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<SEC-DOCUMENT>0000950129-05-003856.txt : 20050420
<SEC-HEADER>0000950129-05-003856.hdr.sgml : 20050420
<ACCEPTANCE-DATETIME>20050420140451
ACCESSION NUMBER:		0000950129-05-003856
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20050418
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20050420
DATE AS OF CHANGE:		20050420

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VIRCO MFG CORPORATION
		CENTRAL INDEX KEY:			0000751365
		STANDARD INDUSTRIAL CLASSIFICATION:	PUBLIC BUILDING AND RELATED FURNITURE [2531]
		IRS NUMBER:				951613718
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0131

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08777
		FILM NUMBER:		05761559

	BUSINESS ADDRESS:	
		STREET 1:		2027 HARPERS WAY
		CITY:			TORRANCE
		STATE:			CA
		ZIP:			90501
		BUSINESS PHONE:		3105330474

	MAIL ADDRESS:	
		STREET 1:		P O BOX 44846
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90044
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>v08095e8vk.htm
<DESCRIPTION>VIRCO MFG. CORPORATION - APRIL 18, 2005
<TEXT>
<HTML>
<HEAD>
<TITLE>e8vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>






<P align="center" style="font-size: 14pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>

<P align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>


<P align="center" style="font-size: 18pt"><B>FORM 8-K</B>


<P align="center" style="font-size: 12pt"><B>CURRENT REPORT</B>



<P align="center" style="font-size: 12pt"><B>Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934</B>


<P align="center" style="font-size: 10pt">Date of Report (Date of earliest event reported): April&nbsp;18, 2005



<P align="center" style="font-size: 10pt">Commission file number 1-8777


<P align="center" style="font-size: 24pt"><B>VIRCO MFG. CORPORATION</B>


<P align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)


<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">DELAWARE
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">95-1613718</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top" nowrap>(State or other jurisdiction of incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>(IRS Employer Identification No.)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">2027 Harpers Way, Torrance, California
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">90501</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Address of principal executive officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">Registrant&#146;s telephone number, including area code <u>(310)&nbsp;533-0474</u>



<P align="left" style="font-size: 10pt">Check the appropriate box below if the Form&nbsp;8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pre-commencement communications pursuant to Rule&nbsp;14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pre-commencement communications pursuant to Rule&nbsp;13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt">1
</DIV>

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<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">ITEM 2.02. RESULTS OF OPERATION AND FINANCIAL CONDITION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">Item&nbsp;9.01 FINANCIAL STATEMENTS AND EXHIBITS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002"> SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">EXHIBIT INDEX</A></TD></TR>
<TR><TD colspan="9"><A HREF="v08095exv99w1.htm">EX-99.1</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>





<P align="center" style="font-size: 10pt"><B>INFORMATION TO BE INCLUDED IN THE REPORT</B>


<!-- link1 "ITEM 2.02. RESULTS OF OPERATION AND FINANCIAL CONDITION" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 2.02. RESULTS OF OPERATION AND FINANCIAL CONDITION</B>



<P align="left" style="font-size: 10pt">On April&nbsp;18, 2005, Virco Mfg. Corporation issued a press release reporting its financial results
for the quarter and fiscal year ended January&nbsp;31, 2005. The press release is attached hereto as
Exhibit&nbsp;99.1. The information in this Item&nbsp;2.02 and the exhibit hereto are furnished to, but not
filed with, the Securities and Exchange Commission.


<!-- link1 "Item&nbsp;9.01 FINANCIAL STATEMENTS AND EXHIBITS" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;9.01 FINANCIAL STATEMENTS AND EXHIBITS.</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Press Release dated April&nbsp;18, 2005</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link1 " SIGNATURES" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>



<P align="left" style="font-size: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.







