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Retirement Plans
 12 Months Ended
Jan. 31, 2012
Retirement Plans [Abstract]  
Retirement Plans

4. Retirement Plans

Pension Plans

The Company maintains three defined benefit pension plans, the Virco Employees Retirement Plan (“Employee Plan”), the Virco Important Performers Retirement Plan (“VIP Plan”), and the Non-Employee Directors Retirement Plan (“Directors Plan”). The Company and its subsidiaries cover all employees under the Employee Plan, which is a qualified noncontributory defined benefit retirement plan. Benefits under the Employee Plan are based on years of service and career average earnings. Benefit accruals under the Employee Plan were frozen effective December 31, 2003.

The Company also provides a supplementary retirement plan for certain key employees, the VIP Plan. The VIP Plan provides a benefit up to 50% of average compensation for the last five years in the VIP Plan, offset by benefits earned under the Employee Plan. The VIP Plan benefits are secured by a life insurance program. The cash surrender values of the policies securing the VIP Plan were $2,973,000 and $2,903,000 at January 31, 2012 and 2011, respectively. These cash surrender values are included in other assets in the consolidated balance sheets. The Company maintains a rabbi trust to hold assets related to the VIP Retirement Plan and a Split $ Life Insurance Plan. Substantially all assets securing the VIP Plan are held in the rabbi trust. Benefit accruals under the VIP Plan were frozen effective December 31, 2003.

In April 2001, the Board of Directors established the Directors Plan, a non-qualified plan for non-employee directors of the Company. The Directors Plan provides a lifetime annual retirement benefit equal to the director’s annual retainer fee for the fiscal year in which the director terminates his or her position with the Board, subject to the director providing 10 years of service to the Company. At January 31, 2012, the Directors Plan did not hold any assets. Benefit accruals under the Directors Plan were frozen effective December 31, 2003.

The annual measurement date for all plans for the fiscal years ended January 31, 2012, 2011, and 2010 is January 31. Effective December 31, 2003, the Company froze all future benefit accruals under the plans. Employees can continue to vest under the benefits earned to date, but no covered participants will earn additional benefits under the plan freeze.

Accounting policy regarding pensions requires management to make complex and subjective estimates and assumptions relating to amounts which are inherently uncertain. Three primary economic assumptions influence the reported values of plan liabilities and pension costs. The Company takes the following factors into consideration: discount rate, assumed rate of return and rate of increase in compensation.

The discount rate represents an estimate of the rate of return on a portfolio of high-quality fixed-income securities that would provide cash flows that match the expected benefit payment stream from the plans. When setting the discount rate, the Company utilizes a spot-rate yield curve developed from high-quality bonds currently available which reflects changes in rates that have occurred over the past year. This assumption is sensitive to movements in market rates that have occurred since the preceding valuation date, and therefore, may change from year to year.

Because the Company froze future benefit accruals for all three defined benefit plans, the compensation increase assumption had no impact on pension expense, accumulated benefit obligation or projected benefit obligation for the period ended January 31, 2012 or 2011.

The assumed rate of return on plan assets represents an estimate of long-term returns available to investors who hold a mixture of stocks, bonds, and cash equivalent securities. When setting its expected return on plan asset assumptions, the Company considers long-term rates of return on various asset classes (both historical and forecasted, using data collected from various sources generally regarded as authoritative) in the context of expected long-term average asset allocations for its defined benefit pension plan. Two of the Company’s defined benefit pension plans (the VIP Plan and the Directors Plan) are executive benefit plans that are not funded and are subject to the Company’s creditors. Because these plans are not funded, the assumed rate of return has no impact on pension expense or the funded status of the plans.

The Company maintains a trust for and funds the pension obligations for the Employee Plan. The Board of Directors appoints a Retirement Plan Committee that establishes a policy for investment and funding strategies. Approximately 75% of the trust assets are managed by investment advisors and held in common trust funds with the balance managed by the Retirement Plan Committee. The Retirement Plan Committee has established target asset allocations for its investment advisors, who invest the trust assets in a variety of institutional collective trust funds. The long-term asset allocation target provided to the investment advisors is 80% stock and 20% bond, with maximum allocations of 80% large cap stocks, 30% small cap stocks, and 30% international stock. The Company has established a custom benchmark derived from a variety of stock and bond indices that are weighted to approximate the asset allocation provided to the investment advisors. The investment advisors’ performance is compared to the custom index as part of the evaluation of the investment advisors’ performance. The Retirement Plan Committee receives monthly reports from the investment advisors and meets periodically with them to discuss investment performance.

At January 31, 2012 and 2011, the amount of the plan assets invested in bond or short-term investment funds was 6% and 7%, respectively, and the balance of the trust was held in equity funds or investments. The trust does not hold any Company stock. It is the Company’s policy to contribute adequate funds to the trust accounts to cover benefit payments under the VIP Plan and Directors Plan and to maintain the funded status of the Employee Plan at level which is adequate to avoid significant restrictions to the Qualified Plan under the Pension Protection Act of 2006.

