VIRC · Read the filing

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview of Operating Results

Virco Mfg. Corporation is the nation’s largest domestic manufacturer and distributor of Furniture, Fixtures, and Equipment ("FF&E") for the education (K-12) market. The Company’s operating model and unique market differs in several ways from the traditional furniture industry model. The furniture industry is traditionally structured around furniture manufacturers that sell to end customers through dealership networks. These dealership networks can be aligned with one manufacturer or open to

multiple manufacturers. Virco is one of the few domestic manufacturers of school furniture that call on and sell direct to school customers, with approximately 75% to 85% of sales being direct to customers.

The markets that Virco serves include the education market (the Company's primary market), which is made up of public and private schools (preschool through 12th grade), junior and community colleges, four-year colleges and universities and trade, technical and vocational schools. Virco also serves convention centers and arenas; the hospitality industry, with respect to their banquet and meeting facilities; government facilities at the federal, state, county and municipal levels; and places of worship. In addition, the Company sells to wholesalers, distributors, retailers, catalog retailers, and internet retailers that serve these same markets. These institutions are frequently characterized by extreme seasonality and/or a bid-based purchasing function. The Company's business model, which is designed to support this strategy, is highly integrated. The Company markets and sells direct to the schools and provides project management and logistics. Approximately 80% of sales are delivered FOB destination.

As part of this integrated business model, the Company has developed several competencies to enable superior service to the markets in which Virco competes. Virco's sales force is supported by a project management team which includes field-based project specialists, in-house interior designers, project management specialists, purchasing specialists, and field service supervisors. The project management team and the sales force utilize the Company's proprietary PlanSCAPE® software in conjunction with Building Information Modeling when preparing complete package solutions for the FF&E segment of bond-funded public school construction projects. The PlanSCAPE® software supports classroom by classroom product selection, product specification, pricing, and furniture delivery including delivery to and turnkey classroom setup. PlanSCAPE® software also enables the entire Virco sales force to prepare quotations for less complicated projects. An important element of Virco's business model is the Company's emphasis on developing and maintaining key manufacturing, warehousing, distribution, delivery, project management and service capabilities. The Company has developed a comprehensive product offering for the FF&E needs of the K-12 education market, enabling a school to procure all of its FF&E requirements from one source.

China’s entry into the World Trade Organization in 2001 had a severe impact on the industry, with most furniture manufacturers closing their domestic fabrication facilities and importing components or finished goods from China. This also enabled dealers and resellers to bypass domestic sources and purchase direct from China for domestic distribution. During this time Virco retained its domestic fabrication facilities. Today these facilities are substantially depreciated on our books but extremely well maintained, automated where cost effective, and fully operational. Recent economic events, in some cases accelerated by COVID, tariffs, volatility in both cost and availability of ocean freight, and other extended supply chain challenges have made our domestic manufacturing footprint a significant competitive advantage compared to companies which import finished products.

Furniture sold into the educational market is characteristically heavy, bulky, and logistically challenging compared to other markets significantly impacted by imports.

The market for school furniture is traditionally seasonal, with approximately 50% of annual sales occurring in the months of June, July, and August. The Company has traditionally met the seasonal needs with significant overtime and by hiring seasonal temporary labor. During fiscal 2021, the demand for school furniture declined primarily due to the COVID-19 pandemic disruption, order rates declined by 20%, and the Company reduced production levels. Because of the traditional dependence on temporary seasonal labor, the Company was able to reduce seasonal hiring to match production to demand. The Company did not sever any of its full-time employees during the pandemic.

In the prior fiscal year, the Company benefited from a large series of disaster recovery orders that were received at the end of fiscal 2024 and the first quarter of fiscal 2025. During fiscal 2025, the Company shipped and recognized revenue related to these orders of approximately $23.0 million. These shipments positively affected the Company’s traditional seasonal cycle, with positive impacts on production, overhead absorption, accounts receivable, collections, as well as lower borrowings to support that inventory. This project was substantially completed at the end of fiscal year 2025. The Company believes that the timing and related positive impacts of this project were non-recurring and that more typical seasonal and financial patterns are likely to return moving forward.

Following a downturn during the COVID pandemic, order rates recovered during fiscal 2022, 2023, and 2024. Initially, the Company had difficulty sourcing adequate new permanent and temporary workers. The Company remedied this by providing significant raises to its hourly work force, and for fiscal years 2023 - 2026 our ability to support the seasonal business model returned to pre-COVID capabilities, with the Company delivering 47% - 49% of annual revenue during June, July, and August.

Virco's product offering consists primarily of items manufactured by Virco, complemented with products sourced from other furniture manufacturers to fill any gaps in product manufactured by the Company. The Company has served the education industry for over 76 years and over this time developed products to address a variety of classroom management trends, from collaborative learning to individual and combination desks facilitating distancing and classroom control. The pandemic caused a noticeable change in the types of products requested by educators. In fiscal 2021, we experienced an increase in the demand for individual desks. In fiscal 2022, demand began to return to products supporting collaborative learning. This trend continued

through fiscal 2023, 2024, 2025 and 2026. Our product offerings are continually enhanced with an ongoing new product development program that incorporates internally developed products as well as product lines developed with accomplished designers. Finally, management continues to hone Virco's ability to forecast, finance, manufacture, warehouse, deliver and install furniture within the relatively narrow delivery window associated with the highly seasonal demand for education sales. The educational sales market is extremely seasonal. In fiscal 2025 and 2026, approximately 50% of the Company's total sales were delivered in June, July, and August. During periods of traditional seasonality, average weekly shipments during July and August can be as great as six times the level of average weekly shipments in the winter months. Virco's substantial warehouse space allows the Company to build and ship adequate inventories to service this narrow delivery window for the education market.

The budgetary pressures directly impact the demand for the Company's products, as the demand for educational furniture largely depends upon: (1) available funding in a school's general operating fund and (2) the completion of bond-funded projects, which is directly impacted by the amount of bond financing issued to fund new school construction, to renovate older schools, and to fully equip new and renovated schools.

We believe that a significant majority, approximately 80-85%, of a typical school's operating budget is for the salaries and benefits for school teachers and administrators. Increasing costs for medical insurance, combined with pressures from unfunded post-retirement medical and pension obligations reduces funds available for other purposes. In response to these budgetary pressures, schools typically elect to retain teachers and spend less on repairs, maintenance, and replacement furniture, which in turn reduces the demand for, and sales of, the Company's products.

The significant budgetary challenges faced by the education industry have had an impact on the Company’s business model over this time frame and have created opportunities as well. In response to their budgetary challenges, many school districts closed warehouses and reduced janitorial and support staff in order to retain accredited teachers. Selling efforts must now reach school principals and administrative staff in addition to the district business offices. Sales priced under national contracts or buying groups are displacing competitive bids administered by professional purchasing departments. Distribution and service has become a more meaningful component of our business as most deliveries are to school sites, and over 50% include delivery into the classroom. This evolution adds to the seasonal challenges of our business, but also creates opportunities to suppliers that can execute during the short summer delivery window.

The Company’s operating results can be impacted significantly by cost and volatility of commodities, especially steel, plastic, wood, and energy. The majority of the Company's sales are generated under annual contracts in which the Company can raise the price of its products once every six months and only on future orders. If the costs of the Company's raw materials increase suddenly or unexpectedly, the Company cannot be certain that it will be able to implement immediate corresponding increases in its sales prices in order to offset such increased costs. The Company moderates this exposure by building significant quantities of finished goods and component parts during the first and second quarters. In fiscal 2023, the cost of commodities was volatile, but not as severe as experienced in 2022. Increased selling prices covered increases in commodity prices during fiscal 2023. In 2025 and 2026, the Company increased selling prices in anticipation of additional cost increases. The cost of materials in 2025 and 2026 were reasonably stable compared to the volatility in prior years – especially the years impacted by COVID.

Approximately 80% of Virco’s sales include freight to the customer facility and the cost or availability of transportation equipment can adversely impact both profitability and customer service. Significant cost increases in manufacturing or distributing products during a given contract period can adversely impact operating results and have done so during prior years. The Company typically benefits from any decreases in raw material or distribution costs under the contracts described above.

Beginning in 2025, the United States implemented and proposed significant changes to trade policies, including broad-based tariffs on imports from certain countries and product categories under the International Emergency Economic Powers Act (“IEEPA”). These actions included tariffs on imports from Canada, Mexico, and China, as well as higher tariffs on steel, aluminum, and certain manufactured goods, including furniture. As a result, U.S. tariff rates increased to their highest levels in decades. Tariffs have also been used as a policy tool in trade negotiations and in connection with broader geopolitical objectives. These tariffs are expected to increase the cost of imported components and materials during fiscal 2027. Although the Company increased product prices in fiscal 2026 and 2027 to offset higher costs, it may not be able to fully pass through increases in raw materials, transportation, and energy, including steel and plastics.

On February 20, 2026, the U.S. Supreme Court issued a ruling in Learning Resources, Inc. v. Trump, striking down certain tariffs previously imposed under the IEEPA. The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments. Following the Supreme Court’s decision, the Trump Administration implemented a 10% global tariff under Section 122 of the Trade Act of 1974, effective February 24, 2026 for a period of 150 days. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. We

continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition and results of operations.

Ongoing conflict in the Middle East has contributed to volatility in crude oil and natural gas markets. Because many plastic resins are petroleum- and natural gas-based, disruptions in these markets may reduce supply availability and increase material costs. Energy price volatility may also increase transportation and logistics costs. The Company is uncertain as to the impact this conflict might have on its cost of goods sold and margins.

