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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
VIRCO MFG. CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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VIRCO MFG. CORPORATION
2027 HARPERS WAY, TORRANCE, CALIFORNIA 90501
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 2000
The Annual Meeting of Stockholders of Virco Mfg. Corporation, a Delaware
corporation, will be held at 2:00 p.m. on Tuesday, June 20, 2000 at 2027 Harpers
Way, Torrance, California, for the following purposes:
1. To elect three directors to serve until the 2003 Annual Meeting of
Stockholders and until their successors are elected and qualified; and
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on May 5, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments and postponements thereof.
Whether or not you expect to attend the meeting, please date, sign and
return the enclosed proxy. If you attend the meeting, you may vote in person
whether or not you have returned a proxy.
By Order of the Board of Directors
Robert E. Dose, Secretary
Torrance, California
May 22, 2000
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VIRCO MFG. CORPORATION
2027 HARPERS WAY, TORRANCE, CALIFORNIA 90501
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS, JUNE 20, 2000
------------------------
GENERAL INFORMATION
This Proxy Statement is being mailed to stockholders of Virco Mfg.
Corporation, a Delaware corporation (the "Company"), on or about May 22, 2000 in
connection with the solicitation by the Board of Directors of proxies to be used
at the Annual Meeting of Stockholders of the Company to be held on Tuesday, June
20, 2000 at 2:00 p.m. at 2027 Harpers Way, Torrance, California and any and all
adjournments and postponements thereof.
The cost of preparing, assembling and mailing the Notice of Annual Meeting
of Stockholders, Proxy Statement and form of proxy and the solicitation of
proxies will be paid by the Company. Proxies may be solicited in person or by
telephone or telegraph by personnel of the Company who will not receive any
additional compensation for such solicitation. The Company will pay brokers or
other persons holding stock in their names or the names of their nominees for
the expenses of forwarding soliciting material to their principals.
RECORD DATE AND VOTING
The close of business on May 5, 2000 has been fixed as the record date for
the determination of stockholders entitled to notice of and to vote at the
meeting. On that date there were 10,333,079 shares of the Company's Common
Stock, par value $.01 per share, outstanding. All voting rights are vested
exclusively in the holders of the Company's Common Stock. Each share is entitled
to one vote on any matter that may be presented for consideration and action by
the stockholders, except that as to the election of directors, stockholders may
cumulate their votes. Because three directors are to be elected, cumulative
voting means that each stockholder may cast a number of votes equal to three
times the number of shares actually owned. That number of votes may be cast for
one nominee, divided equally among the three nominees or divided among the
nominees in any other manner. The proxy holders will have authority, in their
discretion, to vote cumulatively for less than all of the nominees.
In all matters other than the election of directors, the affirmative vote
of the majority of shares of Common Stock present in person or represented by
proxy at the meeting and entitled to vote on the subject matter would be the act
of the stockholders. Directors will be elected by a plurality of the votes of
the Common Stock present in person or represented by proxy. Abstentions will be
treated as the equivalent of a negative vote for the purpose of determining
whether a proposal has been adopted and will have no effect for the purpose of
determining whether a director has been elected. Broker non-votes are not
counted for the purpose of determining the votes cast on a proposal.
Proxies will be voted for management's nominees for election as directors
and in accordance with the recommendations of the Board of Directors contained
in the Proxy Statement, unless the stockholder otherwise directs in his proxy.
Where the stockholder has appropriately directed how the proxy is to be voted,
it will be voted according to his direction. Any stockholder has the power to
revoke his proxy at any time before it is voted at the meeting by submitting
written notice of revocation to the Secretary of the Company, or by filing a
duly executed proxy bearing a later date. A proxy will not be voted if the
stockholder who executed it is present at the meeting and elects to vote the
shares represented thereby in person.
