11-K 1 a401kplan_202011kxdol.htm 11-K Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 11-K

(Mark One)
x    
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 2020
OR
¨TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-8777
Virco Mfg. Corporation 401(k) Plan
Virco Mfg. Corporation
2027 Harpers Way
Torrance, California 90501


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INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE


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Report of Independent Registered Public Accounting Firm


To the Plan Administrator and Participants of
Virco Mfg. Corporation 401(k) Plan:

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of Virco Mfg. Corporation 401(k) Plan (the "Plan") as of December 31, 2020 and 2019, and the related statement of changes in net assets available for benefits for the year ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2020 and 2019, and the changes in net assets available for benefits for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements 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 Plan 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

Supplemental Information

The supplemental information in the accompanying schedule of assets (held at end of year) as of December 31, 2020 has been subjected to audit procedures performed in conjunction with the audit of Plan’s financial statements. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying schedule, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.


/S/ KBF CPAs LLP

We have served as the Plan’s auditor since 2011.

Irvine, California
June 28, 2021


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Virco Mfg. Corporation 401(k) Plan
Statements of Net Assets Available for Benefits


 December 31
 20202019
Assets
Investments, at fair value:
Common collective trust$2,077,381 $1,658,231 
Mutual funds31,736,807 26,986,507 
Common stock2,413,351 3,217,997 
36,227,539 31,862,735 
Receivables:
Employee contribution receivable35,603 — 
Employer contribution receivable37,255 15,632 
Notes receivable from participants1,181,943 1,124,094 
1,254,801 1,139,726 
Total assets37,482,340 33,002,461 
Liabilities
Refund of excess contributions69,715 33,593 
Total liabilities69,715 33,593 
Net assets available for benefits$37,412,625 $32,968,868 

See accompanying notes to the financial statements.

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Virco Mfg. Corporation 401(k) Plan
Statement of Changes in Net Assets Available for Benefits

 Year Ended December  31,
2020
Additions to net assets attributed to:
Contributions:
Participant contributions$2,521,158 
Rollover contributions291,195 
Employer contributions779,313 
Total contributions3,591,666 
Net investment income:
Interest and dividends719,313 
Net appreciation in fair value of investments2,590,232 
Total net investment lncome3,309,545 
Interest on notes receivable from participants59,509 
Other income109,743 
Deductions from net assets attributed to:
Benefits paid to participants(2,391,805)
Corrective distribution payments(387)
Administrative expenses(234,514)
Net increase4,443,757 
Net assets available for plan benefits:
Beginning of year32,968,868 
End of year$37,412,625 

See accompanying notes to the financial statements.

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Virco Mfg. Corporation 401(k) Plan
Notes to the Financial Statements
December 31, 2020


1. Plan Description

The following description of the Virco Mfg. Corporation 401(k) Plan (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions.

General

Virco Mfg. Corporation ("Virco" or the "Company") established the Plan to comply with section 401(a) of the Internal Revenue Code (the “IRC”) as a profit sharing plan subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan is designed to enable employees to save for retirement and defer payment of income taxes on the amount invested and earnings thereon. A Plan committee comprised of at least two persons appointed by the Company's Board of Directors administers the Plan.

The trustee, Reliance Trust Company ("Reliance Trust"), invests the Plan's assets at the direction of the participants and makes distributions to participants.

Eligibility

Employees of the Company excluding leased employees, non-resident aliens, certain part-time or seasonal employees, or employees covered by a collective bargaining agreement not expressly providing inclusion in the Plan, are eligible to participate in the Plan if they have attained at least 18 years of age and have completed one month of eligible service.

Contributions

Eligible employees may defer 1% to 75% of eligible compensation on a pre-tax basis, limited to $19,500 in 2020 as prescribed by the IRC. Participants who have attained age 50 before the end of the Plan year are eligible to make additional catch-up contributions.

