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Summary of Business and Significant Accounting Policies | 12 Months Ended
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Jan. 31, 2025
Accounting Policies [Abstract] |
Summary of Business and Significant Accounting Policies | Summary of Business and Significant Accounting Policies Business Virco Mfg. Corporation (the “Company”), which operates in one business segment, is engaged in the design, production, and distribution of quality furniture for the commercial and education markets. Over 75 years of manufacturing operations have resulted in a wide product assortment. Major products include mobile tables, mobile storage equipment, desks, computer furniture, chairs, activity tables, folding chairs and folding tables. The Company manufactures its products in Torrance, California, and Conway, Arkansas, for sale primarily in the United States. The Company operates in a seasonal business and requires significant amounts of working capital under its credit facility to fund acquisitions of inventory and finance receivables during the summer delivery season. The educational sales market is extremely seasonal. Historically, Virco ships approximately 50% of its annual revenue in the months of June, July, and August. In fiscal 2022, the seasonal peak was distorted due to severe supply chain interruptions, labor shortages, and COVID-19 related employee absences and the Company delivered less than 40% of sales during June, July, and August. In fiscal 2025, the Company started to return to the traditional seasonality and delivered approximately 47% of annual sales in June, July, and August. Restrictions imposed by the terms of the Company’s credit facility may limit the Company’s operating and financial flexibility (see Note 3). Principles of Consolidation and Reclassification The consolidated financial statements include the accounts of Virco Mfg. Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Management Use of Estimates Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities - and disclosure of contingent assets and liabilities - at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates made by management include, but are not limited to, valuation of inventory; recoverability of deferred tax assets and liabilities; useful lives of property, plant and equipment; liabilities under pension, warranty, self-insurance, and environmental claims; and the accounts receivable allowance for credit losses. Fiscal Year End Fiscal years 2025 and 2024 refer to the fiscal years ended January 31, 2025 and 2024, respectively. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Sales to the Company’s recurring customers are generally made on open accounts with terms consistent with the industry. Credit is extended based on an evaluation of the customer’s financial condition and payment history. Past due accounts are determined based on how recently payments have been made in relation to the terms granted. Amounts are written off against the allowance in the period that the Company determines that the receivable is not collectable. The Company purchases insurance on receivables from certain commercial customers to minimize the Company’s credit risk. The Company does not typically obtain collateral to secure credit risk. Customers with inadequate credit are required to provide cash in advance or letters of credit. The Company does not assess interest on receivable balances. A substantial percentage of the Company’s receivables come from low-risk government entities. The Company had two customers with balances greater than 10% of the Company's accounts receivable at January 31, 2025. The majority of their outstanding balances were paid off subsequent to year ended January 31, 2025. There were no customers accounted for more than 10% of the Company's accounts receivable at January 31, 2024. Because of the short time between shipment and collection, the net carrying value of receivables approximates the fair value for these assets. No customer exceeded 10% of the Company’s net sales for fiscal years ended January 31, 2025 and 2024. Foreign net sales were approximately 12.3% and 4.7% of the Company’s net sales for fiscal years 2025 and 2024, respectively. Cash and Cash Equivalents Cash consists of cash on hand, and the Company has approximately $26.9 million in cash and cash equivalents as of January 31, 2025. The Company classifies highly liquid investments with original maturities of three months or less as cash and cash equivalents. Significant concentrations of credit risk may arise from the Company’s cash maintained at PNC bank, as from time to time cash balances may exceed the FDIC limits. Outstanding checks are classified as a reduction in cash. Fair Values of Financial Instruments The fair values of the Company’s cash, accounts receivable, accounts payable and current portion of debt approximate their carrying amounts due to their short-term nature. For fair value of debt, see Note 3. Financial assets and liabilities measured at fair value on a recurring basis are classified in one of the three following categories, which are described below: Level 1 — Valuations based on unadjusted quoted prices for identical assets in an active market. Level 2 — Valuations based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 3 — Valuations based on inputs that are unobservable and involve management judgment and our own assumptions about market participants and pricing. Financial assets measured at fair value on a recurring basis include assets associated with the Virco Employees Retirement Plan, and assets held in the Rabbi Trust securing the Company's Important Performers Retirement Plan (“VIP Plan”) and Split-dollar life insurance benefit program (see Note 4). Inventories Inventory is valued at the lower of cost or net realizable value (determined on a first-in, first-out basis) and includes material, labor, and factory overhead. The Company records valuation adjustments for the excess cost of the inventory over its estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated using an estimated percentage applied to inventories based on a physical inspection of the product in connection with a physical inventory, a review of slow-moving products and component stage, inventory category, historical and forecasted consumption of sales, and consideration of active marketing programs. The market for educational furniture is traditionally driven by value, not style, and the Company has not typically incurred material obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional valuation adjustments may be required. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation. The following table presents an updated breakdown of the Company’s net inventory (in thousands) as of January 31, 2025 and 2024:
| January 31,
| 2025 |  | 2024
Finished goods | $ | 19,599 |  |  | $ | 18,861 |
Work in Process | 21,357 |  |  | 25,047 |
Raw materials | 14,691 |  |  | 14,463 |
Inventories | $ | 55,647 |  |  | $ | 58,371 |
Property, Plant, and Equipment Property, plant, and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed on the straight-line method for financial reporting purposes based upon the following estimated useful lives:
Land improvements | 5 to 25 years
Buildings and building improvements | 5 to 40 years
Machinery and equipment | 3 to 10 years
Leasehold improvements | shorter of lease or useful life
The Company capitalizes the cost of betterments that extend the life of an asset. Repairs and maintenance that do not extend the life of an asset are expensed as incurred. Repair and maintenance expense were $2.3 million and $1.8 million for fiscal years ended January 31, 2025 and 2024, respectively. Property, plant, and equipment purchased during the year that remains unpaid were $1.8 million and $0.5 million as of January 31, 2025 and 2024, respectively. The Company has established asset retirement obligations related to leased manufacturing facilities. Accrued asset retirement obligations are recorded at net present value and discounted over the life of the lease. Asset retirement obligations, included in other non-current liabilities were $445,000 and $212,000 at January 31, 2025 and 2024, respectively.