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SECURITY OWNERSHIP
SHARES OWNED BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information as of April 30, 2000 (unless
otherwise indicated) relating to the beneficial ownership of the Company's
Common Stock (i) by each person known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock of the Company, (ii) by each
director or nominee of the Company, (iii) by each executive officer of the
Company named in the Summary Compensation Table below and (iv) by all officers
and directors of the Company as a group. The number of shares beneficially owned
is deemed to include shares of Common Stock in which the persons named have or
share either investment or voting power. Unless otherwise indicated, the mailing
address of each of the persons named is 2027 Harpers Way, Torrance, California
90501.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------ ----------------- ----------
Dimensional Fund Advisors Inc.(2).................. 773,330 7.5%
Bruce S. Sherman(3)................................ 648,984 6.3
Robert A. Virtue(4)................................ 319,410 3.1
Chairman of the Board of Directors,
President, Chief Executive Officer
Douglas A. Virtue.................................. 414,057 4.0
Director, Executive Vice President
Donald S. Friesz................................... 77,123 (5)
Director
Robert K. Montgomery............................... 0 (5)
Director
George W. Ott...................................... 9,584 (5)
Director
Glen D. Parish..................................... 11,796 (5)
Director, Vice President, General Manager
Donald A. Patrick.................................. 38,498 (5)
Director
John H. Stafford................................... 8,733 (5)
Director
Hugh D. Tyler...................................... 25,011 (5)
Former Director, Former Vice President
James R. Wilburn................................... 11,542 (5)
Director
Robert E. Dose..................................... 27,035 (5)
Vice President Finance, Secretary, Treasurer
Larry O. Wonder.................................... 16,871 (5)
Vice President, Education Sales Group
Robert J. Mills.................................... 25,256 (5)
Vice President, General Manager
All executive officers and directors as a group (15
persons)......................................... 1,015,744 9.6
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(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, to the knowledge of the Company, the
persons named in this table have sole voting and investment power with
respect to all shares beneficially owned by them. For purposes of this
table, a person is deemed to have "beneficial ownership" as of a given date
of any security that such person has the right to acquire within 60 days
after such date. Amounts for Messrs. Robert Virtue, Douglas Virtue, Friesz,
Montgomery, Ott, Parish, Patrick, Stafford, Tyler, Wilburn, Dose, Mills,
Wonder, and all executive officers and directors as a group, include 68,254,
36,016, 17,310, 0, 1,244, 6,820, 4,498, 4,498, 0, 4,498, 20,064, 20,064,
9,537 and 238,578 shares issuable upon exercise of options, respectively,
and 6,381, 4,399, 0, 0, 0, 3,168,
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0, 0, 5,480, 0, 4,331, 2,738, 2,926 and 31,148 shares held under the
Company's Employee Stock Ownership Plan as of December 31, 1999,
respectively.
(2) As of February 3, 2000, according to information provided to the Company.
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, furnishes investment advice to four registered investment
companies, and serves as investment manager to certain other commingled
group trusts (these investment companies and investment vehicles are the
"Funds"). In its role as investment advisor or manager, Dimensional
possesses both voting and investment power over the shares of the Company's
Common Stock that are owned by the Funds. Dimensional disclaims beneficial
ownership of such shares. The principal business address of Dimensional is
1299 Ocean Avenue, 11th floor, Santa Monica, California 90401.
(3) As of February 16, 2000, according to information provided to the Company.
Bruce S. Sherman is Chairman of Private Capital Management, Inc. ("PCM") and
exercises shared dispositive power with respect to the 408,684 shares held
by PCM on behalf of its clients. Mr. Sherman is also the Managing General
partner of SPS Partners, L.P. ("SPS") which acts as the Investment Advisor
for Entrepreneurial Value Fund, L.P., and exercises shared dispositive power
with respect to the 240,300 shares held by SPS. Mr. Sherman disclaims the
existence of a group. Mr. Sherman's address is 3003 Tamiami Trail N.,
Naples, Florida 34103.
(4) Does not include 1,233,815 shares owned beneficially by Mr. Robert Virtue's
adult children, including Mr. Douglas Virtue, as to which Mr. Robert Virtue
disclaims beneficial ownership.
(5) Less than 1%.
All information with respect to beneficial ownership of the shares referred
to above is based upon filings made by the respective beneficial owners with the
Securities and Exchange Commission or information provided to the Company by
such beneficial owners.
Douglas Virtue is Robert Virtue's son. The total number of shares
beneficially owned by Mr. Robert Virtue, his brothers Raymond W. Virtue and
Richard J. Virtue, his sister, Nancy Virtue Cutshall, their children and their
mother, Mrs. Julian A. Virtue, aggregate 4,944,556 shares or 47.4% of the total
shares of Common Stock outstanding.
Robert A. Virtue, Richard J. Virtue, Raymond W. Virtue, Nancy Virtue
Cutshall and certain of their respective spouses and children (the
"Stockholders") and the Company have entered into an agreement with respect to
certain shares of the Company's Common Stock received by the Stockholders as
gifts from their father, Julian A. Virtue, including shares received in
subsequent stock dividends in respect of such shares. Under the agreement, each
Stockholder who proposes to sell any of such shares is required to provide the
remaining Stockholders notice of the terms of such proposed sale. Each of the
remaining Stockholders is entitled to purchase any or all of such shares on the
terms set forth in the notice. Any shares not purchased by such remaining
Stockholders may be purchased by the Company on such terms. The agreement also
provides for a similar right of first refusal in the event of the death or
bankruptcy of a Stockholder, except that the purchase price for the shares is to
be based upon the then prevailing sales price of the Company's Common Stock on
the American Stock Exchange.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who own more than 10% of any
equity security of the Company to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and to furnish copies of
these reports to the Company. Based solely on a review of the copies of the
forms that the Company received, the Company believes that all such forms
required during the fiscal year ended January 31, 2000 were filed on a timely
basis except for a Form 4 for Mr. Ott with respect to a stock purchase in June
1999, which was filed two days late.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides for the division
of the Board of Directors into three classes as nearly equal in number as
possible. In accordance with the Certificate of Incorporation, the Board of
Directors has nominated Robert A. Virtue, Robert K. Montgomery and Donald A.