Effective January 1, 2018, the Company initiated a discretionary employer match, in Company stock, equal to 50% of the first 5% of the amount deferred by the employee. 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. 

Participant Accounts

Participants can direct their account balances into a variety of investments offered by Reliance Trust, including shares of Virco Unitized Stock. The Virco Unitized Stock is a unitized investment which consists of Virco common stock and investment in a money market fund. Investment election changes may be made on a daily basis. Individual accounts are maintained for each of the Plan's participants to reflect the participant's contributions, the Company's contributions, if any, and an allocation of the Plan's earnings (losses) and expenses. The benefit to which a participant is currently entitled is the benefit that can be provided from the participant's vested account.

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Payment of Benefits

Upon reaching retirement age, termination of service or death, a participant or beneficiary may elect to receive a lump-sum amount equal to the participant's vested account balance. Additionally, participants still employed by the Company who have reached 59 ½ years of age may take an in-service distribution from their elective deferrals made to the Plan.  Company stock held in the participant's account may be distributed in stock unless the participant requests the distribution in cash in lieu of stock. Participants eligible for distributions may elect that their vested balance be rolled over into another eligible retirement plan. Account balances less than $1,000 can be distributed in a single lump-sum cash payment to the participant or beneficiary at the discretion of the Company. 

Hardship Withdrawals

Upon certain conditions, participants, while still employed by the Company, are permitted to withdraw, in a single sum, a portion of their vested account as a result of an immediate and heavy financial need. These conditions include unreimbursed medical expenses, the purchase of the participant's principal residence, the payment of post-secondary education tuition, the payment of burial or funeral costs of immediate family members, the payment of natural disaster clean-up on the participant's principal residence or to prevent eviction or foreclosure from the participant's principal residence.

Vesting
 
A participant is immediately 100% vested in the value of his or her contributions and earnings thereon. Additionally, a participant is automatically 100% vested in the value of all employer contributions on the participant's 65th birthday, death, or if the participant becomes permanently disabled while still employed by the Company. However, if employment terminates before the age of 65 for a reason other than death or disability, the participant's vesting in the value of any matching or other Company contributions will be based upon the participant's years of vesting service and in accordance with the following schedule:
Years of ServiceVested Interest
Less than 20 %
220 %
340 %
460 %
580 %
6 or more100 %

The amount to which the participant is not vested is subject to forfeiture in accordance with the provisions of the Plan. Forfeitures may be used to pay administrative expenses or to reduce matching contributions. At December 31, 2020 and 2019, forfeitures of approximately $20 and $576, respectively, were available to offset future employer contributions or Plan expenses.

Voting Rights

All shares of Company common stock allocated to participant accounts are voted by Reliance Trust in accordance with the participant's instructions. Allocated shares not voted by participants are voted pro rata by Reliance Trust based on votes actually cast by participants.

Notes Receivable from Participants

Participants may borrow the lesser of $50,000 or 50% of their vested account balance, subject to a $1,000 minimum and certain other restrictions. Loans are secured by the vested account balance of the participant. Loans are repayable through payroll deductions over periods ranging up to five years, unless the loan is used to acquire a principal residence, in which case the loan term may be extended to ten years. Participant loans, when initiated, bear interest at the prime rate as of the beginning of quarter in which the loan was originated plus 1%. The interest rate on outstanding loans at December 31, 2020 ranged from 4.25% to 6.50% per annum, and loans mature through 2030.


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Impact of the Coronavirus Aid, Relief, and Economic Security Act

Effective April 7, 2020, the Plan implemented the distribution provision of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act that was signed into law on March 27, 2020. A CARES Act distribution allows the Plan's participants to take a COVID-19 related distribution up to $100,000 from the Plan beginning on or after January 1, 2020 and before December 31, 2020. In addition, the Plan adopted the temporary loan rules and repayment deferral provision of the CARES Act. These provisions allow the participant to increase the amount of their outstanding loans to $100,000 and allows qualified Plan participants who have Plan loan repayments to defer such repayments until December 31, 2020.

