Virco MFG (VIRC) risk factors, FY2026 10-K

RISKS RELATED TO SCHOOL FUNDING

1. 01Our product sales are significantly affected by education funding, which is a function of tax revenues and general economic conditions. If the economy weakens, funding for education may fail to improve or decrease, which would adversely affect our business and results of operations
2. 02Gaps in state budgets may adversely affect our revenue and results of operations
3. 03Reduced levels of spending on education may significantly impact spending on furniture and increase price competition in the furniture market. If price competition increases, we may need to reduce our prices to build or maintain our market share, which in turn could lower our profit margins

STRATEGIC AND OPERATIONAL RISKS

1. 04Our efforts to introduce new products that meet customer requirements may not be successful, which could limit our sales growth or cause our sales to decline
2. 05We depend on a global network of outside suppliers for raw materials and components, who may be unable to meet our volume and quality requirements on a timely basis, and we may be unable to obtain alternative sources28% rewritten
3. 06Cost and availability of third-party freight can adversely affect our profitability and results of operations
4. 07The majority of our sales are priced through one contract, under which we are the exclusive supplier of classroom furniture
5. 08Rising health care costs could adversely affect the Company’s business and financial resultsNew
6. 09Natural disasters, public health crises, and other catastrophic or force majeure events could disrupt the Company’s production, supply chains, and broader economic conditions, adversely affecting its results of operationsNew
7. 10Our recent revenue growth may not be sustainable

INDUSTRY AND ECONOMIC RISKS

1. 11Increases in basic commodity, raw material and component costs could adversely affect our profitability70% rewritten
2. 12We are affected by the cost of petroleum-based products and increases in petroleum prices could reduce our margins and profits26% rewritten
3. 13Evolving trade policies that increase tariffs may have a material adverse effect on the Company’s business and results of operations30% rewritten
4. 14We may not be able to renew our credit facility on favorable terms, or at all, which would adversely affect our results of operations
5. 15The Company's business is highly seasonal and requires significant working capital in anticipation of and during the peak summer season. This requires management to make estimates and judgments with respect to the Company's working capital requirements during, and in anticipation of, the peak summer season
6. 16We may require additional capital in the future, which may not be available or may be available only on unfavorable terms
7. 17Volatility in the equity markets or interest rates could substantially increase our pension costs and have an adverse effect on our operating results

LEGAL AND REGULATORY RISKS

1. 18An inability to protect our intellectual property could have an adverse effect on our business
2. 19If third parties claim that we infringe upon their intellectual property rights, we may incur liability and costs and may have to redesign or discontinue the infringing products
3. 20We 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
4. 21We are subject to potential labor disruptions, which could have an adverse effect on our business
5. 22Our insurance coverage may not adequately cover for any product liability claims
6. 23Holders of approximately 30% of the shares of our stock have entered into an agreement restricting the sale of the stock
7. 24Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company
8. 25We may be affected by climate change and new regulations and requirements relating to climate issues
9. 26We may not be able to manage our business effectively if we are unable to retain our experienced management team or recruit other key personnel
10. 27Failures, disruptions, or security incidents affecting the Company’s information technology systems could adversely affect operations, harm its reputation, and expose it to legal liabilityNew
11. 28less regulated and remote areas of the world. As a result, we may not be able to address these techniques proactively or implement adequate preventative measuresNew
12. 29The adoption of artificial intelligence (“AI”) in educational environments may alter learning patterns and purchasing needs, which could reduce order volume and adversely affect the Company’s business and financial resultsNew
13. 30Any failure by us to comply with a variety of privacy and consumer protection laws may harm us
14. 31Our stock price has historically been volatile, and investors in our common stock could suffer a decline in value