Patrick (each of whom is currently a director) to serve as directors in Class
III of the Board of Directors with a term expiring in 2003.
It is intended that the proxies solicited by this Proxy Statement will be
voted in favor of the election of Messrs. Robert A. Virtue, Montgomery and
Patrick, unless authority to do so is withheld. Should any of such nominees be
unable to serve as a director or should any additional vacancy occur before the
election (which events are not anticipated), proxies may be voted for a
substitute nominee selected by the Board of Directors or the authorized number
of directors may be reduced. If for any reason the authorized number of
directors is reduced, the proxies will be voted, in the absence of instructions
to the contrary, for the election of the remaining nominees named in this Proxy
Statement. In the event that any person other than the nominees named below
should be nominated for election as a director, the proxies may be voted
cumulatively for less than all of the nominees.
The following table sets forth certain information with respect to each of
the three nominees, as well as each of the five continuing directors.
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
NOMINEES FOR DIRECTORS WHOSE TERMS EXPIRE IN 2003:
Robert A. Virtue............. 67 Chairman of the Board and Chief Executive Officer of the 1956
Company since 1990; President of the Company since August
1982
Robert K. Montgomery......... 61 Partner of Gibson, Dunn & Crutcher LLP law firm since 1971 2000
Donald A. Patrick............ 75 Vice President and a founder of Diversified Business 1983
Resources, Inc. (mergers, acquisitions and business
consultants) since 1988
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2001:
Douglas A. Virtue............ 41 Executive Vice President since December 1997; previously 1992
General Manager of the Torrance Division of the Company
since 1992
George W. Ott................ 68 President and Founder of Ott and Hansen since 1976 1994
John H. Stafford............. 79 Retired since 1983; director of Mossimo, Inc. since October 1985
1996; previously Partner of Main Hurdman, a predecessor of
KPMG Peat Marwick (certified public accountants)
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2002:
Donald S. Friesz............. 70 Vice President Sales and Marketing from 1982 to February 1992
1996
Glen D. Parish............... 62 Vice President since 1999; General Manager of the Conway 1999
Division since 1999; previously Vice President of Conway
Sales and Marketing
James R. Wilburn............. 67 Dean of the School of Public Policy, Pepperdine University, 1986
since September 1996; previously Dean of the School of
Business and Management, Pepperdine University
(1982 - 1994); Professor of Business Strategy, Pepperdine
University (1994 - 1996); director of First Fidelity Thrift
since February 1995; director of JCB Bank since January
1998; director of Olson Company since January 1990
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Each director of the Company serving in 1999 attended at least 75% of the
1999 meetings of the Board of Directors and each committee on which he served.
Directors who are also officers of the Company or its subsidiaries receive no
additional compensation for their services as directors. Other directors
received a retainer of $4,000 per quarter, a fee of $1,000 for each Board
meeting and a fee of $750 for each committee meeting attended. The Board of
Directors held six meetings in 1999. At the February 1999 meeting of the Board
of Directors, the annual retainer was increased from $16,000 to $18,000
effective February 2000. In 1999, Messrs. Ott, Patrick, Stafford and Wilburn
each received options to purchase 1,000 shares of Common Stock at $15.625 per
share (1,100 shares at $14.20 per share after adjusting for a 10% stock dividend
issued in 1999 under the Company's 1997 Stock Incentive Plan).
The Board of Directors has an Audit Committee that in 1999 was composed of
Messrs. Friesz, Ott, Patrick, Stafford and Wilburn. The Audit Committee held two
meetings in 1999. The functions of the Audit Committee include reviewing the
financial statements of the Company, the scope of the annual audit by the
Company's independent auditors and the audit reports rendered by such
independent auditors. The Audit Committee may also examine and consider other
appropriate matters. The Audit Committee's charter, describing its policies and
responsibilities, appears as Appendix A to this proxy statement
The Board of Directors has a Compensation Committee that in 1999 was
composed of Messrs. Friesz, Ott, Patrick, Stafford and Wilburn. The function of
this Committee is to make recommendations to the Board regarding changes in
salaries and benefits. The Compensation Committee held one meeting in 1999.