2. Summary of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements have been prepared on an accrual basis of accounting.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management of the Plan to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Investment Valuation and Income Recognition

Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 4 for discussion of fair value measurements.

Net appreciation in fair value of investments consists of the net change in unrealized gains or losses during the year and the realized gain or loss on investments sold during the year.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis, and dividends are recorded on the ex-dividend date.

Notes Receivable from Participants

Notes receivable from participants are recorded at their unpaid principal balance plus accrued but unpaid interest.

Payment of Benefits

Benefits are recorded when paid.

Revenue Credits

During 2014, the Plan entered into an agreement with the trustee whereby the trustee shares certain revenue generated by the Plan in excess of their fees. These deposits are included in other income on the statement of changes in net assets available for benefits and are available to pay for Plan expenses or to be reallocated to participants. During 2020, revenue credits of approximately $110,000 were deposited into the Plan.

Administrative Expenses

Substantially all direct expenses of the Plan are paid by the Plan Sponsor, Virco Mfg. Corporation. Certain indirect expenses are included in the transaction prices of the investments bought and sold and are not separately identified in the statement of changes in net assets available for benefits.

New Accounting Pronouncements

Accounting Standard Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements in Topic 820, including the removal, modification to, and addition of certain disclosure requirements. This ASU
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is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. The majority of the disclosure changes are to be applied on a prospective basis. The Plan adopted the ASU during 2020. The ASU’s adoption did not have a significant impact on the financial statements.

3. Investments

Plan assets are held by Reliance Trust at December 31, 2020 and 2019. Upon enrollment in the Plan, a participant may direct employee contributions among any or all of the investment options.

Participants may change investment choices any business day by transferring a percentage from one investment alternative to another effective as of the end of any business day. The investments in mutual funds and common collective trust are valued at the closing net asset value ("NAV") per share as determined by the appropriate fund portfolio on a daily basis.

The MetLife Reliance Stable Value Fund (the “SVF”) is a common collective trust investing primarily in certain MetLife group annuity contracts offered by Metropolitan Life Insurance Company. The SVF is valued at fair value based on the NAV of the underlying investments. The NAV per unit is computed by dividing the total assets of the SVF, less its liabilities, by the total number of units outstanding at the time of such computation.

Certain events limit the ability of the Plan to transact at NAV (contract value) with the issuer. Such events include but may not be limited to the following: (1) the complete or partial termination of the Plan (2) bankruptcy of the Plan sponsor or other Plan sponsor events (for example, divestitures or spin-offs of a subsidiary) that cause a significant withdrawal from the Plan, or (3) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA. The Plan Administrator does not believe that any of the events which could limit the Plan’s ability to transact at contract value with participants are probable of occurring.

4. Fair Value Measurements

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1 -    Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2 -    Inputs to the valuation methodology include:
•Quoted prices for similar assets or liabilities in active markets;
•Quoted prices for identical or similar assets or liabilities in inactive markets;
•Inputs other than quoted prices that are observable for the asset or liability;
•Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 -    Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2020 and 2019.

Money market fund: Valued at the NAV of the fund at year end. NAV is also the quoted market price as of the reporting date.
 
Common collective trust: Investments in common collective trust is valued at NAV, which is based on the aggregate current fair values of the underlying assets in relation to the total number of units outstanding. The common collective trust has no
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unfunded commitments as of December 31, 2020, and can be redeemed daily with no redemption notice period or other redemption restrictions.

Mutual funds: Valued at the NAV of shares held by the Plan at year end. NAV represents the sum of the underlying investments and represents the price at which the funds are traded on active markets.

Common stock: Valued at the closing price reported in the active market.

