<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
VIRCO MFG. CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
VIRCO MFG. CORPORATION
2027 HARPERS WAY
TORRANCE, CALIFORNIA 90501
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 1998
The Annual Meeting of Stockholders of Virco Mfg. Corporation, a Delaware
corporation, will be held at 2:00 p.m. on Tuesday, June 23, 1998 at 2027 Harpers
Way, Torrance, California, for the following purposes:
1. To elect three directors to serve until the 2001 Annual Meeting of
Stockholders and until their successors are elected and qualified;
2. To consider and vote upon the approval of an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock; and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on May 5, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments and postponements thereof.
Whether or not you expect to attend the meeting, please date, sign and
return the enclosed proxy. If you attend the meeting, you may vote in person
whether or not you have returned a proxy.
By Order of the Board of Directors
James R. Braam, Secretary
Torrance, California
May 18, 1998
<PAGE> 3
VIRCO MFG. CORPORATION
2027 HARPERS WAY
TORRANCE, CALIFORNIA 90501
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 23, 1998
------------------------
GENERAL INFORMATION
This Proxy Statement is being mailed to stockholders of Virco Mfg.
Corporation, a Delaware corporation (the "Company"), on or about May 18, 1998 in
connection with the solicitation by the Board of Directors of proxies to be used
at the Annual Meeting of Stockholders of the Company to be held on Tuesday, June
23, 1998 at 2:00 p.m. at 2027 Harpers Way, Torrance, California and any and all
adjournments and postponements thereof.
The cost of preparing, assembling and mailing the Notice of Annual Meeting
of Stockholders, Proxy Statement and form of proxy and the solicitation of
proxies will be paid by the Company. Proxies may be solicited in person or by
telephone or telegraph by personnel of the Company who will not receive any
additional compensation for such solicitation. The Company will pay brokers or
other persons holding stock in their names or the names of their nominees for
the expenses of forwarding soliciting material to their principals.
RECORD DATE AND VOTING
The close of business on May 5, 1998 has been fixed as the record date for
the determination of stockholders entitled to notice of and to vote at the
meeting. On that date there were 8,942,155 shares of the Company's Common Stock,
par value $.01 per share, outstanding. All voting rights are vested exclusively
in the holders of the Company's Common Stock. Each share is entitled to one vote
on any matter that may be presented for consideration and action by the
stockholders, except that as to the election of directors, stockholders may
cumulate their votes. Because three directors are to be elected, cumulative
voting means that each stockholder may cast a number of votes equal to three
times the number of shares actually owned. That number of votes may be cast for
one nominee, divided equally among the three nominees or divided among the
nominees in any other manner. The proxy holders will have authority, in their
discretion, to vote cumulatively for less than all of the nominees.
In all matters other than the election of directors and the approval of the
amendment to the Company's Certificate of Incorporation, the affirmative vote of
the majority of shares of Common Stock present in person or represented by proxy
at the meeting and entitled to vote on the subject matter would be the act of
the stockholders. Directors will be elected by a plurality of the votes of the
Common Stock present in person or represented by proxy. The amendment to the
Company's Certificate of Incorporation will be approved by a majority of the
outstanding shares of Common Stock. Abstentions will be treated as the
equivalent of a negative vote for the purpose of determining whether a proposal
has been adopted and will have no effect for the purpose of determining whether
a director has been elected. Broker non-votes are not counted for the purpose of
determining the votes cast on a proposal.
Proxies will be voted for management's nominees for election as directors
and in accordance with the recommendations of the Board of Directors contained
in the Proxy Statement, unless the stockholder otherwise directs in his proxy.
Where the stockholder has appropriately directed how the proxy is to be voted,
it will be voted according to his direction. Any stockholder has the power to
revoke his proxy at any time before it is voted at the meeting by submitting
written notice of revocation to the Secretary of the Company, or by filing a
duly executed proxy bearing a later date. A proxy will not be voted if the
stockholder who executed it is present at the meeting and elects to vote the
shares represented thereby in person.
