entered into an amendment to the Rights Agreement governing the Rights. The amendment, among other things, extended the term of the Rights issued under the Rights Agreement to October 25, 2016, removed the dead-hand provisions from the Rights Agreement, and formally replaced the former Rights Agent, The Chase Manhattan Bank, with its successor-in-interest, Mellon Investor Services LLC.


Note 9. Stockholders’ Equity

During the sixthree months ended July 31, 2012,2013, the Company did not repurchase any shares of its common stock. As of July 31, 2012, $1.12013, $1.1 million remained available for repurchases of the Company’s common stock pursuant to the Company’s repurchase program approved by the Board of Directors. Pursuant to the Company’s Credit Agreement with PNC however,bank, the Company is prohibited from repurchasing any shares of its stock except in cases where a repurchase is financed by a substantially concurrent issuance of new shares of the Company’s common stock.


Note 10. Retirement Plans

The Company and its subsidiaries cover employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”). Benefits under the Employees Retirement Plan are based on years of service and career average earnings. As more fully described in the Form 10-K, benefit accruals under the Employees Retirement Plan were frozen effective December 31, 2003.


The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”). The VIP Plan provides a benefit of up to 50% of average compensation for the last five5 years in the VIP Plan, offset by benefits earned under the Employees RetirementPension Plan. As more fully described in the Form 10-K, benefit accruals under this plan were frozen effective December 31, 2003.


14

Table of Contents


The Company also provides a non-qualified plan for non-employee directors of the Company (the “Non-Employee Directors Retirement Plan”). The Non-Employee Directors Retirement Plan provides a lifetime annual retirement benefit equal to the director’s annual retainer fee for the fiscal year in which the director terminates his or her position with the Board, subject to the director providing 10 years of service to the Company. As more fully described in the Form 10-K, benefit accruals under this plan were frozen effective December 31, 2003.

The net periodic pension costscost (income) for the Employees RetirementPension Plan, the VIP Plan, and the Non-Employee Directors Retirement Plan for the three and six months ended July 31, 20122013 and 20112012 were as follows (in thousands):

   Three Months Ended July 31, 
                 Non-Employee Directors 
   Pension Plan  VIP Retirement Plan   Retirement Plan 
   2012  2011  2012   2011   2012   2011 

Service cost

  $—     $—     $—      $—      $—      $—    

Interest cost

   325    360    88     95     5     6  

Expected return on plan assets

   (245  (289  —       —       —       —    

Amortization of prior service cost

   —      —      —       —       —       —    

Recognized net actuarial loss or (gain)

   360    262    51     13     —       (10
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost (income)

  $440   $333   $139    $108    $5    $(4
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

   Six Months Ended July 31, 
                 Non-Employee Directors 
   Pension Plan  VIP Retirement Plan   Retirement Plan 
   2012  2011  2012   2011   2012   2011 

Service cost

  $—     $—     $—      $—      $—      $—    

Interest cost

   650    720    176     190     10     12  

Expected return on plan assets

   (490  (578  —       —       —       —    

Amortization of prior service cost

   —      —      —       —       —       —    

Recognized net actuarial loss or (gain)

   720    524    102     26     —       (20
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost (income)

  $880   $666   $278    $216    $10    $(8
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

 Three Months Ended July 31,
         Non-Employee Directors
 Pension Plan VIP Retirement Plan Retirement Plan
 2013 2012 2013 2012 2013 2012
Service cost$
 $
 $
 $
 $
 $
Interest cost322
 325
 83
 88
 4
 5
Expected return on plan assets(276) (245) 
 
 
 
Settlement cost
 
 
 
 
 
Amortization of prior service cost
 
 
 
 
 
Recognized net actuarial loss or (gain)350
 360
 55
 51
 (3) 
Net periodic pension cost (income)$396
 $440
 $138
 $139
 $1
 $5

 Six Months Ended July 31,
         Non-Employee Directors
 Pension Plan VIP Retirement Plan Retirement Plan
 2013 2012 2013 2012 2013 2012
Service cost$
 $
 $
 $
 $
 $
Interest cost644
 650
 166
 176
 8
 10
Expected return on plan assets(552) (490) 
 
 
 
Settlement cost
 
 
 
 
 
Amortization of prior service cost
 
 
 
 
 
Recognized net actuarial loss or (gain)700
 720
 110
 102
 (6) 
Net periodic pension cost (income)$792
 $880
 $276
 $278
 $2
 $10

Note 11. Warranty Accrual

The Company accrues an estimate of its exposure to warranty claims based upon both current and historical product sales data and warranty costs incurred. The Company’s products carry a ten-year10-year warranty. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. The warranty liability is included in accrued liabilities in the accompanying consolidated balance sheets.