| January 31,
| 2025 |  | 2024
| (In thousands)
Balance at beginning of period | $ | 212 |  |  | $ | 205 |
Increase in obligation | 200 |  |  | — |
Accretion expense | 33 |  |  | 7 |
Balance at end of period | $ | 445 |  |  | $ | 212 |
Impairment of Long-Lived Assets An impairment loss is recognized in the event facts and circumstances indicate the carrying amount of a long-lived asset may not be recoverable, and an estimate of future undiscounted cash flows is less than the carrying amount of the asset. Impairment is recorded based on the excess of the carrying amount of the impaired asset over the fair value. Generally, fair value represents the Company’s expected future cash flows from the use of an asset or group of assets, discounted at a rate commensurate with the risks involved. There were no impairments for fiscal years ended January 31, 2025 and 2024. Net Income per Share The Company computes net income per share attributable to common stockholders by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares, determined using the treasury-stock method. For purposes of the diluted income per share calculation, restricted stock units are considered to be potential common shares. There were no anti-dilutive shares included in the calculation of net income per share for fiscal periods disclosed. The following table sets forth the computation of basic and diluted income per share:
| January 31,
| 2025 |  | 2024
| (In thousands, except per share)
Numerator |  |  |
Net income | $ | 21,644 |  |  | $ | 21,910 |
Denominator |  |  |
Weighted-average shares — basic | 16,365 |  |  | 16,295 |
Dilutive effect of common stock equivalents from equity incentive plans | 7 |  |  | 93 |
Weighted-average shares | 16,372 |  |  | 16,388 |
Net income per common share |  |  |
Basic | $ | 1.32 |  |  | $ | 1.34 |
Diluted | $ | 1.32 |  |  | $ | 1.34 |
Environmental Costs The Company is subject to numerous environmental laws and regulations in the various jurisdictions in which it operates that (a) govern operations that may have adverse environmental effects, such as the discharge of materials into the environment, as well as handling, storage, transportation and disposal practices for solid and hazardous wastes, and (b) impose liability for response costs and certain damages resulting from past and current spills, disposals or other releases of hazardous materials. Normal, recurring expenses related to operating the Company's factories in a manner that meets or exceeds environmental laws and regulations are matched to the cost of producing inventory. Despite our efforts to comply with existing laws and regulations, compliance with more stringent laws or regulations or stricter interpretation of existing laws, may require additional expenditures by us, some of which may be material. We reserve amounts for such matters when expenditures are probable and reasonably estimable. Costs incurred to investigate and remediate environmental waste are expensed, unless the remediation extends the useful life of the assets employed at the site. At January 31, 2025 and 2024, the Company had not capitalized any remediation costs and had not recorded any amortization expense in fiscal years 2025 and 2024. Advertising Costs Advertising costs are expensed in the period during which the advertising space is run. Selling, general, and administrative expenses include advertising costs for the years ended January 31, 2025 and 2024 of $1.5 million and $1.4 million, respectively, and are expensed as incurred. Prepaid advertising costs reported as a prepaid asset on the accompanying consolidated balance sheets at January 31, 2025 and 2024, were $397,000 and $432,000, respectively. Product Warranty Expense The Company provides a product warranty on most products. Products sold prior to January 31, 2014 are out of warranty. Effective February 1, 2014 through December 31, 2016, the Company modified its warranty to a limited lifetime warranty. Effective January 1, 2017, the Company modified the warranty offered to provide specific warranty periods by product component, with no warranty period longer than ten years. The Company generally provides that customers can return a defective product during the specified warranty period following purchase in exchange for a replacement product or the repair of the product by the Company at no charge to the customer. The Company determines whether replacement or repair is appropriate in each circumstance. The Company uses historical data to estimate appropriate levels of warranty reserves. Because product mix, production methods and raw material sources change over time, historic data may not always provide precise estimates for future warranty expense. The Company recorded warranty reserves of $350,000 as of January 31, 2025 and 2024, as other long-term liabilities in the accompanying consolidated balance sheets. The current portion of the warranty reserve were $150,000 as of January 31, 2025 and 2024, and included in other accrued liabilities in the accompanying consolidated balance sheets. Self-Insurance In fiscal 2025 and 2024, the Company was self-insured for product liability losses up to $250,000 per occurrence, workers’ compensation losses up to $250,000 per occurrence, general liability losses up to $50,000 per occurrence and auto liability losses up to $50,000 