1
<PAGE> 4
SECURITY OWNERSHIP
SHARES OWNED BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information as of April 3, 1998 (unless
otherwise indicated) relating to the beneficial ownership of the Company's
Common Stock (i) by each person known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock of the Company, (ii) by each
director or nominee of the Company, (iii) by each executive officer of the
Company named in the Summary Compensation Table below and (iv) by all officers
and directors of the Company as a group. The number of shares beneficially owned
is deemed to include shares of Common Stock in which the persons named have or
share either investment or voting power. Unless otherwise indicated, the mailing
address of each of the persons named is 2027 Harpers Way, Torrance, California
90501.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------ ----------------- ----------
<S> <C> <C>
Dimensional Fund Advisors Inc.(2)........................ 680,822 7.6%
Robert A. Virtue(3)...................................... 295,682 3.3
Chairman of the Board of Directors, Chief Executive
Officer
Douglas A. Virtue........................................ 335,757 3.7
Director, Executive Vice President
Raymond W. Virtue(4)..................................... 108,989 1.2
Director, Vice President
Donald S. Friesz......................................... 80,640 (5)
Director, Vice President Sales and Marketing
George W. Ott............................................ 4,995 (5)
Director
Donald A. Patrick........................................ 22,922 (5)
Director
John H. Stafford......................................... 6,422 (5)
Director
Hugh D. Tyler............................................ 47,262 (5)
Director, Vice President
James R. Wilburn......................................... 8,744 (5)
Director
James R. Braam........................................... 38,193 (5)
Vice President Finance, Secretary
Matthew G. Tarnay........................................ 46,700 (5)
Vice President
All executive officers and directors as a group (16
persons)............................................... 1,044,282 11.4
</TABLE>
- ---------------
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, to the knowledge of the Company, the
persons named in this table have sole voting and investment power with
respect to all shares beneficially owned by them. For purposes of this
table, a person is deemed to have "beneficial ownership" as of a given date
of any security that such person has the right to acquire within 60 days
after such date. Amounts for Messrs. Robert Virtue, Douglas Virtue, Raymond
Virtue, Friesz, Ott, Patrick, Stafford, Tyler, Wilburn, Braam and Tarnay,
and all executive officers and directors as a group, include 62,403, 27,311,
7,663, 21,943, 1,294, 2,922, 2,922, 38,293, 2,922, 8,739 and 38,293 shares
issuable upon exercise of options, respectively.
(2) As of December 31, 1997, according to information provided to the Company.
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 680,822 shares of the
Company's Common Stock, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, for which Dimensional serves
as
2
<PAGE> 5
investment manager. Dimensional disclaims beneficial ownership of all such
shares. The principal business address of Dimensional is 1299 Ocean Avenue,
11th floor, Santa Monica, California 90401.
(3) Does not include 989,425 shares owned beneficially by Mr. Robert Virtue's
adult children, including Mr. Douglas Virtue, as to which Mr. Robert Virtue
disclaims beneficial ownership.
(4) Does not include 397,830 shares owned beneficially by Mr. Raymond Virtue's
adult children as to which Mr. Virtue disclaims beneficial ownership.
(5) Less than 1%.
All information with respect to beneficial ownership of the shares referred
to above is based upon filings made by the respective beneficial owners with the
Securities and Exchange Commission or information provided to the Company by
such beneficial owners.
Robert A. Virtue and Raymond W. Virtue are siblings and Douglas Virtue is
Robert Virtue's son. The total number of shares beneficially owned by Mr. Robert
Virtue, Mr. Raymond Virtue, their brother, Richard J. Virtue, their sister,
Nancy Virtue Cutshall, their children and their mother, Mrs. Julian A. Virtue,
aggregate 4,205,269 shares or 46.5% of the total shares of Common Stock
outstanding.
Robert A. Virtue, Richard J. Virtue, Raymond W. Virtue, Nancy Virtue
Cutshall and certain of their respective spouses and children (the
"Stockholders") and the Company have entered into an agreement with respect to
certain shares of the Company's Common Stock received by the Stockholders as
gifts from their father, Julian A. Virtue, including shares received in
subsequent stock dividends in respect of such shares. Under the agreement, each
Stockholder who proposes to sell any of such shares is required to provide the
remaining Stockholders notice of the terms of such proposed sale. Each of the
remaining Stockholders is entitled to purchase any or all of such shares on the
terms set forth in the notice. Any shares not purchased by such remaining
Stockholders may be purchased by the Company on such terms. The agreement also
provides for a similar right of first refusal in the event of the death or
bankruptcy of a Stockholder, except that the purchase price for the shares is to
be based upon the then prevailing sales price of the Company's Common Stock on
the American Stock Exchange.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of any equity security of
the Company to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and to furnish copies of these reports to the
Company. Based solely on a review of the copies of the forms that the Company
received, the Company believes that all Forms 4 or 5 were filed on a timely
basis.