The following table sets forth by level, within the fair value hierarchy, the Plan's investment assets at fair value as of December 31, 2020 and 2019:
 Investment Assets at Fair Value as of December 31, 2020
 Level 1Level 2Level 3Total
Virco Mfg. Corporation common stock$2,345,695 $— $— $2,345,695 
Money market fund held by Virco Unitized Stock67,656 — — 67,656 
Mutual funds31,736,807 — — 31,736,807 
Common collective trust— 2,077,381 — 2,077,381 
Total investment assets at fair value$34,150,158 $2,077,381 $— $36,227,539 

 Investment Assets at Fair Value as of December 31, 2019
 Level 1Level 2Level 3Total
Virco Mfg. Corporation common stock$3,083,074 $— $— $3,083,074 
Money market fund held by Virco Unitized Stock134,923 — — 134,923 
Mutual funds26,986,507 — — 26,986,507 
Common collective trust— 1,658,231 — 1,658,231 
Total investment assets at fair value$30,204,504 $1,658,231 $— $31,862,735 

The shares of Virco Unitized Stock are valued on a unitized basis and hold Virco Mfg. Corporation common stock and a money market fund. Unitization of the investment allows for daily trades and the value of a unit reflects the combined value of the Virco Mfg. Corporation common stock and the money market fund held in the fund. At December 31, 2020 and 2019, this investment held 927,157 shares and 735,642 shares of Virco Mfg. Corporation common stock, respectively.

5. Risks and Uncertainties

The Plan's assets are invested in a variety of investments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, foreign currency and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits, and therefore participant account balances.

6. Related Party Transactions

Certain Plan investments are managed by Reliance Trust as of December 31, 2020 and 2019. Reliance Trust is the trustee as defined by the Plan and, therefore, these investments and investment transactions qualify as party-in-interest transactions. Certain investment fees are paid by the trustee and are reflected in the investment income or loss for the year. The Plan also issues loans to participants that are secured by the vested balance in the participants' accounts. As such, these transactions qualify as party-in-interest transactions, which are exempt from the prohibited transactions rules.

Additionally, the Plan sponsor, Virco Mfg. Corporation, is a party-in-interest to the Plan; however, there were no transactions with the Plan Sponsor other than the funding of contributions to the Plan and payment of certain administrative expenses of the Plan, which are exempt transactions.

7. Income Tax Status

Effective December 4, 2015, the Plan was restated utilizing the Automatic Data Processing (“ADP”) Defined Contribution Plan Non-standardized 401(k) Profit Sharing Plan document.  ADP received an opinion letter dated July 16, 2014, in which the
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Internal Revenue Service ("IRS") stated that as of that date the Plan document was designed in compliance with the applicable requirements of the IRC. The Plan has been amended since that date, however, the Plan Administrator believes the Plan continues to be operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt.

Assuming it meets certain initial and ongoing requirements, the Plan is generally exempt from federal and state income taxes. However, generally accepted accounting principles requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2020, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

8. Plan Termination

Although it has not expressed any intention to do so, the Company reserves the right to change or discontinue the Plan at any time subject to the provisions of ERISA. In the event of Plan termination, the participants will become fully vested in their accounts.

9. Reconciliation to Form 5500
 
The following is a reconciliation of net assets available for benefits per the Plan's financial statements to amounts included in the Plan's Form 5500:
 December 31
 20202019
Net assets available for benefits per the Plan’s financial statements$37,412,625 $32,968,868 
Add refund of excess contribution payable at end of year69,715 33,593 
Less participants deemed distributed loans(38,347)(9,998)
Net assets available for benefits per the Plan’s Form 5500$37,443,993 $32,992,463 
The following is a reconciliation of changes in net assets available for benefits per the Plan’s financial statements to amounts included in the Plan’s Form 5500:
 Year ended December, 31
2020
Changes in net assets available for benefits per the Plan’s financial statements$4,443,757 
Add refund of excess contribution payable at end of year69,715 
Less refund of excess contribution payable at beginning of year(33,593)
Change in participants deemed distributed loans at end of year(28,349)
Change in net assets available for benefits per the Plan’s Form 5500$4,451,530 



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Virco Mfg. Corporation 401(k) Plan