<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>Virco Mfg. Corporation</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: April 18, 2005&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Robert A. Virtue
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Robert A. Virtue&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer and<BR>
Chairman of the Board of
Directors&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<!-- link1 "EXHIBIT INDEX" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center" style="font-size: 10pt"><B>EXHIBIT INDEX</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 8pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit<BR>
Number
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Description</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Press Release dated April&nbsp;18, 2005.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">4
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>v08095exv99w1.htm
<DESCRIPTION>EX-99.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv99w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EXHIBIT 99.1</B>



<P align="left" style="font-size: 10pt">FOR IMMEDIATE RELEASE


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contact:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert A. Virtue, President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Douglas A. Virtue, Executive Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert E. Dose, Chief Financial Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Virco Mfg. Corporation</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(310) 533-0474</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">Virco<SUP style="font-size: 85%; vertical-align: text-top">&#174; </SUP>Announces Fourth Quarter and Annual Results



<P align="left" style="font-size: 10pt">Torrance, California &#150; April&nbsp;18, 2005 &#150; Virco Mfg. Corporation<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> (AMEX: VIR) today
announced fourth quarter and year-end results for fiscal 2004, ended January&nbsp;31, 2005, in the
following letter to shareholders from Robert A. Virtue, President and CEO:



<P align="left" style="font-size: 10pt">A year that saw the successful completion of our restructuring and the long awaited recovery of the
classroom furniture market ended on a disappointing note as we lost $11,446,000 in the fourth
quarter. For the year we lost $13,995,000.



<P align="left" style="font-size: 10pt">Despite this poor result, we are more optimistic about the future than at any time in the past
three years. We&#146;ve passed the bottom of two troughs: volume in 2003 and margin in 2004. With the
causes of both identified and corrected, and with our experienced workforce and infrastructure both
performing smoothly, we are now taking advantage of the early stages of the recovery for which we
planned.



<P align="left" style="font-size: 10pt">Some highlights from 2004 include:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">o
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A 4% increase in revenue from $191,852,000 to $199,854,000;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">o
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A return to positive operating cash flow of $3,678,000;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">o
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A reduction in both year-ending inventories and bank borrowings;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">o
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Greatly improved on-time deliveries during the busy summer season; and</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">o
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The launch of ZUMA&#153;, the most successful new product in our history.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Here are the numbers:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">Twelve Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">1/31/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">1/31/2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">1/31/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">1/31/2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(in thousands except per share data)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31,218            </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">199,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">191,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general &#038; administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,497</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,497</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Separation costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,331</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,718</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,880</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,638</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,731</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,677</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(11,446</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,987</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,995</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(21,961</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.68</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 10pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding <SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,106</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P>
<HR size="1" noshade width="16%" align="left" color="#000000">
<DIV align="left" style="font-size: 10pt">(a)&nbsp;Net loss per share was calculated based on basic shares outstanding due to the anti-dilutive
effect on the inclusion of common stock equivalent shares.</DIV>


<P align="center" style="font-size: 10pt">5
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">1/31/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">1/31/2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">46,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51,386</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,882</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,982</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,352</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Much of last year&#146;s report was dedicated to our strategy of managing through a recession. We
didn&#146;t know for sure when the recovery would occur or how strong it would be, but we sensed it
would spur a decisive sorting event among the suppliers to our market. It now appears that last
year&#146;s continued difficult conditions, including stubbornly low market volume and a twofold
increase in steel and plastic resin costs, may have intensified the sorting.



<P align="left" style="font-size: 10pt">We begin this year&#146;s report with a detailed recap of our restructuring goals and achievements,
separating those successes from the raw material and pricing issues that caused our loss. Next we
address pricing trends. Finally, we discuss our market development and growth initiatives.



<P align="left" style="font-size: 10pt"><U>Restructuring Goals and Achievements</U>



<P align="left" style="font-size: 10pt">In last year&#146;s report we listed two specific financial goals for the restructuring. First, we
wanted to downsize to a scale that permitted break-even results at volume of $190,000,000 to
$200,000,000. Second, we wanted to save between $20,000,000 and $25,000,000 in total operating
expense versus restructuring charges of $13,920,000. We achieved both of these goals.



<P align="left" style="font-size: 10pt">The cause of last year&#146;s loss was not failure to cut deep enough. It was a twofold cost increase
in steel and plastic resin that struck early in the term of fixed price contracts with our public
school customers. Many of these contracts are secured by bid and performance bonds. In 55&nbsp;years
of serving the public school market, we&#146;ve never had a bond called. We were obligated
contractually and by a sense of duty to deliver furniture at the agreed upon prices.



