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<SEC-DOCUMENT>0000950148-07-000025.txt : 20070409
<SEC-HEADER>0000950148-07-000025.hdr.sgml : 20070409
<ACCEPTANCE-DATETIME>20070212172127
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950148-07-000025
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20070212

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:		CORRESP

	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
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt">February&nbsp;12, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Terence O&#146;Brien<BR>
Branch Chief<BR>
Securities and Exchange Commission<BR>
Washington, D.C. 20549-0510

</DIV>

<DIV align="left" style="margin-top: 12pt">
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    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Re:</I>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><I>Virco Mfg. Corporation<BR>
&nbsp;<I><BR>
Form&nbsp;10-K for the fiscal year ended January&nbsp;31, 2006<BR></I>
Filed April&nbsp;17, 2006<BR></I>
&nbsp;<I><BR>
Form&nbsp;10-Q for the quarter ended October&nbsp;31, 2006<BR>
File No.&nbsp;1-8777</I></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Mr.&nbsp;O&#146;Brien:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of Virco Mfg. Corporation (the &#147;<B>Company</B>&#148;), this letter responds to your letter dated
January&nbsp;22, 2007, regarding the Company&#146;s Annual Report on Form&nbsp;10-K for the fiscal year ended
January&nbsp;31, 2006 and Quarterly Report on Form&nbsp;10-Q for the quarter ended October&nbsp;31, 2006. Each of
your comments from the January&nbsp;22, 2007 letter is set forth below, followed by the Company&#146;s
related response.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Form&nbsp;10-K for the year ended January&nbsp;31, 2006</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Management&#146;s Discussion and Analysis, page 18</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Results of Operations, page 23</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;We note your statements on page 7 that &#147;Significant portions of educational furniture are
sold on a bid basis&#148; and &#147;A significant portion of Virco&#146;s business is awarded through annual bids
with school districts or other buying groups used by school districts.&#148; We further note that
during the period covered by these annual contracts, you have very limited or in some cases no
ability to increase selling prices. In future filings in MD&#038;A, please give quantitative effect to
such claims, especially in light of the current landscape discussed in your results of operations
that increased sales were attributable to increased prices.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The bids and contracts under which the Company sells its products directly to public agencies
are shaped by the needs of the contracting agencies and the competitive forces of the marketplace.
In addition to direct sales, the Company also sells a substantial portion of its products through
multi-channel wholesalers, distributors and retailers. These resellers have separate pricing,
terms and conditions that are subject to the somewhat different market forces affecting for-profit
businesses.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For both public agencies and multi-channel resellers, contracts with annual terms are
re-priced each year at the Company&#146;s best estimate of underlying raw material and operating costs
averaged over the expected delivery term of the contract. Contracts with multi-year terms
generally include provisions for negotiated inflation adjustments. More than 90&nbsp;percent of
Company&#146;s sales are priced under these contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In future filings, the Company will comply with this request by quantifying the percentage of
Company&#146;s sales derived from annually priced contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Financial Statements</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>1. Summary of Business and Significant Accounting Policies, page 41</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.&nbsp;We note the discussion of the contract with the nationwide purchasing organization on pages&nbsp;7 and 12. Please tell us why you have not provided the disclosures outlined in SOP 94-6 regarding
the concentration in the volume of business transacted under this contract.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company pursues a multi-channel distribution strategy that provides its customers with a
broad choice of transaction and delivery options while limiting the financial risk of
concentration. In any given year, the Company will promote or recommend to its direct customers
the channel that best fulfills their requirements for price, convenience, and service terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nationwide purchasing organization referred to on pages 7 and 12 of the Company&#146;s Annual
Report on Form&nbsp;10K for the fiscal year ended January&nbsp;31,
2006, is one contract within the direct
channel. This organization does not purchase products from the Company. It provides a public bid
specification and authorization service to publicly-funded agencies which can then use the
organization&#146;s contract to make authorized expenditures of taxpayer funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For all purchases made under this contract, the Company maintains a direct transactional
relationship with the end user, not the purchasing organization. Purchase orders are issued