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides for the division
of the Board of Directors into three classes as nearly equal in number as
possible. In accordance with the Certificate of Incorporation, the Board of
Directors has nominated George W. Ott, John H. Stafford and Douglas A. Virtue
(each of whom is currently a director) to serve as directors in Class I of the
Board of Directors with a term expiring in 2001.
It is intended that the proxies solicited by this Proxy Statement will be
voted in favor of the election of Messrs. Ott, Stafford and Douglas A. Virtue,
unless authority to do so is withheld. Should any of such nominees be unable to
serve as a director or should any additional vacancy occur before the election
(which events are not anticipated), proxies may be voted for a substitute
nominee selected by the Board of Directors or the authorized number of directors
may be reduced. If for any reason the authorized number of directors is reduced,
the proxies will be voted, in the absence of instructions to the contrary, for
the election of the remaining nominees named in this Proxy Statement. In the
event that any person other than the nominees named below should be nominated
for election as a director, the proxies may be voted cumulatively for less than
all of the nominees.
3
<PAGE> 6
The following table sets forth certain information with respect to each of
the three nominees, as well as each of the six continuing directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
<S> <C> <C> <C>
NOMINEES FOR DIRECTORS WHOSE TERMS EXPIRE IN 2001:
George W. Ott............. 66 President and Founder of Ott and Hansen since 1976 1994
John H. Stafford.......... 77 Retired since 1983; director of Mossimo, Inc. since 1985
October 1996; previously Partner of Main Hurdman, a
predecessor of KPMG Peat Marwick (certified public
accountants)
Douglas A. Virtue......... 39 Executive Vice President since December 1997; 1992
previously General Manager of the Torrance Division
of the Company (1992 - 1997), Marketing Services
Manager (1989 - 1992), Contract Administrator (1988)
and in production control of the Company
(1985 - 1988)
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1999:
James R. Wilburn.......... 65 Inaugural Dean of the School of Public Policy, 1986
Pepperdine University, since September 1996;
previously Dean of the School of Business and
Management, Pepperdine University (1982 - 1994);
Professor of Business Strategy, Pepperdine
University (1994 - 1996); director of First Fidelity
Thrift since February 1995; director of JCB Bank
since January 1998; director of Olson Company since
January 1990
Hugh D. Tyler............. 56 Vice President of the Company since 1988; General 1988
Manager of the Conway Division since 1988;
previously Controller of the Conway Division
Donald S. Friesz.......... 68 Vice President Sales and Marketing from 1982 to 1992
February 1996
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2000:
Donald A. Patrick......... 73 Vice President and a founder of Diversified Business 1983
Resources, Inc. (mergers, acquisitions and business
consultants) since 1988
Raymond W. Virtue......... 56 Vice President of the Company since June 1983; 1983
previously President of Delkay Plastics Corp. (a
former wholly-owned subsidiary of the Company)
Robert A. Virtue.......... 65 Chairman of the Board and Chief Executive Officer of 1956
the Company since 1990; President of the Company
since August 1982
</TABLE>
Each director of the Company serving in 1997 attended at least 75% of the
1997 meetings of the Board of Directors and each committee on which he served.
Directors who are also officers of the Company or its subsidiaries receive no
additional compensation for their services as directors. Other directors
received a retainer of $2,500 per quarter for the first quarter and $3,000 per
quarter thereafter, a fee of $500 for the February 1997 meeting and $1,000 for
each Board meeting thereafter, and a fee of $500 for each committee meeting
attended. The Board of Directors held six meetings in 1997. At the February 1998
meeting of the Board of Directors, the annual retainer was increased to $15,000
effective February 1, 1998. In 1997, Messrs. Ott, Patrick, Stafford and Wilburn
each received options to purchase 500 shares of Common Stock at $24.50 per share
(750 shares at $16.33 per share after adjusting for a 3 for 2 stock split issued
in 1997) under the Company's 1997 Stock Incentive Plan.
4
<PAGE> 7
The Board of Directors has an Audit Committee that in 1997 was composed of
Messrs. Friesz, Ott, Patrick, Stafford and Wilburn. The Audit Committee held one
meeting in 1997. The functions of the Audit Committee include reviewing the
financial statements of the Company, the scope of the annual audit by the
Company's independent auditors and the audit reports rendered by such
independent auditors. The Audit Committee may also examine and consider other
appropriate matters.