The following is a summary of the Company’s warranty claim activity for the three months and six months ended July 31, 20122013 and 20112012 (in thousands):

   Three Months Ended  Six Months Ended 
   7/31/2012  7/31/2011  7/31/2012  7/31/2011 
   (In thousands) 

Beginning accrued warranty balance

  $1,400   $2,150   $1,400   $2,300  

Provision

   88    276    199    348  

Costs incurred

   (188  (626  (299  (848
  

 

 

  

 

 

  

 

 

  

 

 

 

Ending accrued warranty balance

  $1,300   $1,800   $1,300   $1,800  
  

 

 

  

 

 

  

 

 

  

 

 

 
 Three Months Ended Six Months Ended
 7/31/20137/31/2012 7/31/20137/31/2012
 (In thousands)
Beginning accrued warranty balance$1,000
$1,400
 $1,000
$1,400
Provision75
88
 216
199
Costs incurred(75)(188) (216)(299)
Ending accrued warranty balance$1,000
$1,300
 $1,000
$1,300





15



Note 12. Subsequent Events

We have evaluated subsequent events to assess the need for potential recognition or disclosure in this Quarterly Report on Form 10-Q. Such events were evaluated through the date these financial statements were issued. Based upon this evaluation, it was determined that, except for the disclosure set forth below, no subsequent events occurred that required recognition or disclosure in the financial statements.

On September 12, 2012, the Company entered into Amendment No. 3 (“Amendment No. 3”) which reduced the minimum EBITDA financial covenant contained therein for the months from July 2012 through January 2013 from $6,894,000 to $5,800,000.








VIRCO MFG. CORPORATION


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


Results of Operations


The Company’sCompany's order rates and results of operations for the first six months of 20122013 continue to be adversely impacted by economic conditions and the related impact on tax receipts and budgeted expenditures for public schools. Order rates for the first six months of 2012ended July 31, 2013 are slightly higher (<1%)5.6% lower than the corresponding period last year, butand continue to show greater than normal volatility on a month-to-month basis. When compared to 2011, however, volatility has improved. InOrder rates for the first quarter ended April and May of 2011,30, 2013 were significantly lower (24.1%) than the Company experienced a dramatic dropsame period in the prior year, with the entire reduction in orders whichoccurring in the first two months. For each of the next four months, order rates were greater than the corresponding month in the prior year. Order rates, in turn, caused significant reductions in production levels duringfor the second quarter of 2011, followed by restructuring inthree months ended July 31, 2013 were 6.1% greater than the third quarter of 2011. three months ended July 31, 2012.
As discussed more thoroughly in the Company’sCompany's Annual Report on Form 10-K for the year ended January 31, 20122013 (“Form 10-K”), the Company substantially reduced its full time work force through an early retirement program and attrition, primarily during the third and fourth quarters of 2011. For 2012,In May of 2013, due to continued weakness in the economy and the resulting challenges facing the Company's business, the Company is using greater quantitiesfurther reduced its workforce by 41 employees. The second quarter results include a charge of temporary labor$412,000 related to address the seasonal production and distribution requirements of our business. During the first six months of 2012,this reduction. At July 31, 2013, the Company deferred building large quantitieshad 100 fewer permanent employees than at July 31, 2012 and 300 fewer employees than at July 31, 2011. As a result of inventory for summer deliveries until the second quarter of 2012. This operating change caused production levelsthese recent reductions in the first quarter of 2012 to be less than in the first quarter of 2011 and for production levels in the second quarter of 2012 to be greater than the second quarter of 2011. In addition to comparatively stable order rates,force, the Company has benefitedmade greater utilization of temporary employees during the summer months and expects to benefit from relatively stable commodities costs fora lower cost structure during the traditionally slow first six months of 2012. This compares favorably to 2011 when the Company experienced significant increases in the cost of steel in the second quarter of 2011 and significant increases in the cost of plastic and fuel in the second and third quarters of 2011.

fourth quarters.