EIN: 95-1613718 Plan Number: 002
Schedule H, Line 4i—Schedule of Assets (Held at End of Year)
December 31, 2020
Name of IssuerDescription of
Investment		Number of
Units		Current Value
* Metlife Reliance Stable Value Fund Class 10Common collective trust17,037 $2,077,381 
TIAA-CREF Lifecycle Index 2055 InstitutionalMutual fund13,918 286,704 
TIAA-CREF Lifecycle Index 2010 InstitutionalMutual fund584 10,234 
TIAA-CREF Lifecycle Index 2025 InstitutionalMutual fund339,261 7,188,944 
TIAA-CREF Lifecycle Index 2020 InstitutionalMutual fund165,236 3,268,366 
TIAA-CREF Lifecycle Index 2035 InstitutionalMutual fund104,361 2,502,586 
TIAA-CREF Lifecycle Index 2040 InstitutionalMutual fund56,301 1,409,782 
TIAA-CREF Lifecycle Index 2030 InstitutionalMutual fund198,758 4,493,913 
TIAA-CREF Lifecycle Index 2045 InstitutionalMutual fund45,852 1,169,230 
TIAA-CREF Lifecycle Index 2015 InstitutionalMutual fund178 3,270 
TIAA-CREF Lifecycle Index 2050 InstitutionalMutual fund19,604 503,430 
TIAA-CREF Lifecycle Index 2060 InstitutionalMutual fund2,304 36,592 
TIAA-CREF Lifecycle Index Retirement Income FundMutual fund108,337 1,801,647 
Western Asset Income FundMutual fund40,303 249,070 
Vanguard Small Cap Index FundMutual fund8,867 826,538 
Fidelity 500 Index FundMutual fund8,609 1,120,599 
Columbia Global Tech Growth FundMutual fund14,660 908,644 
Hartford Core Equity FundMutual fund12,879 536,167 
BNYM International Equity FundMutual fund4,210 176,598 
BNYM Small/Mid Cap GrowthMutual fund27,632 1,075,427 
Vanguard Mid Cap Index FundMutual fund4,547 1,165,848 
Hartford Small Cap Growth FundMutual fund4,407 305,520 
Prudential Total Return Bond FundMutual fund28,803 434,631 
Columbia Global Opportunities Fund AdvisorMutual fund7,174 112,493 
Virtus Ceredex Large Cap Value Equity FundMutual fund34,457 468,957 
Victory Established Value FundMutual fund5,377 219,906 
Victory Syamore Small Company Opportunity FundMutual fund3,466 163,991 
American Fund EuroPacific Growth FundMutual fund7,025 486,338 
American Fund American Balanced FundMutual fund18,149 548,659 
American Funds New World FundMutual fund2,979 262,723 
* Virco Mfg. Corporation (1)Common stock859,854 2,413,351 
* Participant Loans **— 1,181,943 
$37,409,482 
* Party-in-interest
** The participant loans bear interest at the prime rate as of the beginning of the quarter in which the loan was originated plus 1% and are collateralized by the participants’ vested account balance. The interest rate on outstanding loans at December 31, 2020 ranged from 4.25% to 6.50% and loans mature through 2030.
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(1)Virco Unitized Stock is a unitized investment which consists of Virco common stock and investments in a money market fund. At December 31, 2020, this investment held 927,157 shares of Virco common stock with a market value of approximately $2.3 million and short-term investment fund of approximately $68,000.

Note: Cost information is not required for participant directed investments.

See accompanying report of independent registered public accounting firm.
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SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act of 1934, Virco Mfg. Corporation as Plan Administrator has duly caused this Annual Report on Form 11-K for the year ended December 31, 2020, to be signed on its behalf by the undersigned hereunto duly authorized.

Virco Mfg. Corporation 401(k) Plan
Date: June 28, 2021By:/s/ Robert E. Dose
Robert E. Dose
Vice President — Finance
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