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of tax reform provisions, was signed into law in the United States. FASB Topic 740, Income Taxes, requires the effects of tax law changes to be recognized in the period of enactment. As the legislation was signed into law before the close of the second quarter, the impacts are included in the Company's operating results for fiscal 2026. Among other provisions, the OBBB repealed the capitalization of domestic research and development expenditures, extended bonus depreciation on fixed assets, and reduced the deduction rate on foreign-derived deduction eligible income and income from non-U.S. subsidiaries. These provisions did not have a material impact on the Company's effective tax rate and deferred tax assets in fiscal year ended January 31, 2026 and are not expected to have a material impact on future periods.

While the Company anticipates challenging economic conditions to continue to impact its core customer base in the near term, there are certain underlying demographics, customer responses and changes in the competitive landscape that provide opportunities. First, the underlying demographics of the student population are relatively stable compared to the volatility of school budgets and the related impact on furniture and equipment purchases. This volatility is attributable to the financial health of the school systems. Virco management believes that there is a pent-up demand for quality school furniture (though it is unclear when and to what extent that pent-up demand will be converted into a meaningful increase in purchases). Second, management believes that parents and voters will make quality education an ongoing priority for future government spending. The disruption related to COVID-19 school closures reinforced the need for learning in classroom settings. Third, many schools have responded to the budget strains by reducing their support infrastructure. This change provides opportunities to provide services to schools, such as project management for new or renovated schools, delivery to individual school sites rather than truckload deliveries to central warehouses, and delivery of furniture into classrooms. Moreover, this change offers opportunities for Virco to promote its complete product assortment which allows one-stop shopping as opposed to sourcing furniture needs from a variety of suppliers. Fourth, many suppliers previously shut down or dramatically curtailed their domestic manufacturing capabilities, making it difficult for competitors to adapt to dynamic fluctuations in demand or provide custom colors or finishes during a narrow seasonal summer delivery window when they are reliant upon a supply chain extending to Asia or elsewhere. Meanwhile, Virco has continued to invest in automation at its domestic manufacturing facilities, adding flat metal forming processes to its manufacturing capabilities and bringing production into its factories of items formerly sourced from other suppliers (both domestic and international). Domestic production facilitates our product development process, enabling the Company to more rapidly develop new products, release extensions of product families, and offer customized variants of our product offerings. Virco views its domestic factories as a strategic resource for providing its customers with timely delivery of a broad selection of colors, finishes, laminates, and product styles. Finally, many of our domestic competitors, especially small dealerships, may be undercapitalized and less capable of supporting the significant seasonal nature of our business. We believe that our financial strength, which allows us to build material quantities of inventory in advance of the summer delivery season, is a significant competitive advantage.

Critical Accounting Policies and Estimates

This discussion and analysis of Virco's financial condition and results of operations is based upon the Company's consolidated financial statements (“financial statements”), which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires Virco management to make estimates and judgments that affect the Company's reported assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Certain of these estimates are considered critical accounting estimates (slow-moving and obsolete inventories). On an ongoing basis, management evaluates estimates, including those related to valuation of inventory and related slow-moving and obsolete inventories, self-insured retention for workers' compensation insurance and estimates related to deferred tax assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. This forms the basis of judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Factors that could cause or contribute to these differences include the factors discussed above under “Item 1A. Risk Factors”, and elsewhere in this Annual Report on Form 10-K. Virco's critical accounting policies and estimates are as follows:

Slow-Moving and Obsolete Inventories: Inventories are valued at the lower of cost or net realizable value (determined on a first-in, first-out (“FIFO”) basis and include 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 involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations. 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, 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.

While we believe that adequate adjustments for inventory obsolescence have been made in the consolidated financial statements, our obsolescence adjustments calculations contain estimates that require management to make assumptions based on several factors, including market conditions, the selling environment, historical results, supply-chain environment, current inventory trends and customer behavior. There have been no changes to our policies for establishing adjustments throughout the year, and we do not expect significant changes to our historical obsolescence levels. A 10% increase in our year-end inventory adjustments would decrease our net income by approximately $400,000, on an after-tax basis. The net income would increase by similar amounts if the inventory adjustments were to decrease by a comparable percentage. As of January 31, 2026 and January 31, 2025, our inventory obsolescence adjustments were $5.0 million and $5.6 million, respectively, representing 8.1% and 9.1%, respectively, of our inventories on a FIFO basis.

Self-Insured Retention: For fiscal 2026 and 2025, the Company was self-insured for product liability losses up to $250,000 per occurrence, workers' compensation losses up to $250,000 per occurrence, and auto and general liability losses up to $50,000 per occurrence. The Company obtains quarterly or semi-annual actuarial valuations for the self-insured retentions. Product liability, workers' compensation, and auto reserves for known and unknown incurred but not reported (“IBNR”) losses are recorded at the net present value of the estimated losses using a risk-free discount rate of 4.0% for fiscal 2026 and fiscal 2025. Given the relatively short term over which the known losses and IBNR losses are discounted, the sensitivity to the discount rate is not significant. Estimated workers' compensation and auto losses (including IBNR) were funded during the insurance year and subject to retroactive loss adjustments. The Company's exposure to self-insured retentions varies depending upon the market conditions in the insurance industry and the availability of cost-effective insurance coverage. Self-insured retentions for fiscal 2027 will be comparable to the retention levels for fiscal 2026.

Deferred Tax Assets and Liabilities: In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion or all of its deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carry backs, tax-planning strategies, and results of recent operations (including cumulative income (losses) in recent years), to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets.

The amount of the deferred tax asset considered realizable could be adjusted if the Company’s actual results in the future do not generate taxable income that is sufficient to allow the Company to utilize its deferred tax assets. The Company’s future taxable income projections are subject to a high degree of uncertainty and could be impacted, both positively and negatively, by changes in our business or the markets in which we operate. A change in the assessment of the realizability of our deferred tax assets could materially impact our results of operations.

Results of Operations (fiscal 2026 vs. 2025)

Financial Highlights

The Company earned a pre-tax profit of $3.5 million on net sales of $199.7 million for fiscal 2026, compared to pre-tax profit of $28.4 million on net sales of $266.2 million in fiscal 2025. Net income per diluted share was $0.16 for fiscal 2026, compared to $1.32 per diluted share in the prior year. Cash flow used in operations was $0.8 million in fiscal 2026, compared to cash provided by operations of $33.1 million in fiscal 2025.

Net Sales

Virco's net sales decreased by 25.0% in fiscal 2026 to $199.7 million compared to $266.2 million in fiscal 2025. In fiscal 2025 the Company benefited from a large series of one-time, disaster recovery counter-seasonal shipments that resulted in approximately $23.0 million of additional shipments. These deliveries positively affected the Company's traditional cycle in the prior year, with positive impacts on production, overhead absorption, accounts receivable, collections, and reductions in

inventory, as well as lower borrowings to support that inventory. Excluding this non-recurring event, net sales for fiscal 2026 decreased approximately 18%, driven by the current dynamic macroeconomic environment and uncertainty surrounding the government's budget and spending levels, which adversely affected the demand for the Company's products.

The Company has effectively increased selling prices under its largest contracts to recover volatile commodity, energy, freight, and labor costs incurred in recent years. The Company does not anticipate material margin growth as recent price increases have restored profitability. As we have gone through this economic cycle, the Company continues to focus on strategies to develop and strengthen its brand with emphasis on product quality, product selection, and service. We will continue to use our domestic factories to provide greater flexibility for custom specifications such as laminates, colors, and on-time delivery. The Company will continue to emphasize product value, design and variety; the strength of its distribution and delivery network; its classroom delivery and project management capabilities; and the importance of timely delivery during peak seasonal periods. To increase or maintain market share during fiscal 2027, when market conditions warrant, the Company may selectively compete based on direct prices. Estimates of sales volume for the next year may continue to be impacted by global events.

Cost of Sales

Cost of sales was 59.3% of net sales in fiscal 2026 and 56.9% of net sales in fiscal 2025. Gross margin in fiscal 2026 was 40.7% compared to 43.1% in the prior year. Gross margin declined in the current year primarily due to lower sales volume combined with a decline in production levels, partially offset by sales price increases and a slight reduction in manufacturing spending. The Company reduced production levels in order to maintain control over inventory levels.

The material portion of our costs as a percentage of sales was 31.8% of net sales in fiscal 2026 and 33.2% of net sales in fiscal 2025. This was the result of changes to product mix, as business shifted to a higher percentage of full service deliveries. Full service delivery orders are more service oriented and as such the associated expenses are recorded in Selling, General and Administrative instead of Cost of Sales.

During fiscal 2027, the Company anticipates continued uncertainty and volatility in commodity costs, particularly with respect to certain raw materials, transportation, energy, and tariffs due to potential macroeconomic events. The Company also anticipates continued and possibly increased supply chain disruptions from both domestic and international suppliers. Due in part to volatile transportation and energy costs, we may incur higher commodity costs in fiscal 2027. For more information, please see the section below entitled “Inflation and Future Change in Prices.”

Selling, General and Administrative and Other Expenses

Selling, general and administrative expenses ("SG&A") for fiscal 2026 decreased by $9.2 million to $77.6 million from $86.8 million. The decrease in SG&A was primarily due to lower variable selling expenses related to the overall decline in sales volume. SG&A expenses as a percentage of net sales were 38.9% compared to 32.6% last year. This was the result of changes to product mix, as business shifted to a higher percentage of full service deliveries. Full service delivery orders are more service oriented and as such the associated expenses are recorded in SG&A instead of cost of sales. Additionally, a certain portion of SG&A expense is fixed in nature and as such does not fluctuate with sales volume.

Pension expense decreased due to increased discount rates and higher expected return on plan assets. Discount rates decreased from approximately 5.6% in fiscal 2025 to a range of 3.9% - 5.4% in fiscal 2026. Expected return on plant assets increased from approximately 5.2% in fiscal 2025 to approximately 5.6% in fiscal 2026. Interest expense was $49,000 lower in fiscal 2026 compared to fiscal 2025 because of decreased levels of borrowing.