As a result of operating losses incurred during 2010 and 2011, the Company has established a substantial valuation allowance for deferred tax assets. For this reason, the discussion below will focus on pre-tax operating results.

For the three months ended July 31, 2012,2013, the Company earned a pre-tax profit of $6,285,000 on net sales of $56,933,000 compared to a pre-tax profit of $7,259,000 on net sales of $60,392,000 compared to a pre-tax profit of $2,775,000 on net sales of $62,817,000 in the same period last year.

Net sales for the three months ended July 31, 20122013 decreased by $2,425,000,$3,459,000, a 3.9%5.7% decrease, compared to the same period last year. This decrease was the result of a reduction in unit volume partially offset by a modestslight increase in selling prices. Unit volume declined largely as a result of general economic conditions, which negatively impacted tax receipts, the funded status of public schools, and reduced levels of school construction completions. Incoming orders for the same period increased by 6.1% compared to the prior year. Backlog at July 31, 2013 increased by less than 11.5% compared to the prior year.
Gross margin as a percentage of sales was relatively stable at 37.8% for the three months ended July 31, 2013 compared to 37.9% in the same period last year. Gross margin was unfavorably affected by a decrease in overhead absorption as a result of an 10% decrease in production hours offset by reductions in overhead spending. Commodity costs have been stable compared to the prior year.
Selling, general and administrative expenses for the three months ended July 31, 2013, which include $412,000 of severance expenses, decreased by approximately $400,000 compared to the same period last year, but increased as a percentage of sales by nearly 1%. The decrease in selling, general and administrative expenses was attributable to a reduction in variable selling and service costs due to the reduced volume of shipments and due to cost reductions, offset by the severance expenses.
For the six months ended July 31, 2013, the Company earned a pre-tax profit of $1,801,000 on net sales of $76,823,000 compared to a pre-tax profit of $2,442,000 on net sales of $84,060,000 in the same period last year.
Net sales for the six months ended July 31, 2013 decreased by $7,237,000, an 8.6% decrease, compared to the same period last year. This decrease was the result of a reduction in unit volume partially offset by a slight increase in selling prices. Unit volume declined largely as a result of general economic conditions, which negatively impacted tax receipts, the funded status of public schools, and reduced levels of school construction completions. Incoming orders for the same period decreased by less than 2%5.6% compared to the prior year. Backlog at July 31, 2012 increased by less than 1% compared to the prior year.

Gross margin as a percentage of sales increased to 37.9% for the three months ended July 31, 2012 compared to 31.7% in the same period last year. Gross margin was favorably affected by an increase in overhead absorption as a result of an 18% increase in production hours, stable commodity costs, a modest price increase and reduced levels of factory spending attributable to the restructuring completed in the third and fourth quarters in 2011.

Selling, general and administrative expenses for the three months ended July 31, 2012 decreased by approximately $1,570,000 compared to the same period last year, and decreased as a percentage of sales by 1.5%. The decrease in selling, general and administrative expenses was attributable to a reduction in variable selling and service costs due to the reduced volume of shipments and due to cost reductions implemented in the third and fourth quarters in 2011.

For the six months ended July 31, 2012, the Company earned a pre-tax profit of $2,442,000 on net sales of $84,060,000 compared to a pre-tax loss of $2,597,000 on net sales of $87,073,000 in the same period last year.

Net sales for the six months ended July 31, 2012 decreased by $3,013,000, a 3.5% decrease, compared to the same period last year. This decrease was the result of a reduction in unit volume partially offset by a modest increase in selling prices. Unit volume declined largely as a result of general economic conditions, which negatively impacted tax receipts, the funded status of public schools, and reduced levels of school construction completions. Incoming orders for the same period increased by slightly (<1%) compared to the prior year.

Gross margin as a percentage of sales improved to 35.5%36.4% for the six months ended July 31, 20122013 compared to 30.6%35.5% in the same period last year. The improvement in gross margin was attributable to a modestslight increase in selling prices, stable commodity costs, and a reduction in factory spending, resulting from the restructuring in the third and fourth quarters of 2011 described above, offset by a decrease in overhead absorption as a result of a 4.6%7.0% reduction in production hours.