<P align="left" style="font-size: 10pt">The impact of higher material costs was especially painful coming on the heels of a restructuring.
Even as we saw margins dropping through mid-summer and recognized that we would not reach
break-even for the year, we continued to focus on performance. We then relied on the goodwill
earned by a good performance to justify a price increase when the contracts came up for renewal.
This proved to be the right approach.



<P align="left" style="font-size: 10pt">When shareholders or analysts ask us about excess capacity, what they&#146;re really asking about is
excess cost. The assumption is that unused factory space is costly and leads to an uncompetitive
position in the marketplace. Another assumption is that <I>all </I>manufacturing is now more efficiently
done offshore. The obvious question is, why doesn&#146;t Virco close one of its factories?



<P align="left" style="font-size: 10pt">First, our facilities aren&#146;t just factories. Operationally we have 1,175,000 square feet dedicated
to manufacturing versus 1,000,000 square feet dedicated to warehousing, distribution, customer
service, and installation. In terms of expense, manufacturing is only 2% higher than our combined
retail activities. While it&#146;s definitely true that we have unused factory space, our retail
operations are much nearer to physical capacity. As we expand our PlanSCAPE&#153; project management
services over the next few years, this space will prove increasingly valuable for the consolidation
of large turnkey orders. We&#146;ll discuss PlanSCAPE&#153; more extensively later in this report.



<P align="left" style="font-size: 10pt">Second, for vertically integrated manufacturer/distributors like Virco, floor space isn&#146;t directly
proportional to expense. One of the metrics we watch closely is <I>total operating expense. </I>This is
our baseline measure for the combined scale and efficiency of our manufacturing, distribution and
retail activities. It includes all non-material expenses such as payroll, utilities, leases,
interest, contract services, freight, installation, health care, benefits and bad debt. It also
includes the depreciable cost of facility overhead.



<P align="left" style="font-size: 10pt">Since the year 2000, when total operating expense peaked at $191,767,000 against revenue of
$287,342,000, we have reduced our cost of operations by approximately $60,000,000. (This is equal
to three times the current cost of our Torrance factory operations.) In 2004 total operating
expense was $132,061,000 against revenue of $199,854,000. The ratio of revenue to expense for
these two years was 150 and 151, respectively. These figures and the practical realities of our
market convinced us that the appropriate course for a return to profitability was a price increase,
not further cuts.



<P align="center" style="font-size: 10pt">6
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">After reassessing the dynamics of our market, we concluded that our facilities in Conway, Arkansas,
and Torrance, California, were both necessary. Factors we considered included increasing
seasonality and the corresponding need for off-season storage of ATS components; the
disproportionate freight and installation costs associated with high-cube furniture; emerging signs
of higher costs for imported products; and the expectation that freight costs would continue to
escalate while our own fixed costs moved lower.



<P align="left" style="font-size: 10pt">Conway and Torrance are both ideally located near the fastest growing regions of the country. This
is where bond-funded new school construction is concentrated. Among all segments of our market,
bond-funded projects have been least affected by state and local budget cuts. Proximity to these
projects reduces variable freight and installation costs in addition to improving our performance.



<P align="left" style="font-size: 10pt">There are two other kinds of capacity that are more important than infrastructure. These are
people and liquidity. We&#146;ve spoken repeatedly about both but we want to say it again: our
employees and our relationship with Wells Fargo are both crucial to success.



<P align="left" style="font-size: 10pt">We have developed and retained the most experienced management, sales and operations team in our
industry. One of the misapprehensions fueled by globalization is that all elements of competition
are interchangeable. We have not found this to be true. Each market has idiosyncrasies.
Relationships and experience still matter, even more so in uncertain times when traditional
relationships between manufacturers and distributors are shifting or breaking down. The process of
squeezing inefficiencies out of a market can obviously go too far, at which point the instability
of constant change begins to offset incremental improvements in short-term efficiency. We believe
our market may be nearing this point, and that our track record of long-term reliability will carry
increasing weight in the overall value equation.