Provision for Income Taxes

Our effective tax rate was 25.8% for fiscal 2026, and is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets. The OBBB did not have a material impact on the Company's effective income tax rate for fiscal 2026, which the Company believes is representative of rates that will affect fiscal 2027.

Valuation allowances of $231,000 are needed for certain state net operating loss carryforwards to reduce the carrying amount of deferred tax assets to an amount that is more-likely-than-not to be realized. At January 31, 2026, the Company has no operating loss carryforwards for U.S. federal, and $8.2 million for state income tax purposes, expiring at various dates through January 31, 2045.

Cash Flows

The following table summarizes cash flow information for the fiscal years ended January 31, 2026 and 2025:

January 31,

(In thousands)

Net cash (used in) provided by operating activities $ (841) $ 33,128

Net cash used in investing activities (5,735) (5,563)

Net cash used in financing activities (5,854) (5,984)

Net (decrease) increase in cash $ (12,430) $ 21,581

Operating activities. Our cash flows from operating activities are primarily collections from the sale and distribution of furniture to our customers in the education market. Net cash (used in) provided by operations was $(0.8) million in fiscal 2026 and $33.1 million in fiscal 2025. The change in cash from operating activities was primarily attributable to the decrease in net income and the change in cash used in accounts payable and accrued liabilities.

Investing activities. Our net investments primarily consist of investments in our factories and technology to support our business activities. There were no material commitments for capital expenditures as of January 31, 2026.

Financing activities. Our financing activities primarily consist of payment of cash dividends and repurchases of Company stock.

Due to the seasonal nature of our business, the Company maintains a line of credit to support seasonal working capital needs and typically repays seasonal borrowings at the conclusion of the peak summer season. During fiscal 2026, the Company did not have any borrowings under the line of credit and used cash flows from operations to fund its operating and investing activities.

Inflation and Future Change in Prices

We commit to annual contracts that determine selling prices for goods and services for periods of six months and occasionally longer. Though the Company has negotiated flexibility under many of these contracts that may allow the Company to increase prices on future orders, the Company may not have the ability to raise prices on orders received prior to any announced price increase. Due to the seasonal nature of our business, the Company may receive significant orders during the first and second quarters for delivery in the second and third quarters. With respect to any of the contracts described above, if the costs of providing our products or services increase between the date the orders are received and the shipping date, we may not be able to implement corresponding increases in our sales prices for such products or services to offset the related increased costs. During fiscal 2026 and 2025 the cost of commodities was reasonably stable.

For fiscal 2027, the Company anticipates potential volatility in costs, particularly with respect to energy and transportation costs, as well as imported components from China, freight from China, certain raw materials including steel, and potential impacts of escalating labor costs. Anticipated adverse volatility for fiscal 2027 could be severe in light of global supply chain and economic sanctions, tariffs imposed or threatened on imported commodities and other disruptions affecting our suppliers. There is continued uncertainty with respect to steel and other raw material costs, including plastics, which are affected by the price of oil. Ongoing conflict in the Middle East has contributed to volatility in crude oil and natural gas markets. Because many plastic resins are petroleum- and natural gas-based, disruptions in these markets may reduce supply availability and increase material costs. Energy price volatility may also increase transportation and logistics costs, in the form of increased operation costs for our fleet, and surcharges on freight paid to third-party carriers. Virco depends upon third-party carriers for more than 90% of customer deliveries. Recent regulations and more stringent enforcement of federal regulations governing the transportation industry (especially regarding drivers) have adversely impacted the cost and availability of freight services. Virco expects to incur continued pressure on employee compensation and benefit costs. The Company has renewed health insurance contracts for its employees through December 2026, but costs after that date may be adversely impacted by current legislation, claim costs and industry consolidation.

To recover the cumulative impact of increased costs, the Company has increased published list prices for fiscal 2027. Due to current economic conditions, the Company anticipates increased price competition in fiscal 2027 and may not be able to raise prices further in response to increased commodity costs without risk of losing market share. As a portion of Virco's business is obtained through competitive bids, the Company is carefully considering material and transportation costs as part of the bidding process. The Company is working to control and reduce costs by improving production and distribution methodologies,

investigating new packaging and shipping materials, and searching for new sources of purchased components and raw materials.

Liquidity and Capital Resources

Working Capital Requirements

Virco addresses liquidity and working capital requirements in the context of short-term seasonal requirements and long-term capital requirements of the business. The Company's core business of selling furniture to publicly-funded educational institutions is extremely seasonal. The seasonal nature of this business permeates most of Virco's operational, capital and financing decisions.

The Company's working capital requirements during and in anticipation of the peak summer season oblige management to make estimates and judgments that affect Virco's assets, liabilities, revenues and expenses. Management expends a significant amount of time during the year, and especially in the fourth quarter of the prior year and first quarter of current year, developing a production plan and estimating the number of employees, the amount of raw materials and the types of components and products that will be required during the peak season. If management underestimates any of these requirements, Virco's ability to fill customer orders on a timely basis or to provide adequate customer service may be diminished. If management overestimates any of these requirements, the Company may be required to absorb higher storage, labor, and related costs, each of which may affect profitability. On an ongoing basis, management evaluates such estimates, including those related to market demand, labor costs and inventory levels, and continually strives to improve Virco's ability to correctly forecast business requirements during the peak season each year.

As part of Virco's efforts to address seasonality, financial performance, and quality without sacrificing service or market share, management has been refining the Company's assemble-to-ship ("ATS") operating model. ATS is Virco's version of mass-customization, which assembles standard, stocked components into customized configurations before shipment. The Company's ATS program reduces the total amount of inventory and working capital needed to support a given level of sales. It does this by increasing the inventory's versatility, delaying assembly until the last moment, and reducing the amount of warehouse space needed to store finished goods. In order to provide “one-stop shopping” for all FF&E needs, Virco purchases and re-sells certain finished goods from other furniture manufacturers. When practical, these furniture items are drop shipped from the Company's supplier. Where cost effective, the Company will bring the item into the Virco warehouse, and the third-party products will be shipped along with products manufactured by Virco. The Company did not carry material amounts of vendor inventory during the fiscal years ended January 31, 2026 and 2025.

In addition, Virco finances its largest balance of accounts receivable during the peak season. This occurs for three primary reasons. First, accounts receivable balances naturally increase during the peak season as shipments of products increase. Second, many customers during this period are government institutions, which tend to pay accounts receivable more slowly than commercial customers. Third, many summer deliveries may be “projects” where the Company fulfills large orders of furniture for a new school or significant refurbishment of an existing school. Customers with large projects may require architect sign off, school board approval prior to payment, or punch list completion, all of which can delay payment.

Because of the seasonality of our business, our manufacturing and distribution capacity is dictated by the capacity requirement during the months of June, July, and August. Because of this seasonality, factory utilization is lower during the slow season. The Company utilizes a variety of tactics to address the seasonality of its business. During the summer months, which comprise our second and third fiscal quarters, our personnel utilization generally is at or close to full capacity. The Company utilizes temporary labor and significant overtime to meet the seasonal requirements. During the slow portions of the year, temporary labor and overtime are eliminated to moderate the off-season costs. Our manufacturing facility capacity utilization generally remains less than 100% during these off-season months because physical structure capacity cannot be adjusted as readily as personnel capacity, and we have secured sufficient physical structure capacity to accommodate our current needs, as well as for anticipated future growth. Our physical structure utilization is significantly lower during the first and fourth quarters of each year than it is during the second and third quarters.

The Company utilizes a comparable strategy to address warehousing and distribution requirements. During summer months, temporary labor is hired to supplement experienced warehouse and distribution personnel. More than 90% of the Company's freight is provided by third-party carriers. The Company has secured sufficient warehouse capacity to accommodate our current needs as well as anticipated future growth.

Additionally, the Company may elect to opportunistically purchase shares based on excess cash generation and share price considerations. In fiscal 2026, the Company spent $4.0 million to repurchase 348,944 shares of its common stock. As of January 31, 2026, $7.2 million was authorized and available for repurchase of shares by the Company.

Line of Credit

As the capital required for the summer season generally exceeds cash available from operations, Virco has historically relied on third-party bank financing to meet seasonal cash flow requirements. On December 22, 2011, the Company and Virco Inc., a wholly owned subsidiary of the Company (“Virco” and, together with the Company, the “Borrowers”) entered into a Revolving Credit and Security Agreement (“Restated Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”).

The Restated Credit Agreement as currently in effect provides the Borrowers with a secured revolving line of credit (“Revolving Credit Facility”) subject to a borrowing base limitations and generally provides for advances of up to 85% of eligible accounts receivable, plus a percentage equal to the lesser of 60% of the value of eligible inventory or 85% of the liquidation value of eligible inventory, plus $10.0 million from January through June of each year, minus undrawn amounts of letters of credit and reserves; (ii) inventory sublimit of $35.0 million and ATS inventory sublimit of $15.0 million during the months of May through August; and (iii) an equipment loan of $2.0 million. The Revolving Credit Facility is secured by substantially all of the Borrowers' personal property and certain of the Borrowers' real property. The scheduled maturity date of the Restated Credit Agreement is April 15, 2027, at which point the principal amount outstanding under the Restated Credit Agreement and any accrued and unpaid interest is due and payable, subject to certain prepayment penalties upon earlier termination. Prior to the maturity date, principal amounts outstanding under the Restated Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments, and certain other conditions.

The Revolving Credit Facility interest rate is determined as a sum of the applicable margin rate, which is 3.00% from January through July and 2.50% from August through December, plus the Secured Overnight Financing Rate ("SOFR"). The Company incurred a fee on the unused portion of the revolving line of credit at a rate of 0.25%. The Company did not have an outstanding amount under the Credit Agreement as of January 31, 2026. The interest rate at January 31, 2026 was 8.5%.