The Company does not have a nominating committee. The Board of Directors
performs the functions which might otherwise be performed by such a committee.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for services rendered in
all capacities to the Company and its subsidiaries during the years indicated
for the Chief Executive Officer and the other four most highly compensated
officers of the Company and one additional person who would have been included
as one of the four most highly compensated officers of the Company but for the
fact that he was not serving as an officer at the end of the fiscal year:
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS(3) COMPENSATION(2)
--------------------------- ---- --------- -------- ------------ ---------------
Robert A. Virtue................. 1999 $378,263 -- 1,650 $58,000
Chairman of the Board and 1998 349,264 $123,500 -- 58,000
Chief Executive Officer 1997 330,837 180,000 9,000 58,000
Hugh D. Tyler.................... 1999 222,881 -- 1,650 12,200
Former Vice President and 1998 180,085 46,093 -- 12,200
General Manager -- Conway 1997 156,191 77,650 7,068 12,200
Division (retired December
1999)
Douglas A. Virtue................ 1999 184,888 -- 1,650 3,900
Executive Vice President 1998 162,768 46,200 -- 3,900
1997 135,482 66,500 7,068 3,900
Robert E. Dose................... 1999 164,373 -- 1,650 4,700
Vice President, Finance, 1998 133,187 39,200 11,000 4,700
Secretary and Treasurer 1997 103,879 55,000 6,413 4,700
Larry O. Wonder.................. 1999 147,909 -- 1,650 5,700
Vice President, Education 1998 125,391 35,000 11,000 5,700
Sales Group 1997 117,176 56,700 6,413 5,700
Robert J. Mills.................. 1999 140,117 -- 1,650 2,700
Vice President -- General
Manager 1998 125,687 35,000 11,000 2,700
Torrance Division 1997 112,110 55,600 6,413 2,700
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(1) Excludes compensation in the form of other personal benefits, which, for
each of the executive officers, did not exceed the lesser of $50,000 or 10%
of the total of annual salary and bonus reported for each year.
(2) For 1999, consists of (i) $14,300, $12,200, $4,700, $5,700 and $2,700,
representing the value of Company-paid split-dollar premiums under the
Management Employees Life Insurance Plan, and (ii) $43,700, representing the
value of Company-paid split-dollar premiums under the Executive Survivorship
Life Insurance Plan, for insurance policies on the life of Mr. Robert Virtue
(and his spouse). See "Management Employees Life Insurance Plan" and
"Executive Survivorship Life Insurance Plan." The foregoing amounts
represent the actuarial value of the benefit to the executive officers of
the current year's insurance premium paid by the Company in excess of that
required to fund the death benefits under the policies.
(3) Granted pursuant to the Company's 1993 and 1997 Stock Incentive Plans at the
market price of the Common Stock on the date of grant and adjusted for stock
dividends and 3 for 2 stock splits.
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AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
Shown below is information relating to the exercise of stock options during
1999 for each executive officer of the Company named in the Summary Compensation
Table above:
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE FISCAL YEAR-END(1) AT FISCAL YEAR-END(2)
NAME ON EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- --------------- -------- --------------------------- ---------------------------
Robert A. Virtue......... 2,770 $ 42,968 68,254/0 $ 590,706/0
Hugh D. Tyler............ 41,241 428,395 0/0 0/0
Douglas A. Virtue........ -- -- 35,998/0 288,743/0
Robert E. Dose........... -- -- 20,064/15,334 56,437/26,733
Larry O. Wonder.......... -- -- 9,537/15,334 13,367/26,733
Robert J. Mills.......... -- -- 20,064/15,334 56,437/26,733
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(1) Adjusted for stock dividends.
(2) Calculated using closing price on January 31, 2000 of $12.56.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information relating to the grants of options issued by the
Company during 1999 to each executive officer of the Company named in the
Summary Compensation table above:
INDIVIDUAL
GRANTS POTENTIAL REALIZABLE
-------------- VALUE AT
PERCENTAGE ASSUMED ANNUAL RATES
NUMBER OF OF TOTAL OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES OPTION TERM(3)
GRANTED IN FISCAL EXERCISE PRICE EXPIRATION --------------------
NAME (SHARES)(1)(2) YEAR ($/SHARE)(2) DATE 5% 10%
---- -------------- ---------- -------------- ---------- -------- --------
Robert A Virtue...... 1,650 8.11% $14.72 7/23/2009 $15,289 $38,753
Douglas A. Virtue.... 1,650 8.11 14.72 7/23/2009 15,289 38,753
Hugh D. Tyler........ -- -- -- -- -- --
Robert E. Dose....... 1,650 8.11 14.72 7/23/2009 15,289 38,753
Larry O. Wonder...... 1,650 8.11 14.72 7/23/2009 15,289 38,753
Robert J. Mills...... 1,650 8.11 14.72 7/23/2009 15,289 38,753
- ---------------
(1) Granted pursuant to the 1997 Stock Incentive Plan with immediate vesting.
(2) Adjusted for stock dividends.
(3) The 5% and 10% assumed rates of appreciation are specified under the rules
of the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of its Common Stock. The actual
value, if any, which an executive officer may realize upon the exercise of
stock options will be based upon the difference between the market price of
the Common Stock on the date of exercise and the exercise price.