Selling, general and administrative expenses for the six months ended July 31, 20122013, which include $475,000 of severance expense, decreased by approximately $1,976,000$1,350,000 compared to the same period last year, and decreased but increased as a

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percentage of sales by 1.2%. The decrease in selling, general and administrative expenses was attributable to a reduction in variable selling and service costs due to the reduced volume of shipment and due to cost reductions implemented in the third and fourth quarters in 2011.

reductions.

In the first six months of 20122013 the Company did not record significant income tax expense / (benefit). During the fourth quarter of 2010 the Company established a valuation allowance on the majority of deferred tax assets. Because of this valuation allowance the effective income tax expense / (benefit) is expected to be relatively low, with income tax expense / (benefit) being primarily attributable to alternative minimum taxes combined with income and franchise taxes required by various states.


Liquidity and Capital Resources

Interest expense increased by approximately $111,000$80,000 for the six months ended July 31, 2012,2013, compared to the same period last year. The increase was primarily due to increased borrowing costs related to the Company’sCompany's line of credit with PNC Bank National Association (“PNC Bank”).

Accounts

Net accounts receivable was $2,100,000$582,000 lower at July 31, 20122013 than at July 31, 20112012 due to decreased sales andoffset by slightly lowerhigher days sales outstanding. Accounts receivable was $19,800,000$23,253,000 greater at July 31, 20122013 than at January 31, 20122013 due to the seasonal business cycle. As discussed in the Company’sCompany's Form 10-K, approximately 50% of the Company’sCompany's annual sales volume is shipped in June through September.August. The Company traditionally builds large quantities of inventory during the first quarter of each fiscal year in anticipation of seasonally high summer shipments. The Company started the current fiscal year with $7,580,000 less inventory than in the prior year. For the first six months, the Company increased inventory by approximately $9,900,000$11,523,000 compared to January 31, 2012.2013. This increase was $1,700,000$1,630,000 more than the $8,200,000$9,894,000 increase in 2011, but because the Company started the year with substantially less inventory.comparable period in 2012. At the end of the second quarter inventory was approximately $5,800,000$840,000 less compared to July 31, 2011.2012. The increase in accounts receivable and inventory at July 31, 20122013 compared to the January 31, 2012,2013, was financed through the Company’sCompany's credit facility with PNC Bank.

Borrowings under the Company’sCompany's revolving line of credit with PNC Bank at July 31, 2012 decreased2013 increased by approximately $1,500,000$1,824,000 compared to the borrowings at July 31, 2011 under the Company’s prior credit facility with Wells Fargo Bank, primarily due to decreased levels of inventory and receivables.2012. The Company established a goal of limiting capital spending to less than $3,000,000 for fiscal year 2012,2013, which is less than the Company’sCompany's anticipated depreciation expense. Capital spending for the six months ended July 31, 20122013 was $902,000$1,861,000 compared to $1,340,000$902,000 for the same period last year. Capital expenditures are being financed through the Company’sCompany's credit facility with PNC Bank and operating cash flow.

Net cash used in operating activities for the six months ended July 31, 2012,2013, was $14,000,000$21,183,000 compared to $19,749,000$14,000,000 for the same period last year. The decreaseincrease in cash used was primarily attributable to an increase in pre-tax profitabilitycash used for the first six months of 2012, a decreasereceivables, an increase in cash used for receivables, increasesinventory, and a decrease in accounts payable and accrued liabilities, partially offset by a slight increase in cash used for inventory.

Due to continued weak demand for education furniture, the Company was unable to satisfy the minimum EBITDA covenant for June and July of 2012. Effective July 27, 2012 the Company entered into Amendment No. 2 with PNC Bank to modify the minimum EBITDA covenant for June 2012 so that the Company would be in compliance with the amended covenant. Effective September 12, 2012 the Company entered into Amendment No. 3 with PNC Bank. This amendment modified the minimum monthly EBITDA covenant for the period from July 2012 through January 2013. The Company was in compliance with the amended covenant at July 31, 2012 and anticipates that it will be in compliance with the minimum monthly EBITDA covenants for the balance of the year, but there can be no assurance that the Company will meet these covenants. Approximately $20,851,000 was available for borrowing as of July 31, 2012.

liabilities.