The Restated Credit Agreement permits the Company to issue dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $8.0 million during any fiscal year, provided that no default shall have occurred or is continuing or would result from any such payment, and the Company must demonstrate pro forma compliance with a 12-month trailing Fixed Charge Coverage Ratio ("FCCR") of not less than 1.20:1.00 as of the fiscal quarter immediately preceding the date of any such dividend or payment.

The Restated Credit Agreement contains a clean-down provision that requires the Company to reduce borrowings under the line of credit to less than $10.0 million for a period of 30 consecutive days during the Company’s fourth fiscal quarter of each fiscal year. The clean-down provision allows the Company to maintain the minimum outstanding balance of $10.0 million to be carried on an uninterrupted period extending beyond one year and ultimately due at the scheduled maturity. The Company believes that normal operating cash flow will continue to allow it to meet the clean-down requirement with no adverse impact on the Company's liquidity.

Events of default (subject to certain cure periods and other limitations) under the Restated Credit Agreement include, but are not limited to, (i) non-payment of principal, interest or other amounts due under the Restated Credit Agreement, (ii) the violation of terms, covenants, representations or warranties in the Restated Credit Agreement or related loan documents, (iii) any event of default under agreements governing certain indebtedness of the Borrowers and certain defaults by the Borrowers under other agreements that would materially adversely affect the Borrowers, (iv) certain events of bankruptcy, insolvency or liquidation involving the Borrowers, (v) judgments or judicial actions against the Borrowers in excess of $250,000, subject to certain conditions, (vi) the failure of the Company to comply with Pension Benefit Plans (as defined in the Restated Credit Agreement), (vii) the invalidity of loan documents pertaining to the Restated Credit Agreement, (viii) a change of control of the Borrowers and (ix) the interruption of operations of any of the Borrowers' manufacturing facilities for five consecutive days during the peak season or 15 consecutive days during any other time, subject to certain conditions.

Pursuant to the Restated Credit Agreement, substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Revolving Credit Facility upon receipt by the Borrowers. Due to this automatic liquidating nature of the Revolving Credit Facility, if the Borrowers breach any covenant, violate any representation or warranty, or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion. In addition, certain of the covenants and representations and warranties set forth in the Restated Credit Agreement contain limited or no materiality thresholds, and many of the representations and warranties must be true and correct in all material respects upon each borrowing, which the Borrowers expect to occur on an ongoing basis. Based on the Company’s current projections, raw material costs and its ability to introduce price increases, management believes it will maintain compliance with these financial covenants, although there are uncertainties there within, such as raw material costs and supply chain challenges.

Long-Term Capital Requirements

In addition to short-term liquidity considerations, the Company continually evaluates long-term capital requirements.

Capital expenditures will continue to focus on automation, both in the factory and software applications, and new product development along with the tooling and new processes required to produce new products. The Company has identified several opportunities for capital expenditures during the next five years. The Company anticipates capital spending of approximately $5.0 million for fiscal 2027. Our Revolving Credit Facility with PNC Bank provides a $2.0 million line for equipment and covenants allow for anticipated capital expenditures for fiscal 2027.

Retirement Obligations

The Company provides retirement benefits to employees under two defined benefit retirement plans: the Employee Plan and the VIP Plan. The Employee Plan is a qualified retirement plan that is funded through a trust held at PNC Bank ("Trustee"). The other plan is non-qualified retirement plan. Benefits payable under the VIP Plan are secured by life insurance policies and marketable securities held in a rabbi trust. The Company obtains annual actuarial valuations for both retirement plans.

During the quarter ended October 31, 2025, the Company’s Board of Directors approved the termination of the VIP Plan, a supplemental retirement plan for certain key employees. The termination became effective on November 1, 2025. This decision was part of the Company's ongoing efforts to reduce benefit obligations and ongoing administrative costs. The termination is expected to be settled through lump sum distributions to participants funded by the liquidation of assets held in a rabbi trust, which are expected to occur during the fourth quarter of fiscal year 2027. Management anticipates these distributions will not materially impact the Company's current and long-term liquidity and that the termination will not materially impact the Company's consolidated financial statements.

Because the plans have been frozen since 2003, there is no service cost related to the plans. In the past, due to a large number of lump sum benefits paid to retired and terminated employees, the Company has incurred settlement costs for the Employee Plan. In an effort to de-risk the Employee Plan, the Company intends to continue to reach out to and offer lump sum benefits to terminated and retired employees, which may result in settlement costs in the future. With the increase in interest rates during recent years, the Company was able to purchase approximately $5.0 million of annuities in the third quarter ended October 31, 2023, resulting in a settlement charge in that quarter. In the future, the Company may purchase additional annuities from third parties to further de-risk the Plan. The Company incurred $26,000 in settlement costs in fiscal 2026 and did not incur settlement costs in fiscal 2025. It is the Company's policy to contribute adequate funds to the trust accounts to cover benefit payments under the VIP Plan and to maintain the funded status of the Employee Plan at a level which is adequate to avoid significant restrictions to the Employee Plan under the Pension Protection Act of 2006 and to minimize PBGC related expenses. Contributions to the Qualified Plan Trust and benefit payments under the VIP Plan totaled $357,000 and $623,000 in fiscal 2026 and 2025, respectively.

Contributions during fiscal 2027 will depend upon actual investment results and benefit payments; however, the Company does not expect to make contributions during fiscal 2027. At January 31, 2026, accumulated other comprehensive loss of $112,000, net of tax, is attributable to the pension plans.

The Company does not anticipate making any significant changes to the pension assumptions in the near future. If the Company were to have used different assumptions in the fiscal year ended January 31, 2026, a 1% reduction in investment return would have increased pension expense by approximately $170,000, a 1% change in the rate of compensation increase would have no impact, and a 1% reduction in discount rates would cause obligations under the Plans to increase by approximately $1.9 million and pension expense would decrease by approximately $63,000.

Stockholders' Equity

Historically it has been the board of directors' policy to periodically review the payment of cash and stock dividends in light of the Company's earnings and liquidity. The Company declared a cash dividend in each quarter of 2025 and 2026.

Virco issued a 10% stock dividend or 3/2 stock split every year, beginning in 1983 through 2003. Although the stock dividend had no cash consequences to the Company, the accounting methodology required for 10% dividends has affected the equity section of the balance sheet. When the Company records a 10% stock dividend, 10% of the market capitalization of the Company on the date of the declaration is reclassified from retained earnings to additional paid-in capital. During the period from 1983 through 2003, the cumulative effect of the stock dividends has been to reclassify over $122.0 million from retained earnings to additional paid-in capital. The equity section of the balance sheet on January 31, 2026 reflects additional paid-in

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capital of approximately $113.8 million and accumulated deficit of approximately $7.9 million. The majority of the accumulated deficit is a result of the accounting reclassification and is not the result of accumulated losses.

Environmental and Contingent Liabilities

Environmental Compliance and Government Regulation

Virco is subject to numerous federal, state and local 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. In this context, Virco works diligently to remain in compliance with all such environmental laws and regulations as these affect the Company's operations. Moreover, Virco has enacted policies for recycling and resource recovery that have earned repeated commendations, including: recognition by the California Department of Resources Recycling and Recovery ("CalRecycle") in 2012 and 2011 as a Waste Reduction Awards Program ("WRAP") honoree; recognition by the United States Environmental Protection Agency in 2019 as a WasteWise Winner for reducing waste, in 2004 as a WasteWise Hall of Fame Charter Member, in 2003 as a WasteWise Partner of the Year, and in 2002 as a WasteWise Program Champion for Large Businesses; and recognition by the Sanitation Districts of Los Angeles County for compliance with industrial waste water discharge guidelines in 2008 through 2011. This is only a partial list of Virco's environmental awards and commendations; for a more complete list, go to www.virco.com.

In addition to these awards and commendations, Virco's ZUMA and ZUMAfrd product lines were the first classroom furniture collections to earn indoor air quality certification through the stringent GREENGUARD® Children & Schools Program, now known as GREENGUARD Gold certification. As a follow-up to the certification of ZUMA and ZUMAfrd models in 2006, hundreds of other Virco furniture items - including AnalogyTM furniture models and TextameterTM instructor workstations - have earned GREENGUARD certification. Moreover, all Virco products covered by the Consumer Product Safety Improvement Act of 2008 are in compliance with this legislation. All affected Virco models are also in compliance with the California Air Resources Board rule and Toxic Control Substances Act rule concerning formaldehyde emissions from composite wood products. Environmental laws have changed rapidly in recent years, and Virco may be subject to more stringent environmental laws in the future. The Company has expended, and may be expected to continue to expend, significant amounts in the future for compliance with environmental rules and regulations, for the investigation of environmental conditions, for the installation of environmental control equipment or remediation of environmental contamination. Recurring expenses relating to operating our factories in a manner that meets or exceeds environmental laws are matched to the cost of producing inventory. It is possible that the Company's operations may result in noncompliance with, or liability for remediation pursuant to, environmental laws. Should such eventualities occur, the Company records liabilities for remediation costs when remediation costs are probable and can be reasonably estimated. See “Item 1A. Risk Factors: We could be required to incur substantial costs to comply with environmental and other legal requirements. Violations of, and liabilities under, these laws and regulations may increase our costs or require us to change our business practices."

Contingent Liabilities

In fiscal 2026 and 2025, the Company was self-insured for product liability losses of up to $250,000 per occurrence, general liability losses of up to $50,000 per occurrence, workers' compensation losses up to $250,000 per accident and auto liability up to $50,000 per accident. In prior years the Company has been partially self-insured for workers' compensation, automobile, product, and general liability losses. The Company has purchased insurance to cover losses in excess of the self-insured retention or deductible up to a limit of $30.0 million.