EMPLOYEES RETIREMENT PLAN
The Employees Retirement Plan of the Company is a non-contributory, defined
benefit retirement plan governed by the Employee Retirement Income Security Act
of 1974. With limited exceptions, all employees of the Company and its
participating subsidiaries (including executive officers) are eligible to
participate provided they meet certain service requirements. Benefits are paid
to or on behalf of each participant upon retirement, normally at age 65, and
under certain circumstances upon death. Benefits under the Plan are credited to
the employee each year based upon years of service and remuneration during such
year of service.
Retirement benefits vest partially after three years of service and fully
after seven years of service, or upon the participant's 65th birthday. Benefits
payable under the Plan are adjusted to reflect the form of payment
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elected by the participant. The following table shows the annual pension
benefits for retirement at age 65 which would be payable to retiring employees
with representative earnings and years of service:
PENSION PLAN TABLE
ASSUMED YEARS OF SERVICE(1)(2)
AVERAGE -----------------------------
COMPENSATION(3) 10 20 30
--------------- ------- ------- -------
$ 25,000.................................... $ 2,260 $ 4,520 $ 6,780
50,000.................................... 4,760 9,520 14,280
75,000.................................... 7,260 14,520 21,780
100,000.................................... 9,760 19,520 29,280
125,000.................................... 12,260 24,520 36,780
150,000.................................... 14,760 29,520 44,280
175,000.................................... 15,760 31,519 47,279
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(1) Represents annual retirement benefits payable at normal retirement age. To
the extent a participant's service was rendered prior to February 1, 1964,
the effective date of the Plan, actual benefits will be slightly lower than
the benefits shown in the table.
(2) The benefits shown are for straight-life annuity payments and are not
subject to deduction for Social Security or other offset amounts;
alternative forms of benefit payments are available under the Plan.
(3) Assumed average compensation is based upon regular base compensation before
deduction for taxes or group insurance averaged for each year in the Plan.
Messrs. Robert Virtue, Douglas Virtue, Tyler, Dose, Wonder and Mills have
42, 13, 29, 8, 20 and 4 credited years of service and $72,000, $88,000, $75,000,
$124,000, $87,000 and $154,000 of assumed average compensation, respectively,
under the Plan.
VIRCO VERY IMPORTANT PERFORMERS PLAN
In August 1985, the Board of Directors adopted the Virco Very Important
Performers Plan, which is an unqualified plan providing additional retirement
and death benefits for certain employees identified by the Board of Directors or
the committee administering the Plan as contributing materially to the continued
growth, development and future business of the Company. On January 1, 1998, the
Plan was amended to provide that each officer or employee whose annual base
salary exceeds $80,000 will be a participant in the Plan. Benefits under the
Plan are payable to or on behalf of each participant upon retirement, normally
at age 65, or upon death prior to retirement. The Company is funding its
obligations under the Plan through the purchase of life insurance policies on
the participants.
Vesting for each participant begins at the later date of such participant's
forty-fourth birthday or his birthday in the year he enters the Plan. Vesting
occurs at 10% for each full year subsequent to such date. Under the Plan, each
participant will receive a benefit payable at retirement equal to 50% of the
average base salary during the last five years offset by the monthly benefit
accrued under the Employees Retirement Plan. Participants with fewer than ten
years of participation who retire after reaching age 60 will be entitled to
reduced pro rata benefits based on the number of years they have participated in
the Plan. In the event of the death of a participant prior to retirement, death
benefits are payable for a fifteen-year period to the deceased participant's
beneficiaries.
The estimated annual benefits payable upon retirement at age 65 for Messrs.
Robert Virtue, Douglas Virtue, Tyler, Dose, Wonder and Mills are $120,000,
$43,000, $53,000, $37,000, $27,000 and $24,000, respectively, assuming that the
current compensation of each executive officer remains constant until
retirement.
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MANAGEMENT EMPLOYEES LIFE INSURANCE PLAN
In August 1985, the Board of Directors adopted the Management Employees
Life Insurance Plan, which provides for the Company to obtain life insurance
policies on management employees selected by the Board. Currently, all officers
and employees earning an annual salary exceeding $80,000 are entitled to
participate in the Plan and may elect coverage under the Plan of $100,000.
Officers may elect coverage under the Plan of up to $300,000 in increments of
$50,000.
The premiums for the policies are paid partially by the participants
pursuant to the formula set forth in the Plan, with the Company paying the
remaining portion. The Company retains an interest in the death benefit payable
under the policy for each participant in an amount equal to the aggregate amount
of premium payments made by the Company with respect to such participant's
policy. The remainder of the death benefit is payable to the participant's
beneficiaries. Upon the first to occur of reaching the age of 65, actual
retirement or termination of employment, each participant is entitled to have
the Company assign the policy to the participant or his designee, provided that
the participant first reimburses the Company for all premiums previously paid by
the Company for the policy.