The Company believes that cash flows from operations, together with the Company’sCompany's unused borrowing capacity with PNC Bank will be sufficient to fund the Company’sCompany's debt service requirements, capital expenditures and working capital needs for the next twelve months.


Off Balance Sheet Arrangements

During the six months ended July 31, 2012,2013, there were no material changes in the Company’sCompany's off balance sheet arrangements or contractual obligations and commercial commitments from those disclosed in the Company’sCompany's Form 10-K.


Critical Accounting Policies and Estimates

The Company’sCompany's critical accounting policies are outlined in its Form 10-K. There have been no changes in the six months period ended July 31, 2012.

2013.


Forward-Looking Statements

From time to time, including in this Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2012,2013, the Company or its representatives have made and may make forward-looking statements, orally or in writing, including those contained herein. Such forward-looking statements may be included in, without limitation, reports to stockholders, press releases, oral statements made with the approval of an authorized executive officer of the Company and filings with the Securities and Exchange Commission. The words or phrases “anticipates,” “expects,” “will continue,” “believes,” “estimates,” “projects,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The results contemplated by the Company’sCompany's forward-looking statements are subject to certain risks and uncertainties that could cause actual results to vary materially from anticipated results, including without limitation, availability of funding for educational institutions, availability and cost of materials, especially steel, availability and cost of labor, demand for the Company’sCompany's products, competitive conditions affecting selling prices and margins, capital costs and general economic conditions. Such risks and uncertainties are discussed in more detail in the Company’sCompany's Form 10-K.

The Company’s10-K.The Company's forward-looking statements represent its judgment only on the dates such statements were made. By making any


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forward-looking statements, the Company assumes no duty to update them to reflect new, changed or unanticipated events or circumstances.


Item 3. Quantitative and Qualitative Disclosures about Market Risk

The


On December 22, 2011, the Company and Virco Inc., a wholly owned subsidiary of the Company (“Virco Inc.”("Virco" and, together with the Company, the “Borrowers”"Borrowers") are party to that certainentered into a Revolving Credit and Security Agreement (as amended, the “Credit Agreement”(the "Credit Agreement"), dated as of December 22, 2011, with PNC Bank, National Association, as administrative agent and lender (“PNC”("PNC").

On June 15, 2012, the Borrowers entered into Amendment No. 1 ("Amendment No. 1") to the Credit Agreement which, among other things, increased the borrowing availability thereunder by $3,000,000 for the period from May 1 through July 14 of each year. On July 27, 2012, the Borrowers entered into Amendment No. 2 ("Amendment No. 2") to the Credit Agreement which, among other things, reduced the minimum EBITDA financial covenant contained therein for the five consecutive months ending June 2012 from $1,600,000 to $300,000. On September 12, 2012, the Borrowers entered into Amendment No. 3 ("Amendment No. 3") to the Credit Agreement which, among other things, modified the minimum EBITDA covenant for the balance of the fiscal year. On December 6, 2012, the Borrowers entered into Amendment No. 4 ("Amendment No. 4") to the Credit Agreement which, among other things, waived the violation of the minimum EBITDA and minimum tangible net worth covenants at October 31, 2012 and eliminated the minimum EBITDA covenant at November 30, 2012. On March 1, 2013, the Borrowers entered into Amendment No. 5 ("Amendment No. 5") to the Credit Agreement, which among other things modified the minimum tangible net worth covenant for the periods from January 31, 2013 to January 31, 2014, modified the minimum EBIDTA covenant for certain periods to January 31, 2014 and waived the violation of the minimum EBITDA covenant for the eleven consecutive fiscal month period ending December 31, 2012.