The Company has aggressively pursued a program to improve product quality, reduce product liability claims and losses and to aggressively defend product liability cases. This program has continued through fiscal 2026 and has resulted in reductions in product liability claims and litigated product liability cases. In addition, the Company has active safety programs to improve plant safety and control workers' compensation losses. Management does not anticipate that any related settlement, after consideration of the existing reserves for claims and potential insurance recovery, would have a material adverse effect on the Company's financial position, results of operations or cash flows.

Off-Balance Sheet Arrangements

The Company did not enter into any material off-balance sheet arrangements during fiscal 2026, nor did the Company have any material off-balance sheet arrangements outstanding at January 31, 2026.

New Accounting Pronouncements

See disclosure of recently adopted and recently issued but not yet adopted accounting standards in Note 2 to the Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" to this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

As of January 31, 2026, the Company had no balance outstanding under its revolving credit facility with PNC Bank. The PNC facility bears variable interest based on the Secured Overnight Financing Rate ("SOFR") and we are therefore subject to market risk from interest rate fluctuations. Since we had no balance as of January 31, 2026, a hypothetical 100 basis point change in the applicable interest rates would have no impact on the interest expense incurred by the Company as of such date, but would increase our borrowing costs in other periods when we had a positive balance under the PNC facility. For information related to the Company’s long-term debt, refer to "Note 3. Debt" in the Notes to Consolidated Financial Statements.

The Company's business is subject to changes in the price of raw materials used to manufacture its products, such as steel, plastic, wood, aluminum, polyethylene, polypropylene, plywood, particleboard, and cartons, as well as the price of petroleum, which not only affects the cost of plastic, but also the Company's transportation costs and costs of operating its manufacturing facilities. The Company works to offset these increased costs through sourcing initiatives, product re-engineering, and price increases on its products. Periodically margins are negatively impacted due to the lag between cost increases and the Company’s ability to increase its prices. With respect to the Company's annual contracts (or those contracts that have longer terms), the Company may have limited ability to increase prices during the term of the contract. The Company has, however, negotiated increased flexibility under many of these contracts allowing the Company to increase prices on future orders. Nevertheless, even with respect to these more flexible contracts, the Company does not have the ability to increase prices on orders received prior to any announced price increases. Due to the seasonal nature of its business, the Company may receive significant orders during the first and second quarters for delivery in the second and third quarters. With respect to any of the contracts described above, if the costs of raw materials increase suddenly or unexpectedly, the Company cannot be certain that it will be able to implement corresponding increases in its sales prices in order to offset such increased costs. Significant cost increases in providing products during a given contract period can adversely impact operating results and have done so during prior years. The Company typically benefits from any decreases in raw material costs under the contracts described above.

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page Numbers

Consolidated Balance Sheets as of January 31, 2026 and 2025 42

Notes to Consolidated Financial Statements 48

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Virco Mfg. Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Virco Mfg. Corporation (the “Company”) as of January 31, 2026 and 2025, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the years then ended, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of January 31, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of January 31, 2026 and 2025, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of slow-moving and obsolete inventories

As described in Note 1 to the consolidated financial statements, the Company’s inventories balance was $56.7 million as of January 31, 2026. Inventories are valued at the lower of cost or net realizable value (determined on a first-in, first-out basis) and include material, labor, and factory overhead. The valuation adjustments for slow-moving and obsolete inventories are calculated using an estimated percentage applied to inventories based on a physical inspection of the product in connection with a physical inventory, consideration of inventory holdings and a review of historical and forecasted consumption of sales, and consideration of active marketing programs.

The Company’s determination of the valuation of slow-moving and obsolete inventories required a high degree of management judgment and subjectivity, which in turn led to especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures. We have identified auditing this estimate as a critical audit matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included evaluating the design and testing the operating effectiveness of internal controls related to the Company’s valuation of slow-moving and obsolete inventories. Our audit procedures related to the valuation of slow-moving and obsolete inventories included the following, among others:

•Testing management’s process for determining the valuation of inventories, including:

◦Evaluating management’s methodology to determine the net realizable value of inventories.

◦Evaluating the reasonableness of the significant assumptions used by management, including those related to forecasted inventory usage and backlog.

◦Testing the completeness, accuracy, and relevance of the underlying data of the system-generated information produced and used by management.

◦Testing the mathematical accuracy and calculations related to specific inventory write-down methodologies and percentages by inventory categories.

◦Performing inquiries with non-financial personnel, including sales and production employees, regarding obsolete or discontinued inventory, cancelled sales orders, and other factors to corroborate management’s assumptions regarding qualitative judgments about discontinued, slow moving, and obsolete inventories.

•Testing the reasonableness of management’s assumptions used in determining the valuation of slow-moving and obsolete inventories by:

◦Performing a retrospective review to assess management’s estimated percentages by comparing the prior years’ inventories to current year’s consumption and sales.

◦Performing a sensitivity analysis to determine the percentage increase or decrease that would materially impact the value recorded.

/s/ Baker Tilly US LLP

Los Angeles, California

April 8, 2026

We have served as the Company's auditor since 2022.

Virco Mfg. Corporation

Consolidated Balance Sheets

January 31,

(In thousands)

Assets

Current assets

Prepaid expenses and other current assets 10,104 2,595

Deferred income tax assets, net 5,437 5,821

See accompanying notes to consolidated financial statements.

Virco Mfg. Corporation

Consolidated Balance Sheets

January 31,

(In thousands, except share and par value data)

Liabilities

Current liabilities

Accrued compensation and employee benefits 11,434 11,064

Current portion of long-term debt 269 258

Current portion of operating lease liability 6,490 1,673

Non-current liabilities

Accrued self-insurance retention 730 780

Income tax payable, less current portion 227 200

Long-term debt, less current portion 3,609 3,878

Operating lease liability, less current portion 30,006 36,007

Other long-term liabilities 855 795

Commitments and contingencies (Note 8)

Stockholders’ equity

Preferred stock:

Authorized 3,000,000 shares, $0.01 par value; none issued or outstanding — —

Common stock:

Accumulated other comprehensive (loss) income (112) 422

Total liabilities and stockholders’ equity $ 174,179 $ 191,946

See accompanying notes to consolidated financial statements.

Virco Mfg. Corporation

Consolidated Statements of Income

Years ended January 31,

(In thousands, except per share data)

Selling, general and administrative expenses 77,580 86,835

Unrealized gain on investment in trust account (239) (1,365)

Cash dividends declared per common share: $ 0.10 $ 0.09

Net income per common share:

Weighted average shares outstanding:

See accompanying notes to consolidated financial statements.

Virco Mfg. Corporation

Consolidated Statements of Comprehensive Income

Years ended January 31,

(In thousands)

Other comprehensive (loss) income

See accompanying notes to consolidated financial statements.

Virco Mfg. Corporation

Consolidated Statements of Stockholders’ Equity

Common Stock

Pension adjustments, net of tax effect of $584 — — — — 1,732 1,732

Stock compensation expense — — 395 — — 395

Pension adjustments, net of tax effect of $(179) — — — — (534) (534)

Shares vested and others 23,003 — — — — —

Stock compensation expense — — 208 — — 208

See accompanying notes to consolidated financial statements.

Virco Mfg. Corporation

Consolidated Statements of Cash Flows

Year ended January 31,

(In thousands)

Operating activities

Depreciation and amortization 6,140 5,690

Provision for credit losses 53 —

Amortization of debt issuance costs 139 72

Stock-based compensation 208 395

Defined benefit plan, recognized net loss due to settlements 26 —

Amortization of net actuarial gain for pension plans (363) (142)

Decrease in non-cash surrender value of life insurance policies — (982)

Non-cash gain on investment (239) (1,365)

Surrender of life insurance policies (219) (727)

Changes in operating assets and liabilities:

Prepaid expenses and other assets (699) (370)

Accounts payable and accrued liabilities (11,509) (1,087)

Net cash (used in) provided by operating activities (841) 33,128

Investing activities

Purchases of property, plant and equipment (5,854) (6,295)

Purchases of marketable securities in trust accounts — (1,285)

Proceeds from sale of marketable securities in trust accounts — 1,285

Proceeds for surrendering life insurance policies 119 732

Net cash used in investing activities (5,735) (5,563)

Financing activities

Proceeds from long-term debt — 23,165

Repayment of long-term debt (258) (23,414)

Tax withholding payments on share-based compensation — (412)

Payment on deferred financing costs (20) (50)

Net cash used in financing activities (5,854) (5,984)

Supplemental disclosures of cash flow information:

Cash paid during the period for interest, net of interest income $ 300 $ 349

Cash paid during the period for income taxes, net of refunds $ 108 $ 10,707

See accompanying notes to consolidated financial statements.

VIRCO MFG. CORPORATION

Notes to Consolidated Financial Statements

January 31, 2026

1. 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 76 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, the Company ships approximately 50% of its annual revenue in the months of June, July and August. In fiscal 2025 the Company benefited from a large series of one-time, disaster recovery shipments that resulted in approximately $23.0 million of additional shipments, most of which were counter-seasonal. In fiscal 2026, the Company returned to traditional seasonality and delivered approximately 49% 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; deferred tax assets and liabilities; useful lives of property, plant and equipment; liabilities under pension, warranty and self-insurance; and the accounts receivable allowance for credit losses.

Fiscal Year End

Fiscal years 2026 and 2025 refer to the fiscal years ended January 31, 2026 and 2025, 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. As of January 31, 2026, three customers accounted for approximately 14%, 11% and 10% of total accounts receivable. The majority of the outstanding balances from these customers were collected subsequent to year end. As of January 31, 2025, two customers each accounted for approximately 11% of total accounts receivable. 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, 2026 and 2025. Foreign net sales were approximately 4.2% and 12.3% of the Company’s net sales for fiscal years 2026 and 2025, respectively.