The Board of Directors has a Compensation Committee that in 1997 was
composed of Messrs. Friesz, Ott, Patrick, Stafford and Wilburn. The function of
this Committee is to make recommendations to the Board regarding changes in
salaries and benefits. The Compensation Committee held one meeting in 1997.
The Company does not have a nominating committee. The Board of Directors
performs the functions which might otherwise be performed by such a committee.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for services rendered in
all capacities to the Company and its subsidiaries during the years indicated
for the Chief Executive Officer and the other four most highly compensated
officers of the Company:
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------- AWARDS -- STOCK ALL OTHER
NAME AND TITLE YEAR SALARY(1) BONUS OPTIONS (SHARES) COMPENSATION(2)
-------------- ---- ---------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert A. Virtue...................... 1997 $330,837 $180,000 9,000(3) $58,000
Chairman of the Board and Chief 1996 306,039 163,770 -- 58,100
Executive Officer 1995 293,258 100,700 -- 58,600
Hugh D. Tyler......................... 1997 156,191 77,650 6,425(3) 12,300
Vice President and General 1996 161,678 74,675 -- 12,300
Manager -- Conway Division 1995 150,035 31,900 -- 12,300
James R. Braam........................ 1997 164,255 77,650 6,425(3) 15,700
Vice President, Finance 1996 150,368 74,675 -- 15,700
1995 145,098 40,600 -- 17,100
Raymond W. Virtue..................... 1997 139,438 68,800 6,425(3) 42,600
Vice President -- Purchasing 1996 147,989 66,178 -- 42,600
1995 145,019 35,980 -- 41,300
Matthew G. Tarnay..................... 1997 135,482 66,500 6,425(3) 6,500
Vice President -- Engineering 1996 131,708 64,375 -- 6,500
1995 125,392 35,000 -- 6,500
</TABLE>
- ---------------
(1) Excludes compensation in the form of other personal benefits, which, for
each of the executive officers, did not exceed the lesser of $50,000 or 10%
of the total of annual salary and bonus reported for each year.
(2) For 1997, consists of (i) $14,300, $12,300, $15,700, $6,700 and $6,500,
representing the value of Company-paid split-dollar premiums under the
Management Employees Life Insurance Plan, and (ii) $43,700 and $35,900,
representing the value of Company-paid split-dollar premiums under the
Executive Survivorship Life Insurance Plan, for insurance policies on the
lives of each of Messrs. Robert Virtue and Raymond Virtue (and their
spouses), respectively. See "Management Employees Life Insurance Plan" and
"Executive Survivorship Life Insurance Plan." The foregoing amounts
represent the actuarial value of the benefit to the executive officers of
the current year's insurance premium paid by the Company in excess of that
required to fund the death benefits under the policies.
(3) Granted pursuant to the Company's 1993 and 1997 Stock Incentive Plans at the
market price of the Common Stock on the date of grant.
5
<PAGE> 8
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
Shown below is information relating to the exercise of stock options during
1997 for each executive officer of the Company named in the Summary Compensation
Table above:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE) UNEXERCISABLE)
---- --------------- -------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Robert A. Virtue................ -- -- 51,423/12,481 $1,129,120/260,460
Hugh D. Tyler................... -- -- 31,704/7,663 688,783/156,659
James R. Braam.................. 600 14,090 31,104/7,663 674,741/156,659
Raymond W. Virtue............... -- -- 31,704/7,663 688,783/156,659
Matthew G. Tarnay............... -- -- 31,704/7,663 688,783/156,659
</TABLE>
- ---------------
(1) Calculated using closing price on January 31, 1998 of $26.44.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information relating to the grants of options issued by the
Company during 1997 to each executive officer of the Company named in the
Summary Compensation table above:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
---- --------------- -------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Virtue.......... 6,000(3) 2.87% $10.25 6/16/03 $23,660 $ 54,649
Robert A. Virtue.......... 3,000(4) 1.43 24.25 10/1/07 45,784 116,043
Hugh D. Tyler............. 4,275(3) 2.04 10.25 6/16/03 16,858 38,937
Hugh D. Tyler............. 2,150(4) 1.03 24.25 10/1/07 32,812 83,164
James R. Braam............ 4,275(3) 2.04 10.25 6/16/03 16,858 38,937
James R. Braam............ 2,150(4) 1.03 24.25 10/1/07 32,812 83,164
Raymond W. Virtue......... 4,275(3) 2.04 10.25 6/16/03 16,858 38,937
Raymond W. Virtue......... 2,150(4) 1.03 24.25 10/1/07 32,812 83,164
Matthew G. Tarnay......... 4,275(3) 2.04 10.25 6/16/03 16,858 38,937
Matthew G. Tarnay......... 2,150(4) 1.03 24.25 10/1/07 32,812 83,164
</TABLE>
- ---------------
(1) Includes options granted to the executive officers named in the Summary
Compensation table above on October 15, 1996 subject to the achievement of
certain Company performance goals the fulfillment of which was confirmed in
1997.