The Credit Agreement provides the Borrowers with a secured revolving line of credit (the “Revolving("the Revolving Credit Facility”Facility") of up to $60,000,000,$60,000,000, with seasonal adjustments to the credit limit and subject to borrowing base limitations, and includes a sub-limit of up to $3,000,000$3,000,000 for issuances of letters of credit. The Revolving Credit Facility is an asset-based line of credit that is subject to a borrowing base limitation and generally provides for advances of up to 85% on of eligible accounts receivable, plus a percentage equal to the lesser of 60% of the value of eligible inventory or 85% of the liquidation value of eligible inventory, plus an amount ranging from $6,000,000$4,000,000 to $12,000,000$14,000,000 from March 1February 15 through July 31August 15 of each year, minus undrawn amounts of letters of credit and reserves.reserves as per Amendment No.5. The Revolving Credit Facility is secured by substantially all of the Borrowers’Borrowers' personal property and certain of the Borrowers’Borrowers' real property. The principal amount outstanding under the Credit Agreement and any accrued and unpaid interest is due no later than December 22, 2014, and the Revolving Credit Facility is subject to certain prepayment penalties upon earlier termination of the Revolving Credit Facility. Prior to the maturity date, principal amounts outstanding under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions.


The Revolving Credit Facility bears interest, at the Borrowers’Borrowers' option, at either the Alternate Base Rate (as defined in the Credit Agreement) or the Eurodollar Currency Rate (as defined in the Credit Agreement), in each case plus an applicable margin. The applicable margin for Alternate Base Rate loans is a percentage within a range of 0.75% to 1.75%, and the applicable margin for Eurodollar Currency Rate loans is a percentage within a range of 1.75% to 2.75%, in each case based on the EBITDA of the Borrowers at the end of each fiscal quarter, and may be increased at PNC’sPNC's option by 2.0% during the continuance of an event of default. Accrued interest with respect to principal amounts outstanding under the Credit Agreement is payable in arrears on a monthly basis for Alternative Base Rate loans, and at the end of the applicable interest period but at most every three months for Eurodollar Currency Rate loans.


The Credit Agreement contains a covenant that forbids the Company from issuing dividends or making payments with respect to the Company’sCompany's capital stock, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, repurchase stock, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers, taken as a whole. The Credit Agreement also requires the Company to maintain certainthe following financial covenants, includingmaintenance covenants: (1) a minimum tangible net worth minimum EBITDA amounts andamount, (2) a minimum fixed charge coverage ratio. ratio, and (3) a minimum EBITDA amount, in each case as of the end of the relevant monthly, quarterly or annual measurement period.

In addition, there isthe Credit Agreement contains a “clean down”clean down provision that requires the Company to reduce borrowings under the line to less than $6,000,000$6,000,000 for a period of 60 consecutive days each fiscal year. The Company believes that normal operating cash flow will allow it to meet the “clean down”clean down requirement with no adverse impact on the Company’sCompany's liquidity. The Company was not in compliance with the minimum EBITDA covenantits covenants at July 31, 2012. The Company has obtained a waiver for such non compliance.

2013.


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Events of default (subject to certain cure periods and other limitations) under the Credit Agreement include, but are not limited to, (i) non-payment of principal, interest or other amounts due under the Credit Agreement, (ii) the violation of terms, covenants, representations or warranties in the Credit Agreement or related loan documents, (iii) any event of default under agreements governing certain indebtedness of the Borrowers and certain defaults by the Borrowers under other agreements that would materially adversely affect the Borrowers, (iv) certain events of bankruptcy, insolvency or liquidation involving the Borrowers, (v) judgments or judicial actions against the Borrowers in excess of $250,000,$250,000, subject to certain conditions, (vi) the failure of the Company to comply with Pension Benefit Plans (as defined in the Credit Agreement), (vii) the invalidity of loan documents pertaining to the Credit Agreement, (viii) a change of control of the Borrowers and (ix) the interruption of operations of any of the Borrowers’Borrowers' manufacturing facilities for five consecutive days during the peak season or fifteen consecutive days during any other time, subject to certain conditions.


Pursuant to the Credit Agreement, substantially all of the Borrowers’Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Revolving Credit Facility upon receipt by the Borrowers. Due to this automatic liquidating nature of the Revolving Credit Facility, if the Borrowers breach any covenant, violate any representation or warranty or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion. In addition, certain of the covenants and representations and warranties set forth in the Credit Agreement contain limited or no materiality thresholds,

and many of the representations and warranties must be true and correct in all material respects upon each borrowing, which the Borrowers expect to occur on an ongoing basis. There can be no assurance that the Borrowers will be able to comply with all such covenants and be able to continue to make such representations and warranties on an ongoing basis.