directly from the individual school districts to the Company. Shipments of product are made
directly to the school district. If this contract were not in place, the school district could
purchase direct from the Company under other contracts. No single end user represents more than 5%
of the Company&#146;s total annual revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.&nbsp;You disclose that costs incurred to investigate and remediate environmental waste are
expensed as incurred. Please clarify whether you record liabilities for environmental remediation
costs when remediation efforts are probable and the costs can be reasonably estimated. Discuss
your treatment when information available is only sufficient to estimate a range of probable
liability. In future filings, expand Note 1 to address these matters.</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates factories that are subject to a variety of laws and regulations regarding
emissions and waste resulting from the manufacturing process. Normal, recurring expenses related
to operating the factories in a manner that exceeds environmental laws and regulations are matched
to the cost of producing inventory. The Company&#146;s management expends substantial time and effort
to operate its facilities in accordance with all legal requirements, works diligently to reduce
emissions and waste streams, and aggressively pursues all practical opportunities to recycle, both
in its facilities and in the surrounding communities. The Company has won numerous environmental
awards for these efforts. These normal and recurring costs are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite the significant dedication to operating in compliance with applicable laws, there is a
risk that the Company could fail to comply with a regulation or that the applicable laws and
regulations change. Since the Company&#146;s inception in 1950, there have been occasions when the
Company has been responsible for contributing to the cost of investigating and cleaning
environmental waste, even when the waste was disposed of in accordance with all applicable laws in
effect at the time of disposition. The CERCLA case discussed in comment 4 is an example of such an
event. On these occasions, the Company records environmental liabilities when remediation costs
are probable and can be reasonably estimated. In these situations, the Company will consult with
legal and environmental counsel to determine a range of remediation cost. If there is a most
likely cost to remediate, the Company will record that amount. If there is not a most likely cost
to remediate, the Company will record the low end of the range.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The staff&#146;s comment is noted and the Company will comply with the request and clarify its
disclosure in future filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>8. Contingencies, page 55</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.&nbsp;On page 13 you state you have been identified as a potentially responsible party pursuant
to CERCLA, &#147;for remediation costs associated with waste disposal sites previously used by us.&#148; You
state, &#147;The remediation costs and our allocated share at some of these CERCLA sites are unknown.&#148;
Please provide us with a more detailed discussion of the affected sites and the status of clean-up
efforts and any EPA action. Clarify the amounts that have been recognized as an environmental
remediation liability and discuss your accounting treatment.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s commitment to environmental stewardship plays a key role in its overall mission
to deliver a competitive and sustainable return to shareholders. The Company&#146;s distinguished
record of achievement in the field of recycling and resource recovery is built on a foundation of
more basic but equally important environmentally responsible acts, including the proper disposal of
waste at designated sites. The Company has been identified, along with thousands of other
environmentally conscious organizations, as an entity that lawfully disposed of liquid industrial
waste at the &#147;Operating Industries Inc. Superfund Site&#148; in Monterey Park, California prior to 1984.
The Comprehensive Environmental Response, Compensation, and Liability Act (&#147;CERCLA&#148;) creates an
expansive joint and several liability scheme requiring waste disposers to bear a portion of the
costs associated with the clean-up of environmental
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">waste sites &#151; even if the party acted in full accordance with the law at the time it disposed
of the waste. Accordingly, the EPA is requiring that the Company assist in the remediation efforts
at the Operating Industries Inc. disposal site. Due to both the limited quantity and low toxicity
of waste contributed by the Company, it has been designated as a &#147;de minimis&#148; party. Under CERCLA,
the EPA may offer special settlements to de minimis parties. Region 9 is currently negotiating a
de minimis settlement at this site. Although negotiations have been continuing for over three
years, EPA is expected to present a settlement package to all de minimis parties by October&nbsp;2008.
The amount a party must pay to join a de minimis settlement varies from site to site. In general,
though, it is the sum of a basic payment and premium payment. The basic payment is calculated using
the estimated cost to clean up the site and the amount of the de minimis party&#146;s waste (as a