EXECUTIVE SURVIVORSHIP LIFE INSURANCE PLAN
In August 1985, the Board of Directors adopted the Executive Survivorship
Life Insurance Plan, which provides special life insurance benefits to a group
of management employees selected by the Board. Under this Plan, the Company
maintains insurance policies on the lives of the participants and their spouses.
Robert A. Virtue is currently the only executive officer participating in the
Plan. The Company also maintains insurance policies on the lives of Mr. Raymond
W. Virtue, a former executive officer, and his former spouse under the Plan. The
amount of each of the insurance policies maintained by the Company under the
Plan on the lives of Robert A. Virtue and Raymond W. Virtue and their current or
former spouses is $1,250,000. In 1985, the Company also purchased $1,250,000 of
insurance under the Plan on the lives of Richard Cutshall, who was then a
management employee of the Company, and his spouse Nancy Virtue Cutshall, who is
the beneficial owner of 4.8% of the Company's outstanding shares. In connection
with their divorce in 1987, Mr. Cutshall, who is now deceased, transferred his
interest in such insurance to Mrs. Cutshall. As a result of such transaction,
the policy previously maintained on the life of Mr. Cutshall was terminated and
a $2,500,000 policy is now maintained under the Plan on the life of Mrs.
Cutshall.
The premiums for the policies are paid partially by the participants
pursuant to a formula set forth in the Plan, with the Company paying the
remaining amount. The Company retains an interest in the death benefit payable
under the policy of each participant and spouse in an amount equal to the
aggregate amount of premium payments made by the Company with respect to the
policy of such participant or spouse. The remainder of the death benefit is
payable to the designated beneficiaries of the deceased participant or spouse.
Upon the first to occur of the participant's reaching age 65, retiring or
ceasing to be an employee of the Company for any reason other than death, the
participant or his designee is required to purchase the Company's interest in
the participant's policy and the spouse or the spouse's designee is similarly
required to purchase the Company's interest in the spouse's policy. The amount
to be paid to the Company upon such purchase is the aggregate amount of the
Company's previous premium payments on such policy. In the event a participant
in the Plan dies before reaching age 65 and while an employee of the Company,
the Company remains obligated to maintain the insurance policy under the Plan on
the life of such participant's spouse.
WIDOW'S SALARY CONTINUATION PLAN
In August 1985, the Board of Directors approved the Widow's Salary
Continuation Plan, which provides for surviving widow benefits to be paid by the
Company upon the deaths of Messrs. Julian A. Virtue and Donald Heyl, the former
President of the Company. The widow of Mr. Virtue is currently receiving $5,000
per month under the Plan. In 1999, the Company paid $60,000 to Mrs. Virtue. Upon
the death of Mr. Heyl, his surviving widow will receive $60,000 annually during
her lifetime. The Company is funding its obligation to Mr. Heyl under this Plan
through the purchase of life insurance on the life of Mr. Heyl.
9
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CERTAIN TRANSACTIONS
In 1989 the Company loaned $75,000 to Larry O. Wonder, the Company's Vice
President, Education Sales Group. The loan is secured by a second trust deed on
Mr. Wonder's home and accrues interest at a rate equal to the Wells Fargo prime
interest rate. As of January 31, 2000, the outstanding balance on the loan
including accrued interest was $107,000.
During 1994 the Company entered into a consulting arrangement with
Diversified Business Resources, Inc. ("Diversified"), a consulting firm which is
owned by Donald A. Patrick, who is a Director. During 1999 the Company paid
$265,000 to Diversified in connection with the Conway, Arkansas re-configuration
project.
Robert K. Montgomery is a member of the Board of Directors of the Company
and a nominee as a Class III Director. See "Proposal 1 -- Election of
Directors." Mr. Montgomery is a partner of the law firm Gibson, Dunn & Crutcher
LLP which has provided legal services to the Company. The Company expects that
such law firm will continue to render legal services to the Company.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
developing the Company's executive compensation policies and making
recommendations to the Board of Directors with respect to these policies. In
addition, the Committee makes annual recommendations to the Board of Directors
concerning the compensation paid to the Chief Executive Officer and to each of
the other executive officers of the Company.
EXECUTIVE COMPENSATION POLICY
The goals of the Company's executive compensation policy are to attract and
retain qualified executives and to ensure that their efforts are directed toward
the long-term interests of the Company and its stockholders. The Company is
striving to generally position executive salaries at median competitive levels
and to rely on variable, performance-based bonuses to play a significant role in
determining total compensation. In addition, by establishing the 1993 and 1997
Stock Incentive Plans, the Company further linked executive and stockholder
interests.
The Compensation Committee annually reviews salaries, bonuses and other
aspects of executive compensation. In general, the purpose of such annual
reviews is to ensure that the Company's overall executive compensation program
remains competitive with comparable businesses and that total executive pay
reflects both the individual's performance as well as the overall performance of
the Company.