Cash and Cash Equivalents

Cash consists of cash on hand, and the Company has approximately $14.4 million in cash and cash equivalents as of January 31, 2026. 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 (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. Money market funds and marketable securities held in a rabbi trust that are being used to satisfy the Company's obligations under its VIP Plan are treated as investments and are recorded in prepaid expenses and other current assets or other assets on the accompanying consolidated balance sheets based on the expected timing of settlement of the related obligations (see Note 4).

Inventories

Inventories are valued at the lower of cost or net realizable value (determined on a first-in, first-out basis) and include 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, 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 a breakdown of the Company’s inventories:

January 31,

(In thousands)

Property, Plant and Equipment, Net

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 was $1.3 million and $2.3 million for fiscal years ended January 31, 2026 and 2025, respectively. Property, plant and equipment purchased during the year that remains unpaid were $197,000 and $1.8 million as of January 31, 2026 and 2025, 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 $505,000 and $445,000 at January 31, 2026 and 2025, respectively.

January 31,

(In thousands)

Balance at beginning of period $ 445 $ 212

Increase in obligation — 200

Accretion expense 60 33

Balance at end of period $ 505 $ 445

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 flow 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, 2026 and 2025.

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,

(In thousands, except per share)

Numerator

Denominator

Dilutive effect of common stock equivalents from equity incentive plans 10 7

Net income per common share

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, 2026 and 2025, the Company had not capitalized any remediation costs and had not recorded any amortization expense in fiscal years 2026 and 2025.

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, 2026 and 2025 of $1.4 million and $1.5 million, respectively, and are expensed as incurred. Prepaid advertising costs reported as a prepaid asset on the accompanying consolidated balance sheets at January 31, 2026 and 2025, were $459,000 and $397,000, 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, 2026 and 2025, as other long-term liabilities in the accompanying consolidated balance sheets. The current portion of the warranty reserves were $150,000 as of January 31, 2026 and 2025, and included in other accrued liabilities in the accompanying consolidated balance sheets.

Self-Insurance

In fiscal 2026 and 2025, 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 2026 and fiscal 2025. 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 $850,000 and $900,000 at January 31, 2026 and 2025, respectively, in the accompanying consolidated balance sheets. The current portion of the self-insurance reserve was $120,000 as of January 31, 2026 and 2025, and is 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 (Loss) Income, Net of Tax

The following table summarizes the changes in accumulated balances of other comprehensive (loss) income, net of income tax:

January 31,

(In thousands)

Balance as of beginning of year $ 422 $ (1,310)

Other comprehensive (loss) income before reclassifications (197) 1,874

Amounts reclassified from accumulated comprehensive loss (337) (142)

Net current period other comprehensive (loss) income (534) 1,732

Balance as of end of year $ (112) $ 422

The reclassifications out of accumulated other comprehensive income of $337,000 and $142,000 for the years ended January 31, 2026 and 2025, respectively, related primarily 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, 2026 and 2025, shipping and classroom delivery costs of approximately $22.6 million, and $26.4 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.

2. New Accounting Pronouncements

New Accounting Pronouncements Recently Adopted

Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures. In December 2023, the FASB issued this ASU amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. We adopted this ASU for the year ended January 31, 2026 and applied the amendments prospectively. Adoption of the new standard did not impact our consolidated income statements, balance sheets, or statements of cash flows. Refer to Note 6 for required disclosures.

Recently Issued Accounting Pronouncements

The Company evaluates all ASU's issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our consolidated financial statements. We have assessed all ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact.

ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. In July 2025, the FASB issued this ASU which provides a practical expedient to assume that the conditions as of the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. This guidance is effective for annual reporting periods beginning after December 15, 2025, and for interim periods within those annual reporting periods, with early adoption permitted. The amendments in ASU 2025-05 should be applied prospectively. We do not expect that this guidance will have a material impact on our consolidated financial statements and disclosures.

ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In November 2024, the FASB issued this ASU which requires a public entity to disclose additional information about specific expense categories in the notes to financial statements on an annual and interim basis. The amendments are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. A public entity should apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. We do not expect that this guidance will have a material impact on our consolidated financial statements and disclosures.

Table of Contents

3. Debt

Outstanding balances for the Company’s long-term debt are as follows:

January 31,

(In thousands)

Revolving credit line $ — $ —

The Company and Virco Inc., its wholly-owned subsidiary (collectively, the “Borrowers”) have a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”). The Credit Agreement was amended numerous times since its origination in December 2011, most recently on December 5, 2025.

The Credit Agreement as currently in effect permits the Company to issue cash dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $8.0 million during any fiscal year, provided that no default shall have occurred or is continuing or would result from any such payment, and the Company must demonstrate pro forma compliance with a 12-month trailing Fixed Charge Coverage Ratio ("FCCR") of not less than 1.20:1.00 as of the fiscal quarter immediately preceding the date of any such dividend or payment. The Credit Agreement also requires the Company to maintain a minimum FCCR, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers.

In addition to the financial covenants, the Credit Agreement provides for customary events of default, subject to certain cure periods and other limitations. Substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Credit Agreement upon receipt by the Borrowers. Due to this automatic liquidating nature of the Credit Agreement, if the Borrowers breach any covenant, violate any representation or warranty or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion.

The other material terms of the Credit Agreement as currently in effect include the following: (i) a revolving line of credit with a Maximum Revolving Advance Amount that is subject to a borrowing base limitation and generally provides for advances of up to 85% of eligible accounts receivable, plus a percentage equal to the lesser of 60% of the value of eligible inventory or 85% of the liquidation value of eligible inventory, plus $10.0 million from January through June of each year, minus undrawn amounts of letters of credit and reserves; (ii) inventory sublimit of $35.0 million and assemble-to-ship ("ATS") inventory sublimit of $15.0 million during the months of May through August; and (iii) an equipment loan of $2.0 million. The Credit Agreement is secured by substantially all of the Borrowers’ personal property and certain of the Borrowers’ real property. The Credit Agreement is subject to certain prepayment penalties upon early termination. Prior to the maturity date, principal amounts outstanding under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions, including reduced borrowings under the revolving line to less than or equal $10.0 million for a period of 30 consecutive days during the fourth quarter of each fiscal year. The Credit Agreement also contains certain financial covenants, including covenants requiring a minimum fixed charge coverage ratio and limits on capital expenditures. The Company was in compliance with its debt covenants as of January 31, 2026.

The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $28.0 million was available for borrowing as of January 31, 2026. The interest rate is determined as a sum of the applicable margin rate, which is 3.00% from January through July and 2.50% from August through December, plus the Secured Overnight Financing Rate ("SOFR"). The Company did not have an outstanding amount under the Credit Agreement as of January 31, 2026. The interest rate at January 31, 2026 was 8.5%. The Company also incurred a fee on the unused portion of the revolving line of credit at a rate of 0.250%.

On December 5, 2025, the Company entered into Amendment No. 7 to the Credit Agreement with PNC. Amendment No. 7 amended the Credit Agreement and the secured revolving line of credit provided to the Company by PNC to reflect the following material changes:

i.Modify the stock repurchase window (originally from February 1, 2025 to January 31, 2026) such that the window is now from November 1, 2024 to October 31, 2025 for the $7.5 million of permitted share repurchases that are excluded from a) the FCCR testing, b) the Payment Conditions governing stock repurchases, and c) the trailing twelve months ("TTM") $8.0 million aggregate limit on stock repurchases and dividends.

ii.Commencing with respect to the fiscal quarter ending October 31, 2025, modify the definition of Earnings Before Interest, Taxes, Depreciation, and Amortization as it relates to the FCCR testing to add back non-cash lease expense or subtract non-cash lease income for each TTM reporting period.

iii.Reduce the Revolving Line of Credit limit by $10.0 million, except for the months of October, December, and January. The maximum Revolving Line of Credit limit during June through August was reduced from $70.0 million to $60.0 million.

iv.Reduce the $15.0 million seasonal over-advance to $10.0 million and limit to the months of January through June (removing access in the month of July).

In connection with this amendment, the Company paid fees totaling $20,000 which were capitalized as deferred financing costs and are included in other assets on the accompanying consolidated balance sheets.

On April 9, 2025, the Company entered into Amendment No. 6 to the Credit Agreement with PNC, which established a new category of permitted share repurchases in an amount up to $7.5 million, which is in addition to the dollar limits on permitted share repurchases under the Credit Agreement discussed above. The share repurchases under the new category must occur during the fiscal year ended January 31, 2026, may not occur while any Default or Event of Default exists or would result from such repurchases, and must be made solely from cash on hand and not from the proceeds of advances under the Credit Facility. The permitted share repurchases under this new category are also not counted as “Restricted Payments” when calculating the Company’s compliance with the Fixed Charge Coverage Ratio covenants in the Credit Agreement.

On November 22, 2024, the Company entered into Amendment No. 5 to Amended and Restated Revolving Credit and Security Agreement (“Amendment No. 5”) with PNC, with an effective date of October 1, 2024. Amendment No. 5 amended the Credit Agreement and the secured revolving line of credit provided to the Company by PNC to reflect the following material changes:

i.Reduced the facility fee on the unused portion of the revolving line of credit to 0.250% from 0.375% per annum, commencing October 1, 2024.

ii.Increased limits on permitted acquisitions (as defined in the Credit Agreement) from $5 million to $8 million during the term of the Credit Agreement.

iii.Increased limits on cash dividends and common stock repurchase payments from $5 million to $8 million in the aggregate during any fiscal year.

The Company also carries a mortgage on a manufacturing building in Conway, Arkansas. The original note was dated August 2017 for $5.8 million, at a fixed rate of 4.0% per year and 20-year term. The outstanding amount under this note was $3.9 million as of January 31, 2026.