<P align="left" style="font-size: 10pt">In our heavily seasonal market, liquidity has always been a limiting factor. The financing demands
of pre-season inventories and peak season receivables act decisively to limit how much furniture
and equipment can be delivered within the 10-week summer shipping window. It&#146;s no exaggeration to
say that without Wells Fargo&#146;s enlightened partnership, the competitive advantages of our people,
factories and products would be greatly reduced.



<P align="left" style="font-size: 10pt"><U>The Price Increase</U>



<P align="left" style="font-size: 10pt">One of the dominant trends in public school administration over the past decade has been
decentralization. A number of factors are driving this trend but their net effect on Virco and
other suppliers has been to increase the number of small, high service cost orders. District
warehouses, which formerly functioned as wholesalers to individual schools, are now largely closed.
Instead of making consolidated shipments to warehouses we now find ourselves making numerous
deliveries to individual school sites, where we frequently unload and install the furniture as
well.



<P align="left" style="font-size: 10pt">This trend has created an escalating foundation of intangible service costs underneath the more
tangible items of furniture and equipment. In the deflationary environment of the past three years
we&#146;ve had a certain amount of difficulty selling these intangibles. Part of our margin
deterioration during this period has been a result of unabsorbed service cost.



<P align="left" style="font-size: 10pt">When raw material costs spiked in the spring of 2004, they exacerbated what was already a worsening
margin environment. As the summer progressed we were confronted with many deliveries that we knew
were losing us money. Despite this, we trusted that a strong performance would help illustrate the
importance of reliability. The contrast between Virco and other suppliers was most apparent in
fast growing districts with a preponderance of new school construction projects. In these areas,
our efforts last season have led to expanded business and improved margins this year.



<P align="left" style="font-size: 10pt">As we began formulating our price increase in the fall of 2004, we considered both the material and
service component of the total product package. We decided to introduce a tiered pricing structure
that recognized as accurately as possible both the tangible and intangible costs associated with
all types of orders. Large projects would be priced aggressively, reflecting their greater overall
efficiency. Small deliveries would be priced higher, reflecting their retail level of service.
Customers with large annual volume but small average order size would be given the choice of
consolidating orders for a discount or paying a higher price and keeping their order size the same.
Regional differences in freight and installation were also factored into the matrix.



<P align="center" style="font-size: 10pt">7
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">We began implementing the increase in November, just as margins were bottoming out. Most of our
under-priced contracts expired between December&nbsp;31, 2004 and May&nbsp;31, 2005. We continued to receive
orders at old prices through the transition, resulting in a backlog of blended margins that are

gradually moving higher as old orders are shipped and invoiced.



<P align="left" style="font-size: 10pt">It&#146;s too early to say how much margin improvement we&#146;ll achieve this year or what the impact of
higher prices will be on revenue. We&#146;ve been encouraged by the generally favorable response from
our customers. Prices from competitors are up about as much as our own, with most differences
coming down to a matter of unique product specifications and/or service factors. As of March&nbsp;31,
incoming orders were up 6% compared to the same period last year. Our backlog was 16% higher.
We&#146;ll have a much clearer picture by the time we release our first quarter report in early June,
when we&#146;ll give an updated report on pricing, volume, and market conditions.



<P align="left" style="font-size: 10pt"><U>Market Development and Growth Initiatives</U>



<P align="left" style="font-size: 10pt">In this section of the report we&#146;ll discuss four current initiatives for market development and
growth: 1) new products; 2) PlanSCAPE&#153; project management services; 3) multi-channel commercial
distribution; and 4) professional outreach and support. We&#146;ll also revisit our strategy for
acquisitions.



<P align="left" style="font-size: 10pt">From our current perspective it&#146;s clear we missed a few years of developing compelling new products
for educational environments. The recent success of Plateau&#174;, I.Q.&#174;, Ph.D.&#174;, and ZUMA&#153; confirms
that what appeared to be a pricing problem among our older products was most often a lack of
perceived value. As the market leader, our lethargy contributed to a commoditization of classroom
furniture and equipment.



<P align="left" style="font-size: 10pt">We are now aggressively correcting that oversight. The challenge we&#146;ve set for ourselves is to
identify the major functional categories of educational furniture and equipment, then use
innovative designs to reconfigure traditional materials like steel, wood and plastic into products
of obviously superior value. Everything we&#146;re designing is informed by the feedback of educators,
ergonomists, and the modular efficiency of Assemble-to-Ship.