percentage of the total amount of waste attributed to all potentially responsible parties at the
site). The premium payment varies according to a number of factors specific to both the site and
the settlement. The Company has been subject to comparable claims in the past, and based on its
experience, the Company expects to receive a settlement offer in the range of $100,000 to $150,000.
In accordance with FIN 14, <I>Reasonable Estimation of the Amount of a Loss</I>, the Company has accrued
$100,000 for this liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will comply with the staff&#146;s request and more fully disclose the circumstances of
this liability in future filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.&nbsp;We note your disclosure on page 56 that you have obtained an actuarial estimate of your
total expected future losses for liability claims and have recorded a liability equal to the net
present value of $1.6&nbsp;million at January&nbsp;31, 2006 based on your estimated payout period of four
years using a 6% discount rate. Please address the following comments for future filings:</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Because the liability is recognized on a discounted basis to reflect the
time value of money, your note must include the disclosure requirements of
Question 1 of SAB Topic 5:Y, including the expected aggregate undiscounted
amount, expected payments for each of the five succeeding years and the
aggregate amount thereafter, and a reconciliation of the expected aggregate
undiscounted amount to amounts recognized in the statements of financial
position.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please disclose the nature of the accrual made so that readers may
understand more fully the scope of your product and general liability losses.
See paragraph 9 of SFAS 5.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will comply with the staff&#146;s request in future filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.&nbsp;We note your disclosure that the ultimate outcome of legal proceedings arising in the
normal course of business are not expected to materially affect your financial position, results of
operations or cash flows. A statement that a contingency is not expected to be material does not
satisfy the requirements of SEAS 5 if there is at least a reasonable</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>possibility that a loss exceeding amounts already recognized may have been incurred and the
amount of that additional loss would be material to a decision to buy or sell the registrant&#146;s
securities. From your current disclosure, it is not clear whether these criteria have been met or
whether additional disclosure is required. In future filings, please comply with the disclosure
requirements of paragraphs 8-10 of SFAS 5 and SAB Topic 5:Y.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will comply with the staff&#146;s request in future filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>9. Warranty, page 56</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.&nbsp;You state that effective February&nbsp;1, 2005, you have extended your standard warranty period
to 10&nbsp;years, from five years. Please tell us, and disclose in future filings, the economic,
operational, competitive and regulatory factors contributing to this change. We assume it is not
related to the recurring cosmetic complaint relating to a high-volume component as discussed on
page 21 which has caused your warranty expense to be higher than normal for the last three years.
Please tell us the impact that this change is expected to have on your future results of
operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company extended its standard warranty from 5&nbsp;years to 10&nbsp;years beginning in 2005. This
decision was based on the proven quality of the Company&#146;s products and market opportunities
afforded by a longer warranty. The extended term is not related to the recurring cosmetic
complaint.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In evaluating the potential impact of the warranty extension on future results of operations,
it is important to distinguish between the warranty period and service life. The two are not the
same.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s warranty covers &#147;all substantial defects in material and workmanship&#148;. It is
not a guarantee of service life, which is determined by a combination of factors outside the
Company&#146;s control. These include the appropriate choice of product for a given application, the
intensity of use, regular inspection and maintenance, and potential misuse or abuse. Based on
these variables, the service life of a product may be different than the warranty period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has over 75&nbsp;million units of furniture and equipment currently in service. Based
on the performance of this large installed base, the Company has determined that defects in
materials and workmanship are typically discovered at the time of delivery or shortly thereafter.
Extending the warranty term is therefore not expected to have a significant impact on future
operations or required reserves for warranty expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.&nbsp;We note your warranty liability has been $1.5&nbsp;million for each of the two years ended
January&nbsp;31, 2006, and continuing into the three quarters of fiscal 2007. We further note that the
provision accrued equals exactly your costs incurred. Please address the following comments:</B>
</DIV>