Long-term debt repayments as of January 31, 2026 (in thousands) are as follows:

Year ending January 31,

Management believes that the carrying value of debt approximated fair value at January 31, 2026 and 2025, as all of the long-term debt bears interest at variable rates based on prevailing market conditions, except the mortgage for the manufacturing building in Conway, Arkansas.

4. Retirement Plans

Pension Plans

The Company maintains two defined benefit pension plans, the Virco Employees Retirement Plan (“Employee Plan”), and the Virco Important Performers Retirement Plan (“VIP Plan”). The annual measurement date for both plans is January 31. The Company and its subsidiaries cover all employees hired prior to December 31, 2003 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. All benefits were fully vested as of January 31, 2026 and 2025.

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. Benefit accruals under the VIP Plan were frozen effective December 31, 2003.

In September 2025, the Company's Board of Directors approved the termination of the VIP Plan. The termination became effective on November 1, 2025. The VIP Plan's benefit obligation is expected to be settled by offering lump sum distributions to participants funded by the liquidation of assets held in a rabbi trust during the fourth quarter of fiscal 2027. Pension settlement charges related to the VIP Plan termination, which include the recognition of VIP Plan gains or losses recorded within accumulated other comprehensive (loss) income on the Company's consolidated balance sheets, are currently expected to be recognized during the fourth quarter of fiscal year 2027. The Company anticipates that the termination will not materially impact the Company's consolidated financial statements.

Substantially all assets, consisting of life insurance contracts, equity investments, and cash equivalents, securing the VIP Plan are held in a rabbi trust. The cash surrender values of the life insurance policies are included in other assets and money market funds in the accompanying consolidated balance sheets. The cash surrender values of the life insurance policies securing the VIP Plan were $439,000 and $562,000 at January 31, 2026 and 2025, respectively. Death benefits payable under life insurance policies held by the Plan were approximately $736,000 and $894,000 at January 31, 2026 and 2025, respectively. Equity investments held in the rabbi trust to secure retirement benefits were $8.7 million and $8.4 million as of January 31, 2026 and 2025.

As of January 31, 2026, rabbi trust assets of $6.8 million are included in prepaid expenses and other current assets on the accompanying balance sheet and are expected to be liquidated to fund the settlement of the VIP Plan pension obligation during the fourth quarter of fiscal year 2027. Management intends to hold the remaining rabbi trust assets as long-term investments and as such they are included in other non-current assets on the accompanying balance sheet.As of January 31, 2025, assets held in the rabbi trust were included in other non-current assets on the accompanying consolidated balance sheet.

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 plan settlements.

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. Discount rates for the Employee Plan and the VIP Plan were 3.85% - 5.40% and 5.55% - 5.60% at January 31, 2026 and 2025, respectively.

Because the Company’s future benefit accruals for both benefit plans were frozen in 2003, the compensation increase assumption had no impact on pension expense, accumulated benefit obligation or projected benefit obligation for the years ended January 31, 2026 or 2025.

The assumed rate of return for both benefit 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 retirement 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 66% 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 Company’s investment advisors have developed a funding strategy that moves fund asset allocation from equity and other investments to fixed income instruments designed to mirror the changes in discount rates as the Retirement Plan becomes more fully funded. At January 31, 2026, approximately 31% of the trust assets were held in these investments. The Retirement Plan Committee receives quarterly reports addressing investment returns, funded status of the Retirement Plan and progress on the glidepath to fully funded status from the investment advisors and meets periodically with them to discuss investment performance. At January 31, 2026 and 2025, the amount of the Retirement Plan assets invested in bond or short-term investment funds was 32.1% and 26.3%, respectively, and the balance of the trust was held in equity funds or other 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 to maintain the funded status of the Employee Plan at a level which is adequate to avoid significant restrictions to the Employee Plan under the Pension Protection Act of 2006. Contributions to the Qualified Plan Trust and benefit payments under the VIP Plan totaled $357,000 in fiscal 2026 and $623,000 in fiscal 2025. Contributions during fiscal 2027 will depend upon actual investment results and benefit payments but are anticipated to be $0. At January 31, 2026 and 2025, accumulated other comprehensive (loss) income, net of tax, attributable to the pension plans was approximately $(112,000) and $422,000, respectively.

The following tables set forth the combined funded status of the Company’s pension plans:

Employee Retirement Plans

January 31,

(In thousands)

Change in Benefit Obligation

Benefit obligation at beginning of year $ 26,824 $ 27,385

Service cost — —

Participant contributions — —

Amendments — —

Actuarial losses (gains) 4 (765)

Plan settlement (60) —

Prior service cost 176 —

Change in Plan Assets

Actual return on plan assets 618 2,352

Settlements — —

Funded Status

Unfunded status of the plans $ (6,238) $ (5,785)

Amounts Recognized in Statement of Financial Position

Current liabilities $ (6,357) $ (384)

Non-current assets (liabilities) 119 (5,401)

Amounts Recognized in Statement of Financial Position and Operations

Accrued benefit liability $ (6,238) $ (5,785)

Accumulated other comprehensive gain (1,109) (1,822)

Net amount recognized $ (7,347) $ (7,607)

Unrecognized net actuarial gain $ (1,285) $ (1,822)

Unamortized prior service costs 176 —

Net initial asset recognition — —

Employee Retirement Plans

January 31,

(In thousands, except percentages)

Prior service cost 176 —

Recognized loss due to settlement (26) —

Amortization of initial asset — —

Total recognized in other comprehensive income $ 713 $ (2,316)

Prior service cost $ 176 $ —

Supplemental Data

Components of Net Cost

Service cost $ — $ —

Expected return on plan assets (836) (675)

Amortization of transition amount — —

Recognized loss due to settlement 26 —

Amortization of prior service cost — —

Recognized net actuarial gain (363) (125)

Estimated Future Benefit Payments

Weighted Average Assumptions to Determine Benefit Obligations at Year-End

Rate of compensation increase N/A N/A

Weighted Average Assumptions to Determine Net Periodic Pension Cost

Expected return on plan assets 6.00% 6.00%

Rate of compensation increase N/A N/A

The Employee Plan held no Level 2 or 3 investments at January 31, 2026 and 2025. The following table sets forth the fair value of the Level 1 investments for the Employee Plan:

Fair Value Measurements of Plan Assets

Employee Plan

January 31,

(In thousands)

Level 1 Measurement

Federated Herme Gove Oblig 200 260

Vanguard INTM Term Investment 864 771

Ishares Russell MID-CAP 22 20

Ishares Emerging Markets 23 17

Ishares MSCI EAFE 53 42

Ishares S&P Index 22 19

Vanguard INTM Term Treasury 867 774

In addition to the holdings above, the Employee Plan has a holding in a mutual fund investment, Managed Investment Fund. The mutual fund investment is valued using the net asset value (“NAV”) as a practical expedient and is not required to be categorized in the fair value hierarchy table. The total fair value of this investment was $133,000 and $2.5 million as of January 31, 2026 and 2025, and is not included in the table above. In relation to this investment, there are no unfunded commitments, and the shares can be redeemed on a daily basis with minimal restrictions. Events that may lead to a restriction to transact with the fund is not considered probable.

401(k) Retirement Plan

The Company’s retirement plan, which covers all U.S. employees, allows participants to defer from 1% to 75% of their eligible compensation through a 401(k) retirement program. The plan continues to include Virco stock as one of the investment options. At January 31, 2026 and 2025, the plan held 1,113,175 shares and 1,058,400 shares of the Company’s common stock, respectively. The Company may make a discretionary employer match in the Company Stock Fund. The Company may also make additional employer contributions to the Plan at its sole discretion. Any contribution may be made in cash or in shares of Company common stock. The total amount of Company contributions cannot exceed the amount deductible by the Company for federal income tax purposes. For the fiscal years ended January 31, 2026 and 2025, the compensation costs incurred for employer match were $2.0 million and $1.7 million, respectively.

Life Insurance

The Company provided post-retirement life insurance to certain retired employees under the Dual Option Life Insurance Plan (the "Plan"). Effective January 2004, the Company terminated this plan for active employees. The Company has purchased split-dollar life insurance on the lives of the remaining covered participants. Death benefits due to participants were approximately $1.0 million and $1.3 million at January 31, 2026 and 2025, respectively. Cash surrender values of these policies, which are included in other assets in the accompanying consolidated balance sheets, were $739,000 and $932,000 at January 31, 2026 and 2025, respectively. Death benefits payable under the policies were approximately $1.9 million and $2.2 million at January 31, 2026 and 2025, respectively. Death benefits received under the Plan in excess of the benefit obligation will be retained in the trust and used to secure and fund benefits payable under the VIP Pension Plan. The Company maintains a rabbi trust to hold assets related to the Dual Option Life Insurance Plan. All securing assets held in the rabbi trust were included in other assets on the accompanying consolidated balance sheets.

The following sets forth the Company's change in death benefits payable:

January 31,

(In thousands)

Liability, beginning of year $ 1,345 $ 1,468

Accretion expense 13 27

Death benefits paid (400) (150)

Liability, end of year $ 958 $ 1,345

5. Stock-Based Compensation

Stock Incentive Plan

Under the Company's 2019 Employee Stock Incentive Plan (the “2019 Plan”), the Company may grant an aggregate of 1,000,000 shares to its employees in the form of restricted stock units and non-employee directors in the form of restricted stock awards. Restricted stock awards granted under the 2019 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted. During fiscal year 2026, the Company granted 23,003 awards to non-employee directors, vested 16,066 shares according to their terms and forfeited zero shares under the 2019 Plan. As of January 31, 2026, there were 498,856 shares available for future issuance under the 2019 Plan.