<P align="left" style="font-size: 10pt">The success of ZUMA&#153; convinced us that we can contribute to better design not only in our own
market, but in others as well. This year we&#146;re adding to the ZUMA&#153; line with a series of chairs
and desks made from Fortified Recycled Wood&#153; components. ZUMAfrd&#153; combines high recycled content
with renewable materials and exceptional service life, three of the most important elements of
sustainable design. ZUMAfrd&#153; is also flameproof and comfortable.



<P align="left" style="font-size: 10pt">Our new product pipeline is full. Over the next three years we expect to complete one major
product line per season, using the mid-year venue of NeoCon&#174; for the release. While NeoCon is not
heavily attended by educators, it is the premier showcase for commercial and contract furniture
manufacturers. It also precedes the major show season for educators, which runs from fall through
early spring.



<P align="left" style="font-size: 10pt">The illustrations in this year&#146;s report are a blend of original ZUMA&#153; designs and promotional
mailings for NeoCon 2005, where ZUMAfrd&#153; will be released. You can see the entire ZUMA&#153; line at
the Chicago Merchandise Mart from June&nbsp;13-15.



<P align="left" style="font-size: 10pt">By the end of the current new product cycle we hope to have simultaneously improved the design of
classroom furniture and streamlined internal operations. It is also our intention to make most or
all of the new furniture in our own factories. We believe in the so-called &#147;triple bottom line&#148; of
sustainability, which balances financial performance with environmental and social equity.



<P align="left" style="font-size: 10pt">In earlier reports we&#146;ve discussed the risk of homogenization and loss of control that goes along
with outsourcing. Although we currently make use of certain imported components, we&#146;re
increasingly concerned about the deferred environmental and social costs of outsourcing. A few
years ago, when the cost differential between domestic and imported components was too dramatic to
ignore, these hidden costs were less obvious. Now, as the outsourcing pendulum swings back toward
balance with domestic costs, we&#146;re taking another look at the entire equation.



<P align="left" style="font-size: 10pt">PlanSCAPE&#153; is the name of our turnkey project management service for school construction or
renovation projects. Developed by Furniture Focus&#153;, which we acquired in 2002, PlanSCAPE&#153; is the
appropriate service response to decentralized administration of public schools.



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<P align="left" style="font-size: 10pt">Contrary to our initial expectations, it&#146;s not only small- and mid-sized districts that take
advantage of this service. Business is now about evenly split between large and small districts,
with most of the recent growth occurring in larger districts with aggressive construction projects.



<P align="left" style="font-size: 10pt">In the last year we&#146;ve added three meaningful improvements to the PlanSCAPE&#153; service. First, we
now stock an assortment of furniture and equipment from our Furniture Focus&#153; partners that augments
our own lines and provides four-week delivery or less on everything needed to outfit a school.



<P align="left" style="font-size: 10pt">Second, we formalized our relationship with 14 key partners and added their full lines to a number
of regional and national contracts. This allows public schools and other government agencies to
purchase the entire spectrum of furniture, fixtures and equipment with pre-approved pricing and
authorization.



<P align="left" style="font-size: 10pt">Third, on the largest PlanSCAPE&#153; projects we&#146;re now offering the convenience of
single-point-of-purchase and the reliability of single-point-of-delivery. Traditionally, projects
involving multiple suppliers were drop shipped from each supplier&#146;s location. This resulted in
coordination and receiving challenges at the school site, especially when installation was
involved.



<P align="left" style="font-size: 10pt">We&#146;re now receiving most or all of these packages into our own warehouses prior to final delivery.
This allows superior staging and coordination, providing benefits both to the school and our
various partners. We&#146;re also integrating PlanSCAPE&#153; into SAP, which will further improve its
usability across our entire sales force and customer base.



<P align="left" style="font-size: 10pt">As we remind shareholders every year, approximately one-third of our total business is transacted
through commercial wholesalers, dealers, and direct-mail marketers. We continue to make progress
in developing a rationally priced, multi-tiered distribution network among this important group of
customers.