BASE SALARY
Each year, the performance of executives is reviewed and, based upon an
assessment of individual performance and the Company's performance, a
corresponding salary increase may be awarded. In 1999, based on a comparison of
the Company's executive compensation levels and plans with those of other
companies in the furniture manufacturing business, the Compensation Committee
concluded that the Company's executive salaries had to be adjusted to keep pace
with those of comparable companies. As a result, the salary increases awarded to
the Company's Chief Executive Officer and other executive officers in 1999
reflected primarily the Compensation Committee's determination to adjust
salaries to perceived competitive levels, as well as the Compensation
Committee's evaluation of the overall performance of the Company and the
performance of each executive officer.
The salary of Mr. Robert A. Virtue, the Company's Chief Executive Officer,
was determined on the foregoing basis. In addition to consideration of the
salary levels of the chief executive officer of other furniture manufacturers,
the Board considered the Company's operating results in 1998, the Company's
stock performance, the effect of the general economy on the Company's
performance and the success of the Company in addressing certain goals.
10
13
BONUSES
Early each year the Board of Directors considers and approves an annual
profit plan for the Company, which establishes a target level of overall Company
profits, excluding certain non-recurring items. The bonuses payable to the Chief
Executive Officer and the other executive officers are tied to the Company's
actual performance relative to the annual profit plan. However, bonuses of
divisional general managers are based upon divisional operating results. In
1999, the Chief Executive Officer was eligible to receive a bonus equal to 60%
of his salary and each of the executive officers was eligible to receive a bonus
equal to 50% of his salary if the annual profit plan target level or target
divisional operating results, as applicable, had been achieved. In general, the
amount of the bonus paid was subject to a 2% adjustment for each $200,000
difference between the actual profits and the plan's targeted profit level or,
for divisional general managers, a similar formula to adjust for the difference
between the actual results and the targeted results.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
George W. Ott John H. Stafford
Donald A. Patrick James R. Wilburn
Donald S. Friesz
The report of the Compensation Committee of the Board of Directors shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
11
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STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The stock performance graph set forth below illustrates the Company's
performance in total stockholder return over the period February 1, 1995 through
January 31, 2000 relative to the following external indices: (a) the American
Stock Exchange market value index ("AMEX Market Index") and (b) a peer group.(1)
Each line on the stock performance graph assumes that $100.00 was invested in
the Common Stock and the respective indices on February 1, 1995. The graph then
tracks the value of these investments, assuming reinvestment of dividends,
through January 31, 2000.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS
OF THE COMPANY, AMEX MARKET INDEX AND PEER GROUP
PERFORMANCE GRAPH
VIRCO MFG. CORPORATION PEER GROUP AMEX MARKET INDEX
---------------------- ---------- -----------------
1995 100.00 100.00 100.00
1996 118.43 129.04 128.18
1997 209.54 178.89 137.96
1998 565.36 259.37 157.36
1999 419.16 341.17 163.03
2000 328.09 183.23 192.14
- ---------------
(1) The peer group comprises all companies identified by Media General Financial
Services as being within the "other business and institutional equipment"
industry group, as follows: American Locker Group Incorporated, Autotote
Corporation, Bell & Howell Co., Biper S.A. de C.V., Champion Industries,
Inc., Comtrex Systems Corporation, Diebold, Incorporated, Dorel Industries
Inc., Falcon Products, Inc., Fiberstars, Inc., Franklin Electronic
Publishers, Incorporated, General Binding Corporation, The Genlyte Group
Incorporated, Global Payment Technologies, Inc., Gradco Systems, Inc.,
Herman Miller, Inc., Hon Industries Inc., Hotelworks.com, Inc., Hypercom
Corporation, Kimball International, Inc., Knape & Vogt Manufacturing
Company, Koala Corporation, Kronos Incorporated, LSI Industries Inc.,
Mity-Lite, Inc., Nam Tai Electronics, Inc., Neutral Posture Ergonomics,
Inc., Open Plan Systems, Inc., Par Technology Corporation, Pitney Bowes
Inc., Reconditioned Systems, Inc., Smed International Inc., Smith Corona
Corporation, Steelcase Inc., Tab Products Co., Tidel Technologies, Inc.,
Ultradata Systems, Incorporated, Xerox Corporation and the Company.
12
15
The cumulative total return shown on the stock performance graph indicates
historical results only and is not necessarily indicative of future results.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP, upon the recommendation of the Audit Committee of the
Board of Directors of the Company, continues as the accounting firm selected by
the Board of Directors to examine the accounts of the Company for the current
year. Representatives of Ernst & Young LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
OTHER MATTERS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company by February 15, 2000,
for inclusion in the Company's proxy statement and form of proxy relating to
that meeting.
The Board of Directors does not know of any matters to be presented at the
2000 Annual Meeting other than as stated herein. If other matters do properly
come before the Annual Meeting, the persons named on the accompanying proxy card
will vote the proxies in accordance with their judgment in such matters.