The following table summarizes the stock-based compensation expense related to restricted stock awards recognized in the Company's statement of operations:

January 31,

(In thousands)

Cost of goods sold $ — $ 37

Selling, general and administrative expenses 208 358

Total stock-based compensation expense $ 208 $ 395

The following table summarizes the Company’s restricted stock unit awards activity, and related information:

January 31,

Forfeited — — — —

As of January 31, 2026, there was $62,000 of total unrecognized compensation expense related to restricted stock awards. That expense is expected to be recognized over a weighted-average period of 0.3 years. As of January 31, 2025, there was $83,000 of total unrecognized compensation expense related to restricted stock awards. That expense was recognized during fiscal 2026.

To satisfy employee minimum statutory tax withholding requirements for restricted stock awards that vest, the Company withholds and retires a portion of the vesting common shares, unless an employee elects to pay cash. In fiscal 2026, the Company withheld no common shares. In fiscal 2025, the Company withheld 27,872 common shares, with a value of approximately $412,000. These amounts are presented as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

6. Income Taxes

Our effective tax rate was 25.8%, and is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets. The One Big Beautiful Bill ("OBBB") Act did not have a material impact on the Company's effective income tax rate for fiscal 2026, which the Company believes is representative of rates that will affect fiscal 2027. A summary reconciliation of the effective tax rate by amount and percentage is as follows:

January 31,

(In thousands, except percentages)

U.S. federal statutory rate $ 727 21.0 %

State income taxes, net of federal income tax effect (1) 150 4.3

Effect of changes in tax laws or rates enacted in current period:

Rate adjustment - state — —

Effect of cross-border tax laws:

Foreign-derived intangible income — —

Change in valuation allowance — —

Nontaxable or nondeductible items:

Meals and entertainment 39 1.1

Change in unrecognized tax benefits 21 0.6

Income tax expense $ 895 25.8 %

(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California and Arkansas.

A summary reconciliation of the effective tax rate is as follows:

January 31,

(In thousands)

State taxes (net of federal tax) 1,197

Change in valuation allowance (15)

State rate adjustment 83

Change in unrecognized tax benefits 65

Stock compensation (315)

Expirations of attributes 21

Permanent differences (278)

Return to provision true-up 11

Income tax expense $ 6,780

Significant components of the expense for income taxes attributed to continuing operations are as follows:

January 31,

(In thousands)

Current

Deferred

Change in valuation allowance (5) (15)

Deferred tax assets and liabilities are comprised of the following:

January 31,

(In thousands)

Deferred tax assets

Accrued vacation and sick leave $ 892 $ 2,238

Net operating loss carryforwards 471 439

Deferred tax liabilities

Tax in excess of book depreciation (788) (804)

Valuation allowance (231) (236)

Net long term deferred tax asset $ 5,437 $ 5,821

In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion or all of its deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carry backs, tax-planning strategies, and results of recent operations (including cumulative income or losses in recent years), to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets.

At January 31, 2026, the Company recorded a partial valuation allowance of $231,000 on certain state net operating losses ("NOLs") to reduce the carrying amount of deferred tax assets to an amount that is more-likely-than-not to be realized. The net change in the valuation allowance for the year ended January 31, 2026, was a decrease of $5,000. At January 31, 2026, the Company had no NOLs for U.S. federal tax purposes and $8.2 million for state income tax purposes, expiring at various dates through January 31, 2045. The net change in the valuation allowance for the year ended January 31, 2025, was a decrease of $15,000. At January 31, 2025, the Company had no NOLs for U.S. federal tax purposes, and $6.3 million for state income tax purposes, expiring at various dates through January 31, 2041.

The following table summarizes the activity related to our gross unrecognized tax benefits:

January 31,

(In thousands)

Beginning balances as of January 31, $ 157 $ 92

Increases related to prior year tax positions — 15

Decreases related to prior year tax positions — —

Increases related to current year tax positions 17 57

Decreases related to lapsing of statute of limitations (7) (7)

Ending balance as of January 31, $ 167 $ 157

At January 31, 2026, the Company’s unrecognized tax benefits associated with uncertain tax positions were $167,000, of which $132,000, if recognized, would favorably affect the effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense which is consistent with the recognition of the items in prior reporting. The Company had recorded a liability for interest and penalties related to unrecognized tax benefits of $59,000 at January 31, 2026, and $50,000 at January 31, 2025. The year ended January 31, 2019 and subsequent years remain open for examination by the IRS and state tax authorities. The Company is not currently under IRS or state examination.

The specific timing of when the resolution of each tax position will be reached is uncertain. As of January 31, 2026, it is reasonably possible that unrecognized tax benefits will decrease by $4,600 within the next 12 months due to the expiration of the statute of limitations.

State taxes in California, Texas, Alabama and Maryland made up the majority (greater than 50%) of the Company's state and local taxes for the year ended January 31, 2026.

A summary of income taxes paid is as follows:

January 31,

(In thousands)

Federal $ —

State

Virginia 18

Maryland 17

South Carolina 8

In the current year, the jurisdictions with cash taxes paid that equaled or exceeded 5% of total income taxes paid were Alabama, Texas, Virginia, Maryland and South Carolina.

7. Leases

The Company has operating leases on real property, equipment, and automobiles, expiring at various dates through fiscal 2031. The Company determines if an arrangement is a lease at inception and assesses classification of the lease at commencement. All of the Company’s leases are classified as operating leases. Pursuant to Accounting Standards Codification (ASC) 842 Leases, the Company uses the implicit rate when readily determinable, or the incremental borrowing rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using Company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term.

The Company has an operating lease for its corporate office, manufacturing facility and distribution facility located in Torrance, CA, currently with a remaining lease term through September 2030. The Company leases equipment under a 5-year operating lease arrangement. The Company has the option of buying the assets at the end of the lease period at a price that does not result in the Company being reasonably certain of exercising the option. In addition, the Company leases trucks and automobiles under operating leases that include certain fleet management and maintenance services. Certain of the leases contain renewal or purchase options and require payment for property taxes and insurance. The Company records lease expense on a straight-line basis based on the contractual lease payments. In accordance with ASC 842, the Company recognizes the present value of the future lease commitments as an operating lease liability, and a corresponding right-of-use asset (“ROU asset”), net of tenant allowances. Tenant improvements and related tenant allowances are recorded as a reduction to the ROU asset. The Company elected to account for leases with an original term of 12 months or less that do not contain a purchase option as short-term leases. Additionally, certain of the leases provide for variable payment of property taxes, insurance, and common area

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maintenance payments among others. The Company recognizes variable lease expenses for these leases in the period incurred. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The quantitative information regarding our leases is as follows:

Years ended January 31,

(In thousands)

Sublease income (40) (40)

Other operating leases information:

Weighted-average remaining lease term (years) 4.6 5.5

Weighted-average discount rate 9.84 % 9.80 %

Minimum future lease payments for operating leases in effect as of January 31, 2026 are as follows:

Operating Lease

Year ending January 31, (In thousands)

Remaining balance of lease payments 45,789

Short-term lease liabilities 6,490

Long-term lease liabilities 30,006

Total lease liabilities 36,496

Difference between undiscounted cash flows and discounted cash flows $ 9,293

On July 23, 2024, the Company entered into a new lease agreement (the “Lease”) with Starboard Distribution Center, LLC which extends the Company’s tenancy at its 560,000 sq. ft. office, manufacturing and warehouse facility in Torrance, California. The Lease extends the tenancy for 65 months, covering the period from May 1, 2025 through September 30, 2030. Under the Lease, the monthly base rent will be abated for the initial 5-month period from May 1, 2025 to September 30, 2025, then is set at $726,700 for October 1, 2025 through April 30, 2026, with subsequent increases of 3.5% every 12 months thereafter. The Lease also provides for a tenant improvement allowance of up to $1.7 million to be used by December 31, 2026, which remained fully available as of January 31, 2026. The Landlord has the right to terminate the Lease upon customary events of default. In connection with this lease agreement, in the second quarter ended July 31, 2024, the Company recorded approximately $33.0 million (the present value of the future lease commitments) as an operating lease liability, and a corresponding ROU asset.

8. Commitments and Contingencies

The Company and other furniture manufacturers are subject to federal, state, and local laws and regulations relating to the discharge of materials into the environment and the generation, handling, storage, transportation and disposal of waste and

hazardous materials. The Company has expended, and expects to continue to spend in the future, significant amounts to comply with environmental laws. Recurring expenses relating to operating the Company factories in a manner that meets or exceeds environmental laws are matched to the cost of producing inventory. Despite the Company’s 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 applicable laws and regulations change. On these occasions, the Company records liabilities for remediation costs when remediation costs are probable and can be reasonably estimated.

The Company is subject to contingencies pursuant to environmental laws and regulations that in the future may require the Company to take action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the Company or other parties.

The Company has a self-insured retention for product liability losses up to $250,000 per occurrence, workers’ compensation liability losses up to $250,000 per occurrence, general liability losses up to $50,000 and automobile liability losses up to $50,000 per occurrence. The Company has purchased insurance to cover losses in excess of the retention up to a limit of $30.0 million. The Company recorded a liability for its actuarially estimated future losses for liability claims at net present value of $850,000 and $900,000 at January 31, 2026 and 2025, respectively, based upon the Company’s estimated payout period of five years using a 4.0% discount rate for both years. The estimated liabilities are included in the current and long-term portion of liabilities of the accompanying consolidated balance sheets.

Workers’ compensation, automobile, general and product liability claims may be asserted in the future for events not currently known by management. Management does not anticipate that any related settlement, after consideration of the existing reserve for claims incurred and potential insurance recovery, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Estimated payments under the self-insurance programs are as follows:

Year ending January 31, (In thousands)

Discount to net present value (87)

VIRC US Equity

VIRC · 10-K · period ended 2026-01-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

VIRC US Equity☆

VIRC · 10-K · period ended 2026-01-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

VIRC US Equity