per occurrence. The actuarial estimated liability for the self-insured component of claims was discounted to their net present value utilizing a discount rate of 4.0% in both fiscal 2025 and fiscal 2024. The Company has obtained an actuarial estimate of its total expected future losses for liability claims and recorded a liability equal to the net present value of $900,000 and $770,000 at January 31, 2025 and 2024, respectively, in the accompanying consolidated balance sheets. The current portion of the self-insurance reserve was $120,000 as of January 31, 2025 and included in other accrued liabilities in the accompanying consolidated balance sheets. Stock-Based Compensation Plans The Company recognizes stock-based compensation cost for shares that are expected to vest, on a straight-line basis, over the requisite service period of the award. Accumulated Other Comprehensive Income (Loss), Net of Tax The following table summarizes the changes in accumulated balances of other comprehensive income (loss) (in thousands) for the years ended January 31, 2025 and 2024:
| January 31,
| 2025 |  | 2024
Balance as of beginning of year | $ | (1,310) |  |  | $ | (2,360) |
Other comprehensive income before reclassifications | 1,874 |  |  | 679 |
Amounts reclassified from accumulated comprehensive (income) loss | (142) |  |  | 371 |
Net current period other comprehensive income | 1,732 |  |  | 1,050 |
Balance as of end of year | $ | 422 |  |  | $ | (1,310) |
The reclassifications out of accumulated other comprehensive (income) loss of $(142,000) and $371,000 for the years ended January 31, 2025 and 2024, respectively, related to amortization of actuarial losses and settlements (See Note 4). The reclassifications were included in pension expense in the accompanying consolidated statements of income. Revenue Recognition The Company manufactures, markets and distributes a wide variety of school and office furniture to wholesalers, distributors, educational institutions, and governmental entities. Revenue is recorded for promised goods or services when control is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company's sales generally involve a single performance obligation to deliver goods pursuant to customer purchase orders. Prices for our products are based on published price lists and customer agreements. The Company has determined that the performance obligations are satisfied at a point in time when the Company completes delivery per the customer contract. The majority of sales are free on board ("FOB") destination where the destination is specified per the customer contract and may include delivering the furniture into the classroom, school site or warehouse. Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics to the ultimate customer. Once a product has been delivered per the shipping terms, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment or delivery in accordance with shipping terms because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset. Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. The Company offers sales incentives and discounts through various regional and national programs to our customers. These programs include product rebates, product returns allowances and trade promotions. Variable consideration for these programs is estimated in the transaction price at contract inception based on current sales levels and historical experience using the expected value method, subject to constraint. The Company generates revenue primarily by manufacturing and distributing products through resellers and direct-to-customers. Control transfers to both resellers and direct customers at a point in time when the delivery process is complete as determined by the corresponding shipping terms. Therefore, we do not consider them to be meaningfully different revenue streams given similarities in the nature of the products, performance obligation and distribution processes. Sales are predominately in the United States and to a similar class of customer. We do not manage or evaluate the business based on product line or any other discernable category. For product produced by and sourced from third parties, management has determined that it is the principal, since it (i) bears primary responsibility for fulfilling the promise to the customer; (ii) bears inventory risk before and/or after the good or service is transferred to the customer; and (iii) has discretion in establishing the price for the sale of good or service to the customer. Delivery Costs For the fiscal years ended January 31, 2025 and 2024, shipping and classroom delivery costs of approximately $26.4 million, and $27.2 million, respectively, were included in selling, general and administrative expenses in the accompanying consolidated statements of income. Income Taxes The Company recognizes deferred income taxes under the asset and liability method of accounting for income taxes. Deferred income taxes are recognized for differences between the financial statement and tax basis of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance against deferred tax assets is recorded when it is determined to be more-likely-than-not that the asset will not be realized.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205/tableOfContent + Details
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