The Annual Report to the Stockholders of the Company for the fiscal year
ended January 31, 2000, including financial statements, is being mailed to
stockholders concurrently herewith.
THE COMPANY WILL ALSO PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND RELATED SCHEDULES, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UPON REQUEST IN WRITING FROM ANY PERSON WHO
WAS HOLDER OF RECORD, OR WHO REPRESENTS IN GOOD FAITH HE WAS A BENEFICIAL OWNER,
OF COMMON STOCK OF THE COMPANY ON MAY 5, 2000. ANY SUCH REQUEST SHALL BE
ADDRESSED TO THE COMPANY AT 2027 HARPERS WAY, TORRANCE, CALIFORNIA 90501,
ATTENTION: CORPORATE SECRETARY.
Stockholders are urged to date and sign the enclosed proxy and return it
promptly in the enclosed envelope.
By Order of the Board of Directors
Robert E. Dose, Secretary
Torrance, California
May 22, 2000
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APPENDIX A
VIRCO MFG. CORPORATION
AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the audit committee. The committee
shall review and reassess the charter at least annually and obtain the approval
of the board of directors. The committee shall be appointed by the board of
directors and shall comprise at least three directors, each of whom are
independent of management and the Company. Members of the committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All committee
members shall be financially literate, or shall become financially literate
within a reasonable period of time after appointment to the committee, and at
least one member shall have accounting or related financial management
expertise.
STATEMENT OF POLICY
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the stockholders, potential
stockholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the annual independent audit of the
Company's financial statements, and the legal compliance and ethics programs as
established by management and the board. In so doing, it is the responsibility
of the committee to maintain free and open communication between the committee,
independent auditors and management of the Company. In discharging its oversight
role, the committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and personnel of
the Company and the power to retain outside counsel, or other experts for this
purpose.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the board and report the
results of their activities to the board.
Management is responsible for preparing the Company's financial statements,
and the independent auditors are responsible for auditing those financial
statements. The committee in carrying out its responsibilities believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and circumstances. The committee should take the appropriate
actions to set the overall corporate "tone" for quality financial reporting,
sound business risk practices, and ethical behavior.
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the committee may supplement them
as appropriate.
- The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of
the Company's stockholders. The committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate, replace
the independent auditors. The committee shall discuss with the auditors
their independence from management and the Company and the matters
included in the written disclosures required by the Independence
Standards Board. Annually, the committee shall review and recommend to
the board the selection of the Company's independent auditors.
- The committee shall discuss with the independent auditors the overall
scope and plans for their audit including the adequacy of staffing and
compensation. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and
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ethical compliance programs. Further, the committee shall meet separately
with the independent auditors, with and without management present, to
discuss the results of their examinations.
- The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent auditors
under generally accepted auditing standards. The chair of the committee
may represent the entire committee for the purposes of this review.
- The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K, including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the committee shall discuss the results of
the annual audit and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards.
A-2
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PROXY PROXY
VIRCO MFG. CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 20, 2000
The undersigned hereby appoints ROBERT A. VIRTUE, DOUGLAS A. VIRTUE and
ROBERT E. DOSE, and each of them, with full power of substitution in each, as
proxies of the undersigned to attend and vote, as designated on the reverse
side, all shares of Virco Mfg. Corporation, a Delaware corporation (the
"Company"), which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders to be held June 20, 2000 and any adjournment or postponement
thereof:
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN ACCOMPANYING ENVELOPE.
19
[Reverse Side of Proxy]
Please mark
your vote at [ ]
indicated in
this example
1. Election of Directors:
FOR all nominees listed (except as marked to the contrary). [ ]
WITHHOLD AUTHORITY to vote for all nominees listed. [ ]
Robert A. Virtue Donald A. Patrick Robert K. Montgomery
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write nominee's name on the space provided below.)
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before such meeting.
ANY PREVIOUS PROXY EXECUTED BY THE UNDERSIGNED IS HEREBY REVOKED.
Receipt of the notice of meeting, the proxy statement and the annual report of
the Company for the year ended January 31, 2000, is hereby acknowledged.
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE, IN THE ABSENCE OF ANY DIRECTOR, THIS
PROXY WILL BE VOTED FOR THE ELECTION AS SPECIFIED OF ALL OF THE NOMINEES LISTED,
AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
Signature (s) Date , 2000
--------------------------------------- --------------
Note: Please sign exactly as addressed hereon. If the stock is jointly held each
owner must sign. Executor, trustees, guardian and attorneys should so indicate
when signing. Attorneys should submit proxies of attorney.
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T-Shirt (front):
"World Class furniture..."
[graphic of table, chairs and laptop]
[Virco logo]
"furniture that fits"
T-shirt (back):
"...since 1950."
[graphic of table and chair]
"Virco"