<P align="left" style="font-size: 10pt">In each of the past several years, as the public school market was declining, we enjoyed growth
among commercial accounts. We&#146;re especially hopeful for 2005. With expanded page representation
among wholesalers and direct marketers, and with broad enthusiasm for ZUMA&#153;, we may see
double-digit growth in the commercial segment.



<P align="left" style="font-size: 10pt">As with our public school customers, we&#146;re paying special attention to the intangibles of this
market: packaging, system interfaces and compatibility, and reliable performance. While we would
admit that we&#146;re several years behind industry leaders in these areas, we&#146;ve also been told that
our products and prices are very attractive. We intend to continue the diligent development of our
commercial business until it returns to the importance it enjoyed in the 1970s, when it accounted
for half of our total revenue.



<P align="left" style="font-size: 10pt">For years we&#146;ve sponsored the Association of School Business Officials&#146; Pinnacle Awards for
innovation in public school business practices. In recognition of the expanded role principals are
playing in the broader aspects of administration, we initiated a similar support program for both
the National Association of Secondary School Principals (NASSP)&nbsp;and the National Association of
Elementary School Principals (NAESP). In addition to sponsoring awards and a speaker&#146;s bureau,
we&#146;re providing six classroom makeovers for the principals of financially challenged schools. Our
initial year of partnership has already proven mutually beneficial. As we become more familiar
with the unique challenges faced by principals and their individual schools, our products and
services will evolve appropriately.



<P align="left" style="font-size: 10pt">We have traditionally been very cautious about buying other companies. The few that we&#146;ve
purchased have all been strategic, small, and easily integrated. The last two, Furniture Focus&#153;
and certain assets of Corex, have both contributed to what we hope is a trend of improving results.



<P align="left" style="font-size: 10pt">Challenges of the last three years have caused a shift in many traditional relationships in our
market. While we have no immediate prospects for acquisitions, we sense that the next few years
could provide opportunities to enhance our position as the leading supplier of equipment for
educators.



<P align="left" style="font-size: 10pt">Our obvious short-term goals are a return to historic levels of profitability, restoration of the
cash dividend, and a strengthening of our balance sheet. But as we move forward we&#146;ll also pursue
opportunities for growth through all possible routes, including partnership and acquisition.



<P align="left" style="font-size: 10pt">This year&#146;s annual shareholders&#146; meeting will be held on June&nbsp;7, 2005, at our Torrance, California,
headquarters. All attendees will receive either a ZUMA&#153; rocker or a ZUMAfrd&#153; cantilever chair.
Both



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<P align="left" style="font-size: 10pt">will fit in any environment and both are good for the environment. We hope to see as many of you
as possible in June.



<P align="left" style="font-size: 10pt"><I>This news release contains &#147;forward-looking statements&#148; as defined by the Private Securities
Litigation Reform Act of 1995. These statements include, but are not limited to, statements
regarding: new business strategies; the cost and availability of steel and other raw materials,
especially steel, plastic fuel and energy; availability and cost of labor; the continuing impact of
our Assemble-to-Ship program on earnings; market demand and acceptance of new products; development
of new distribution channels; competitive conditions that affect selling prices and margins; and
seasonality. Forward-looking statements are based on current expectations and beliefs about future
events or circumstances, and you should not place undue reliance on these statements. Such
statements involve known and unknown risks, uncertainties, assumptions and other factors, many of
which are out of our control and difficult to forecast. These factors may cause actual results to
differ materially from those which are anticipated. Such factors include, but are not limited to:
changes in general economic conditions; the seasonality of our markets; the markets for school and
office furniture generally; the specific markets and customers with which we conduct our principal
business; competition. See our Annual Report on Form-10K for year ended January&nbsp;31, 2005, and
other materials filed with the Securities and Exchange Commission for a further description of
these and other risks and uncertainties applicable to our business. We assume no, and hereby
disclaim any, obligation to update any of our forward-looking statements. We nonetheless reserve
the right to make such updates from time to time by press release, periodic reports or other
methods of public disclosure without the need for specific reference to this press release. No
such update shall be deemed to indicate that other statements which are not addressed by such an
update remain correct or create an obligation to provide any other updates.</I>



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