(2) The 5% and 10% assumed rates of appreciation are specified under the rules
of the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of its Common Stock. The actual
value, if any, which an executive officer may realize upon the exercise of
stock options will be based upon the difference between the market price of
the Common Stock on the date of exercise and the exercise price.
(3) Granted pursuant to the 1993 Stock Incentive Plan on October 15, 1996
subject to the achievement of certain Company performance goals the
fulfillment of which was confirmed in 1997. These options vested immediately
upon the date of grant.
(4) Granted pursuant to the 1997 Stock Incentive Plan. The first 50% of these
options vested on January 31, 1998, and the second 50% will vest on January
31, 1999.
EMPLOYEES RETIREMENT PLAN
The Employees Retirement Plan of the Company is a non-contributory, defined
benefit retirement plan governed by the Employee Retirement Income Security Act
of 1974. With limited exceptions, all employees of the Company and its
participating subsidiaries (including executive officers) are eligible to
participate provided they meet certain service requirements. Benefits are paid
to or on behalf of each participant upon retirement, normally at age 65, and
under certain circumstances upon death. Benefits under the Plan are credited to
the employee each year based upon years of service and remuneration during such
year of service.
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<PAGE> 9
Retirement benefits vest partially after three years of service and fully
after seven years of service, or upon the participant's sixty-fifth birthday.
Benefits payable under the Plan are adjusted to reflect the form of payment
elected by the participant. The following table shows the annual pension
benefits for retirement at age 65 which would be payable to retiring employees
with representative earnings and years of service:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ASSUMED YEARS OF SERVICE(1)(2)
AVERAGE --------------------------
COMPENSATION(3) 10 20 30
- --------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
$ 25,000............................................... $2,260 $4,520 $6,780
50,000............................................... 4,760 9,520 14,280
75,000............................................... 7,260 14,520 21,780
100,000............................................... 9,760 19,520 29,280
125,000............................................... 12,260 24,520 36,780
150,000............................................... 14,760 29,520 44,280
175,000............................................... 15,760 31,519 47,279
</TABLE>
- ---------------
(1) Represents annual retirement benefits payable at normal retirement age. To
the extent a participant's service was rendered prior to February 1, 1964,
the effective date of the Plan, actual benefits will be slightly lower than
the benefits shown in the table.
(2) The benefits shown are for straight-life annuity payments and are not
subject to deduction for Social Security or other offset amounts;
alternative forms of benefit payments are available under the Plan.
(3) Assumed average compensation is based upon regular base compensation before
deduction for taxes or group insurance averaged for each year in the Plan.
Messrs. Robert Virtue, Tyler, Braam, Raymond Virtue and Tarnay have 40, 27,
15, 33 and 3 credited years of service and $72,000, $69,000, $118,000, $62,000
and $190,000 of assumed average compensation, respectively, under the Plan.
VIRCO IMPORTANT PERFORMERS PLAN
In August 1985, the Board of Directors adopted the Virco Important
Performers Plan, which is an unqualified plan providing additional retirement
and death benefits for certain employees identified by the Board of Directors or
the committee administering the Plan as contributing materially to the continued
growth, development and future business of the Company. On January 1, 1998, the
Plan was amended to provide that each officer or employee whose annual base
salary exceeds $80,000 will be a participant in the Plan. Benefits under the
Plan are payable to or on behalf of each participant upon retirement, normally
at age 65, or upon death prior to retirement. The Company is funding its
obligations under the Plan through the purchase of life insurance policies on
the participants.