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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please describe to us your process of accounting for your warranty accruals,
including how often you assess and make adjustments to the liability. For
example, we assume the estimated cost of servicing the warranties is accrued at
the time of sale recognition. Then, when the actual costs are incurred, the
accrual is offset by those costs. If so, please explain the reasons your
estimate of the warranty costs associated with current year sales is exactly
equal to the actual costs incurred in the current year.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD><B>Please tell us why you believe a warranty accrual of $1.5&nbsp;million is
appropriate given the increase in the standard warranty period.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a process for addressing all customer complaints or service requests. The
Company&#146;s accounting for warranty expense is incorporated into this process. Requests for warranty
claims are submitted to the Company for evaluation. If approved, the Company determines if the
merchandise is to be replaced or repaired in the field. Expenses related to warranty are
segregated from other types of customer service requests (such as freight damage or short
shipments).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On a monthly basis, management prepares and reviews reports that summarize product-related
service issues (more broadly defined than just warranty). This monthly process helps to highlight
any significant warranty-related issues for further analysis. The Company accrues the estimated
cost of warranty service at the time of sale recognition. The monthly warranty costs are charged
to the warranty reserve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On a quarterly basis, the Company prepares an analysis of warranty expense and evaluates the
type of expenses and amount of expense for unusual trends. In addition, a lag study is prepared
that compares the date of sale of the product to the date of the actual warranty expenditure.
Quarterly adjustments are made to the warranty accrual if considered necessary based upon the
underlying data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent to resolution of the recurring cosmetic complaint, warranty expenses have been
relatively stable. Quarterly analysis of the reserve for warranty expense confirms that the
current reserve falls within the likely range of loss. The expense recorded to replenish the
warranty reserve therefore matched the expenditure incurred. Additionally, the Company determined
after careful analysis, that in light of the fact that warranty claim experience improved enough to
offset the increase in the standard warranty period, no increase to the warranty accrual was
required.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Form&nbsp;10-Q for the period ended October&nbsp;31, 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Management&#146;s Discussion and Analysis, page 16</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.&nbsp;You indicate that in order to comply with debt covenants, you must meet a &#147;clean down&#148;
requirement that your outstanding debt must be less than $30&nbsp;million for all of the fourth quarter
of fiscal 2007. Please disclose in future filings, the impact to your financial position, results
of operations, and liquidity if you were not able to meet this requirement.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In future filings, the Company will comply with the staff&#146;s request and clarify the impact to
the Company&#146;s financial position, results of operations, and liquidity should the Company fail to
meet this covenant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Note 8. Stock Based Compensation, page 11</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.&nbsp;We note your discussion on page 13 of the June&nbsp;20, 2006 restricted stock share grant under
the 1997 Plan to non-employee directors. You state that in connection with the grant of these
restricted stock units, all outstanding, unexercised stock options held by the non-employee
directors were cancelled. Please tell us your consideration of paragraphs 56-57 of SFAS 123R in
accounting for these cancellations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The statement regarding the cancellations of the unexercised options held by the non-employee
directors to which you refer, relates to the January&nbsp;13, 2006 grant of restricted stock units, not
the June&nbsp;20, 2006 grant of restricted shares. The Company will clarify this in future filings. As
the January&nbsp;13, 2006 grant occurred prior to the adoption of SFAS 123R, paragraphs 56-57 of SFAS
123R were not applicable, and the Company accounted for this transaction in accordance with APB No.
25, <I>Accounting for Stock Issued to Employees </I>and FIN 44, <I>Accounting for Certain Transactions
involving Stock Compensation.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.&nbsp;We note also that at February&nbsp;1, 2006, you recorded a transitional reclassification of
$247,000 from current liabilities to additional paid-in capital. It is unclear to us why such a
reclassification was necessary or how it is appropriate under generally accepted accounting
principles. Please advise, citing the appropriate accounting literature where applicable.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The reclassification is related to the adoption of SFAS No.&nbsp;123(R) for restricted stock units
(not shares of restricted stock) that were not vested. Prior to the adoption of SFAS No.&nbsp;123(R)
the Company recorded compensation expense on a straight line basis over the vesting period for
restricted stock units by recording a debit to expense and a credit to a liability account. A
reclassification from liability to equity was made upon vesting of the restricted stock unit, at
which time a stock certificate was issued to the recipient. After an extensive review of the
relevant accounting literature, the Company was not able to cite accounting literature regarding
the classification of unvested restricted stock units prior to adoption of SFAS No.&nbsp;123(R). The
Company believes that the amount in question is not material (neither quantitatively nor
qualitatively) to the financial statements as a whole or individually, and upon vesting of the
units the liability was properly recorded as equity. Because the restricted stock units vested
annually
</DIV>

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</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">upon the anniversary of the grant date, the amount did not ever become material. With the
adoption of SFAS No.&nbsp;123(R) the liability amount was reclassified to additional paid-in capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">* * * * *
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with responding to the staff comments, the Company acknowledges that (1)
the Company is responsible for the adequacy and accuracy of the disclosure in its filings; (2)
staff comments or changes to disclosure in response to staff comments do not foreclose the
Commission from taking any action with respect to the filing; and (3)&nbsp;the Company may not assert
staff comments as a defense in any proceeding initiated by the Securities and Exchange Commission
or any person under the federal securities laws of the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company appreciates the staff&#146;s responsiveness with respect to its filings and looks
forward to resolving any concerns the staff may have. If you have any questions, please contact me
at (310)&nbsp;533-3372.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<BR>
Sincerely,<BR>&nbsp;<BR>
/s/

Robert E, Dose<BR>
Robert E, Dose<BR>
Vice President Finance<BR>
Virco Mfg. Corporation

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">cc:&nbsp;&nbsp;&nbsp;Jenn Do, Staff Accountant
</DIV>



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