During 2011 two events significantly impacted the pension plans. The first event was a reduction in the discount rate utilized to calculate pension plan obligations. The reduction in discount rate caused the liability for pension obligations to increase by approximately $3.7 million, $1.4 million, and $26,000 for the Employee Plan, the VIP Plan, and the Directors Plan, respectively. The increase in liability resulted in a comparable increase to Accumulated Other Comprehensive Income (“AOCI”). The second event was a $2.0 million settlement charge for the Employee Retirement Plan. As part of a restructuring plan, the Company offered early retirement benefits to all employees who voluntarily severed their employment with the Company. Although the early retirement benefit was paid in cash and did not include any additional benefits payable from a retirement plan, the benefit formula was structured to reward employees with significant years of service, the same employees who would have earned retirement benefits prior to the Employee Plan freeze in 2003. The pension trust made significant lump sum distributions to participants in the latter part of the year, resulting in settlement charges in the third and fourth quarters. Because the VIP Plan and Director Plan do not allow lump sum payments, there was no similar settlement charge required.

 

Payments from the Employee Plan pension trust to plan participants are estimated to be $1,403,000 during the fiscal year ending January 31, 2013. It is anticipated that the Company will contribute approximately $1.9 million to the trust in 2012. Actual contributions will depend upon investment return on the plan assets. Payments made under the Employee Plan are made from the trust fund. It is anticipated that the Company will be required to contribute approximately $562,000 to the non-qualified plans during the fiscal year ending January 31, 2013. Payments made under the VIP Plan and Directors Plan are made by the Company.

The following table sets forth (in thousands) the funded status of the Company’s pension plans at January 31, 2012, and 2011:

 

                                                 
    Employee Plan     VIP Plan     Directors Plan  
    1/31/2012     01/31/2011     1/31/2012     01/31/2011     1/31/2012     01/31/2011  

Change in Benefit Obligation

                                                

Benefit obligation at beg. of year

   $ 27,080     $ 25,268     $ 6,529     $ 6,076     $ 450     $ 463  

Service cost

     —         —         —         —         —         —    

Interest cost

     1,370       1,406       379       350       23       25  

Participant contributions

     —         —         —         —         —         —    

Amendments

     —         —         —         —         —         —    

Actuarial losses (gains)

     5,537       1,880       1,622       561       7       (38 ) 

Plan settlement

     (3,791 )      —         —         —         —         —    

Benefits paid

     (613 )      (1,474 )      (451 )      (458 )      —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Benefit obligation at end of year

   $ 29,583     $ 27,080     $ 8,079     $ 6,529     $ 480     $ 450  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Change in Plan Assets

                                                

Fair value at beg of year assets

   $ 17,737     $ 16,192     $ —       $ —       $ —       $ —    

Actual return on plan assets

     (415 )      2,338       —         —         —         —    

Company contributions

     1,890       681       451       458       —         —    

Settlements

     (3,791 )      —         —         —         —         —    

Benefits paid

     (613 )      (1,474 )      (451 )      (458 )      —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Fair value at end of year

   $ 14,808     $ 17,737     $ —       $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Funded Status

                                                

Unfunded status of the plan

   $ (14,775 )    $ (9,343 )    $ (8,079 )    $ (6,529 )    $ (480 )    $ (450 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Amounts Recognized in Statement of Financial Position

                                                

Current liabilities

     —         —         (495 )      (412 )      (67 )      (67 ) 

Non-current liabilities

     (14,775 )      (9,343 )      (7,584 )      (6,117 )      (413 )      (383 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Accrued benefit cost

   $ (14,775 )    $ (9,343 )    $ (8,079 )    $ (6,529 )    $ (480 )    $ (450 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Amounts Recognized in Statement of Financial Position and Operations

                                                

Accrued benefit liability

   $ (14,775 )    $ (9,343 )    $ (8,079 )    $ (6,529 )    $ (480 )    $ (450 ) 

Accumulated other comp. loss (gain)

     16,195       12,226       1,571       1,115       (38 )      (84 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net amount recognized

   $ 1,420     $ 2,883     $ (6,508 )    $ (5,414 )    $ (518 )    $ (534 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Items not yet Recognized as a Component of Net Periodic Pension Expense, Included in AOCI

                                                

Unrecognized net actuarial loss (gain)

   $ 16,195     $ 12,226     $ 1,571     $ 1,115     $ (38 )    $ (84 ) 

Unamortized prior service costs

     —         —         —         —         —         —    

Net initial asset recognition

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 16,195     $ 12,226     $ 1,571     $ 1,115     $ (38 )    $ (84 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                 

Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income

   

Net loss (gain)

   $ 7,060     $ 589     $ 1,622     $ 561     $ 7     $ (38 ) 

Prior service cost

     —         —         —         —         —         —    

Amortization of (loss) gain

     (3,091 )      (972 )      (51 )      —         39       31  

Amortization of prior service cost (credit)

     —         —         —         —         —         —    

Amortization of initial asset

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total recognized in other

   $ 3,969     $ (383 )    $ 1,571     $ 561     $ 46     $ (7 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Comprehensive Income

                                                

Items to be Recognized as a Component of 2012 Periodic
Pension Cost

                                                