The Company's line of credit with PNC Bank is structured to provide seasonal credit availability during the Company's peak summer season. The Company anticipatesbelieves that it will be in compliance with the minimum monthly EBITDA covenants for the balance of the year, but there can be no assurance that the Company will meet these covenants.

On June 15, 2012, the Borrowers entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement which, among other things, increased the borrowing availability thereunder by $3,000,000 for the period from May 1st through July 14th of each year. On July 27, 2012, the Borrowers entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement which reduced the minimum required EBITDA contained therein for the five consecutive months ending June 2012 from $1,600,000 to $300,000. On September 12, 2012, the Company entered into Amendment No. 3 (“Amendment No. 3”) to the credit agreement which reduced the minimum required EBITDA amount contained therein for each measurement period from July 2012 through January 2013 and reduced the minimum required tangible net worth amount contained therein for the measurement periods ending on October 31, 2012 and January 31, 2012.

At July 31, 2012, availability under the Revolving Credit Facility will provide sufficient liquidity to meet its capital requirements in the next 12 months. Approximately $20,192,000was $20,851,000. Management believes that the carrying valueavailable for borrowing as of debt approximated fair value at July 31, 2012, as all of the long-term debt bears interest at variable rates based on prevailing market conditions.

2013.


The descriptions set forth herein of the Credit Agreement, Amendment No. 1, Amendment No.2No. 2, Amendment No. 3, Amendment No. 4 and Amendment No. 35 are qualified in their entirety by the terms of such agreements, each of which has been filed with the Securities and Exchange Commission.


Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Commission’sCommission's rules and forms, and that such information is accumulated and communicated to the Company’sCompany's management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Assessing the costs and benefits of such controls and procedures necessarily involves the exercise of judgment by management, and such controls and procedures, by their nature, can provide only reasonable assurance that management’smanagement's objectives in establishing them will be achieved.

The Company carried out an evaluation, under the supervision and with the participation of the Company’sCompany's management, including its Principal Executive Officer along with its Principal Financial Officer, of the effectiveness of the design and operation of disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, pursuant to Exchange Act Rule 13a-15. Based upon the foregoing, the Company’sCompany's Principal Executive Officer along with the Company’sCompany's Principal Financial Officer concluded that, subject to the limitations noted in Part I, Item 4,above, the Company’sCompany's disclosure controls and procedures are effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’sCommission's rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’sCompany's management, including its Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

There was no change in the Company’sCompany's internal control over financial reporting during the second fiscal quarter of 2012three months ended July 31, 2013 that has materially affected, or is reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.


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Item 5.Other Information

On September 12, 2012, Virco Mfg. Corporation (the “Company”) and Virco Inc., a wholly owned subsidiary of the Company (“Virco”, and, together with the Company, the “Borrowers”), entered into a third amendment (the “Third Amendment”) to the Credit Agreement with PNC. The Third Amendment further amends the Credit Agreement by, among other things, reducing the minimum required EBITDA amount contained therein for each measurement period from July 2012 through January 2013 and reducing the minimum required tangible net worth amount contained therein for the measurement periods ending on October 31, 2012 and January 31, 2012.

The description of the Third Amendment set forth above is qualified in its entirety by the Third Amendment, a copy of which is filed as an exhibit to this report and is incorporated by reference herein.


PART II — OTHER INFORMATION

VIRCO MFG. CORPORATION


Item 1. Legal Proceedings

The Company has various legal actions pending against it arising in the ordinary course of business, which in the opinion of the Company, are not material in that management either expects that the Company will be successful on the merits of the pending cases or that any liabilities resulting from such cases will be substantially covered by insurance. While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to these suits and claims, management believes that the aggregate amount of such liabilities will not be material to the results of operations, financial position, or cash flows of the Company.


Item 1A. Risk Factors

Due to continued weak demand for education furniture, the Company was unable to satisfy the minimum EBITDA covenant for June and July of 2012. Effective July 27, 2012 the Company entered into Amendment No. 2 with PNC Bank to modify the minimum EBITDA covenant for June 2012 so that the Company would be in compliance with the amended covenant. Effective September 12, 2012 the Company entered into Amendment No. 3 with PNC Bank. This amendment modified the minimum monthly EBITDA covenant


In our Form 10-K for the period from July 2012 throughyear ended January 2013. The Company was in compliance with the amended covenant at July 31, 2012 and anticipates that it will be in compliance with the minimum monthly EBITDA covenants for the balance of the year, but there can be no assurance that the Company will meet these covenants.