Vesting for each participant begins at the later date of such participant's
forty fifth birthday or his birthday in the year he enters the Plan. Vesting
occurs at 10% for each full year subsequent to such date. Under the Plan, each
participant will receive a benefit payable at retirement equal to 50% of the
average base salary during the last five years offset by the monthly benefit
accrued under the Employees Retirement Plan. Participants with fewer than ten
years of participation who retire after reaching age 60 will be entitled to
reduced pro rata benefits based on the number of years they have participated in
the Plan. In the event of the death of a participant prior to retirement, death
benefits are payable for a fifteen-year period to the deceased participant's
beneficiaries.
The estimated annual benefits payable upon retirement at age 65 for Messrs.
Robert Virtue, Tyler, Braam, Raymond Virtue and Tarnay are $99,000, $46,000,
$53,000, $39,000 and $45,000, assuming that the current compensation of each
executive officer remains constant until retirement.
7
<PAGE> 10
MANAGEMENT EMPLOYEES LIFE INSURANCE PLAN
In August 1985, the Board of Directors adopted the Management Employees
Life Insurance Plan, which provides for the Company to obtain life insurance
policies on management employees selected by the Board. Currently, all officers
and employees earning an annual salary exceeding $40,000 are entitled to
participate in the Plan. Employees whose salaries exceed $40,000 but are less
than $80,000 may elect to receive coverage of $50,000 under the Plan. Employees
whose salaries exceed $80,000 may elect coverage under the Plan of up to
$100,000 in increments of $50,000. Officers may elect coverage under the Plan of
up to $300,000 in increments of $50,000.
The premiums for the policies are paid partially by the participants
pursuant to the formula set forth in the Plan, with the Company paying the
remaining portion. The Company retains an interest in the death benefit payable
under the policy for each participant in an amount equal to the aggregate amount
of premium payments made by the Company with respect to such participant's
policy. The remainder of the death benefit is payable to the participant's
beneficiaries. Upon the first to occur of reaching the age of 65, actual
retirement or termination of employment, each participant is entitled to have
the Company assign the policy to the participant or his designee, provided that
the participant first reimburses the Company for all premiums previously paid by
the Company for the policy.
EXECUTIVE SURVIVORSHIP LIFE INSURANCE PLAN
In August 1985, the Board of Directors adopted the Executive Survivorship
Life Insurance Plan, which provides special life insurance benefits to a group
of management employees selected by the Board. Under this Plan, the Company
maintains insurance policies on the lives of the participants and their spouses.
Robert A. Virtue and Raymond W. Virtue are currently the only executive officers
participating in the Plan. The amount of each of the insurance policies
maintained by the Company under the Plan on the lives of Robert A. Virtue and
Raymond W. Virtue and their current or former spouses is $1,250,000. In 1985,
the Company also purchased $1,250,000 of insurance under the Plan on the lives
of Richard Cutshall, who was then a management employee of the Company, and his
spouse Nancy Virtue Cutshall, who is the beneficial owner of 4.6% of the
Company's outstanding shares. In connection with their divorce in 1987, Mr.
Cutshall, who is now deceased, transferred his interest in such insurance to
Mrs. Cutshall. As a result of such transaction, the policy previously maintained
on the life of Mr. Cutshall was terminated and a $2,500,000 policy is now
maintained under the Plan on the life of Mrs. Cutshall.
The premiums for the policies are paid partially by the participants
pursuant to a formula set forth in the Plan, with the Company paying the
remaining amount. The Company retains an interest in the death benefit payable
under the policy of each participant and spouse in an amount equal to the
aggregate amount of premium payments made by the Company with respect to the
policy of such participant or spouse. The remainder of the death benefit is
payable to the designated beneficiaries of the deceased participant or spouse.
Upon the first to occur of the participant's reaching age 65, retiring or
ceasing to be an employee of the Company for any reason other than death, the
participant or his designee is required to purchase the Company's interest in
the participant's policy and the spouse or the spouse's designee is similarly
required to purchase the Company's interest in the spouse's policy. The amount
to be paid to the Company upon such purchase is the aggregate amount of the
Company's previous premium payments on such policy. In the event a participant
in the Plan dies before reaching age 65 and while an employee of the Company,
the Company remains obligated to maintain the insurance policy under the Plan on
the life of such participant's spouse.