Prior service cost

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

Net actuarial loss (gain)

     1,423       1,050       205       51       —         (38 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 1,423     $ 1,050     $ 205     $ 51     $ —       $ (38 ) 

Supplemental Data

                                                

Projected benefit obligation

   $ 29,583     $ 27,080     $ 8,079     $ 6,529     $ 480     $ 450  

Accumulated benefit obligation

     29,583       27,080       8,079       6,529       480       450  

Fair value of plan assets

     14,808       17,737       —         —         —         —    

 

                                                 
       
    Employee Plan     VIP Plan     Directors Plan  
    1/31/2012     01/31/2011     1/31/2012     01/31/2011     1/31/2012     01/31/2011  

Components of Net Cost

                                                

Service cost

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

Interest cost

     1,370       1,406       379       350       23       25  

Expected return on plan assets

     (1,107 )      (1,048 )      —         —         —         —    

Amortization of transition amount

     —         —         —         —         —         —    

Recognized (gain) loss due to Curtailments

     —         —         —         —         —         —    

Amortization of prior service cost

     —         —         —         —                    

Recognized net actuarial loss

     3,091       972       51       —         (39 )      (31 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Benefit cost

   $ 3,354     $ 1,330     $ 430     $ 350     $ (16 )    $ (6 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Estimated Future Benefit Payments

                                                

FYE 01-31-2013

   $ 1,403             $ 495             $ 67          

FYE 01-31-2014

     1,319               488               62          

FYE 01-31-2015

     1,675               467               58          

FYE 01-31-2016

     1,703               455               53          

FYE 01-31-2017

     2,191               432               48          

FYE 01-31-2018 to 2022

     7,984               1,973               172          
   

 

 

            

 

 

            

 

 

          

Total

   $ 16,275             $ 4,310             $ 460          
   

 

 

            

 

 

            

 

 

          

Weighted Average Assumptions to Determine
Benefit Obligations at Year-End

                                                

Discount rate

     4.50 %      5.50 %      4.50 %      6.00 %      4.50 %      5.50 % 

Rate of compensation increase

     N/A       N/A       N/A       N/A       N/A       N/A  

Weighted Average Assumptions to Determine
Net Periodic Pension Cost

   

        

Discount rate

     5.50 %      5.75 %      6.00 %      6.00 %      5.50 %      5.75 % 

Expected return on plan assets

     6.50 %      6.50 %      N/A       N/A       N/A       N/A  

Rate of compensation increase

     N/A       N/A       N/A       N/A       N/A       N/A  

 

Fair Value Measurements of Plan Assets

Employee Plan

 

                 
    1/31/2012     01/31/2011  

Level 1 Measurement

                

Cash & Cash Equivalents

   $ 334     $ 245  

Common Stock

     3,538       3,673  
   

 

 

    

 

 

  

Total Level 1

   $ 3,872     $ 3,918  
   

 

 

    

 

 

  

Level 2 Measurement

                

Bond Index Fund

   $ 223     $ 395  

Total Return Bond Fund

     306       358  

US Aggregate Bond Index Fund

     288       436  

Large Cap Growth Index Fund

     3,652       3,750  

Large Cap Value Index Fund

     2,776       2,835  

Russell 2000 Index Fund

     1,380       3,253  

International Equity Index Fund

     1,111       2,131  

Managed Investment Fund

     632       661  

Vanguard MSCI Emerging Markets Fund

     568       —    
   

 

 

    

 

 

  

Total Level 2

   $ 10,936     $ 13,819  
   

 

 

    

 

 

  

Level 3 Measurement

                

None

     N/A       N/A  

401(k) Retirement Plan

The Company’s retirement plan, which covers all U.S. employees, allows participants to defer from 1% to 50% of their eligible compensation through a 401(k) retirement program. Through December 31, 2001, the plan included an employee stock ownership component. The plan continues to include Virco stock as one of the investment options. At January 31, 2012 and 2011, the plan held 754,241 shares and 749,020 shares of Virco stock, respectively. For the fiscal years ended January 31, 2012, 2011 and 2010, there was no employer match and therefore no compensation cost to the Company.

Life Insurance

The Company provided current and post-retirement life insurance to certain salaried employees with split-dollar life insurance policies under the Dual Option Life Insurance Plan. Effective January 2004, the Company terminated this plan for active employees. Cash surrender values of these policies, which are included in other assets in the consolidated balance sheets, were $3,134,000 and $3,063,000 at January 31, 2012 and 2011, respectively. The Company maintains a rabbi trust to hold assets related to the Dual Option Life Insurance Plan. Substantially all assets securing this plan are held in the rabbi trust. As of January 31, 2012 and 2011, the Company has purchased life insurance on the lives of the participants that will pay death benefits of approximately $5,978,000.

 

                 
    01/31/2012     01/31/2011  

Liability beginning of year

   $ 1,964,000     $ 1,997,000  

Accretion expense

     110,000       104,000  

Present value of death benefits paid

     —         (137,000 ) 
   

 

 

    

 

 

  

Liability end of year

   $ 2,074,000     $ 1,964,000