We operate in a seasonal business, and require significant amounts of working capital through2013, we described material risk factors facing our existing credit facilitybusiness. Additional risks not presently known to fund acquisitions of inventory, fund expenses for freight and installation, and finance receivables during the summer delivery season. Restrictions imposed by the terms of our existing credit facility may limit our operating and financial flexibility.

Our credit facility, among other things, largely prevents us from incurring any additional indebtedness, limits capital expenditures, restricts dividends and stock repurchases, and provides for seasonal variations in the maximum borrowing amount, including a reduced maximum level of borrowing during the fourth fiscal quarter. Our credit facility also provides for monthly financial covenants, which currently include a minimum EBITDA, a minimum tangible net worth and a minimum fixed charge coverage ratio requirement. As a result of the foregoing, our operation and financial flexibility may be limited, which may prevent us from engaging in transactions that might further our growth strategy or otherwise be considered beneficial to us.

Under our credit facility, substantially all of our accounts receivable are automatically and promptly swept to repay amounts outstanding under the credit facility upon our receipt. Due to this automatic liquidating nature, if we breach any covenant, violate any representation or warranty or suffer a deterioration in our ability to borrow pursuant to the borrowing base calculation contained in the credit facility, we may not have access to cash liquidity unless provided by the lender in its discretion. If the indebtedness under our credit facility were to be accelerated, we cannot be certain that we will have sufficient funds available to pay such indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. Any such acceleration couldcurrently deem immaterial may also result in a foreclosure on all or substantially all ofimpair our assets, which would have a negative impact on the value of our common stock and jeopardize our ability to continue as a going concern. In addition, certainbusiness operations. As of the covenants and representations and warranties set forthdate of this report, there have been no material changes to the risk factors described in our credit facility contain limited or no materiality thresholds, and many of the representations and warranties must be true and correct in all material respects upon each borrowing, which we expect to occur on an ongoing basis. There can be no assurance that we will be able to comply with all such covenants and be able to continue to make such representations and warranties on an ongoing basis.

Form 10-K.


Item 2. Unregistered Sales of Equity Securities; Use of Proceeds and Issuer Purchases of Equity Securities

On June 6, 2008, the Board of Directors approved a $3,000,000 share repurchase program. As of July 31, 2012,2013, $1,053,000 remained available for repurchase under this program. The Company did not repurchase any shares of its stock during the second quarter of 2012.2013. Pursuant to the Company’sCompany's Credit Agreement with PNC Bank, the Company is prohibited from repurchasing any shares of its stock except in cases where a repurchase is financed by a substantially concurrent issuance of new shares of the Company’sCompany's common stock.

In addition, pursuant to the terms of the Company’sCompany's Credit Agreement with PNC Bank, the Company is prohibited from paying dividends. Consequently, for at least as long as this covenant is included in the Company’sCompany's Credit Agreement, no dividends will be paid by the Company to its stockholders.


Item 6. Exhibits

Exhibit 10.1 — First Amendment to Revolving Credit and Securities Agreement, dated as of June 15, 2012, by and among Virco Mfg. Corporation and Virco, Inc., as borrowers, and PNC Bank, National Association, as the lender and administrative agent.

Exhibit 10.2 — Second Amendment to Revolving Credit and Security Agreement, dated as of July 27, 2012, by and among Virco Mfg. Corporation and Virco, Inc., as borrowers, and PNC Bank, National Association, as the lender and administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 31, 2012).

Exhibit 10.3 — Third Amendment to Revolving Credit and Security Agreement, dated as of September 12, 2012, by and among Virco Mfg. Corporation and Virco, Inc., as borrowers, and PNC Bank, National Association, as the lender and administrative agent .

Exhibit 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 101.INS — XBRL Instance Document.

Exhibit 101.SCH — XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.LAB — XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document.



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VIRCO MFG. CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 VIRCO MFG. CORPORATION
Date: September 14, 201213, 2013By:

/s/ Robert E. Dose

 Robert E. Dose
 Robert E. Dose
Vice President — Finance

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