WIDOW'S SALARY CONTINUATION PLAN
In August 1985, the Board of Directors approved the Widow's Salary
Continuation Plan, which provides for surviving widow benefits to be paid by the
Company upon the deaths of Messrs. Julian A. Virtue and Donald Heyl, the former
President of the Company. The widow of Mr. Virtue is currently receiving $5,000
per month under the Plan. In 1997, the Company paid $60,000 to Mrs. Virtue. Upon
the death of Mr. Heyl, his surviving widow will receive $60,000 annually during
her lifetime. The Company is funding its obligation to Mr. Heyl under this Plan
through the purchase of life insurance on the life of Mr. Heyl.
8
<PAGE> 11
CERTAIN TRANSACTIONS
In 1989 the Company loaned $75,000 to Larry O. Wonder, the Company's Vice
President, Education Sales Group. The loan is secured by a second trust deed on
Mr. Wonder's home and accrues interest at a rate equal to the Wells Fargo prime
interest rate. As of January 31, 1998, the outstanding balance on the loan
including accrued interest was $110,283.
During 1994 the Company entered into a consulting arrangement with
Diversified Business Resources, Inc. ("Diversified"), a consulting firm which is
owned by Donald A. Patrick, who is a Director. During 1997 the Company paid
$203,181 to Diversified in connection with the Company's data processing
committee and the plant expansion in Conway, Arkansas.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
developing the Company's executive compensation policies and making
recommendations to the Board of Directors with respect to these policies. In
addition, the Committee makes annual recommendations to the Board of Directors
concerning the compensation paid to the Chief Executive Officer and to each of
the other executive officers of the Company.
EXECUTIVE COMPENSATION POLICY
The goals of the Company's executive compensation policy are to attract and
retain qualified executives and to ensure that their efforts are directed toward
the long-term interests of the Company and its stockholders. The Company is
striving to generally position executive salaries at median competitive levels
and to rely on variable, performance-based bonuses to play a significant role in
determining total compensation. In addition, by establishing the 1993 and 1997
Stock Incentive Plans, the Company further linked executive and stockholder
interests.
The Compensation Committee annually reviews salaries, bonuses and other
aspects of executive compensation. In general, the purpose of such annual
reviews is to ensure that the Company's overall executive compensation program
remains competitive with comparable businesses and that total executive pay
reflects both the individual's performance as well as the overall performance of
the Company.
BASE SALARY
Each year, the performance of executives is reviewed and, based upon an
assessment of individual performance and the Company's performance, a
corresponding salary increase may be awarded. In 1997 based on a comparison of
the Company's executive compensation levels and plans with those of other
companies in the furniture manufacturing business, the Compensation Committee
concluded that the Company's executive salaries had to be adjusted to keep pace
with those of comparable companies. As a result, the salary increases awarded to
the Company's Chief Executive Officer and other executive officers in 1997
reflected primarily the Compensation Committee's determination to adjust
salaries to perceived competitive levels, as well as the Compensation
Committee's evaluation of the overall performance of the Company and the
performance of each executive officer.
The salary of Mr. Robert A. Virtue, the Company's Chief Executive Officer,
was determined on the foregoing basis. In addition to consideration of the
salary levels of the chief executive officer of other furniture manufacturers,
the Board considered the Company's operating results in 1996, the Company's
stock performance, the effect of the general economy on the Company's
performance and the success of the Company in addressing certain goals.
BONUSES
Early each year the Board of Directors considers and approves an annual
profit plan for the Company, which establishes a target level of overall Company
profits, excluding certain non-recurring items. The bonuses payable to the Chief
Executive Officer and the other executive officers are tied to the Company's
9
<PAGE> 12
actual performance relative to the annual profit plan. However, bonuses of
divisional general managers are based upon divisional operating results. In
1997, the Chief Executive Officer was eligible to receive a bonus equal to 60%
of his salary and each of the executive officers was eligible to receive a bonus
equal to 50% of his salary if the annual profit plan target level or target
divisional operating results, as applicable, had been achieved. In general, the
amount of the bonus paid was subject to a 2% adjustment for each $100,000
difference between the actual profits and the plan's targeted profit level or,
for divisional general managers, a similar formula to adjust for the difference
between the actual results and the targeted results.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
<TABLE>
<S> <C>
George W. Ott John H. Stafford
Donald A. Patrick James R. Wilburn
Donald S. Friesz
</TABLE>
The report of the Compensation Committee of the Board of Directors shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
PROPOSAL 2
AMENDMENT TO ARTICLE FOUR OF THE
COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has unanimously approved and recommends for
stockholder approval a proposed amendment to Article Four of the Company's
Certificate of Incorporation providing for an increase in the number of
authorized shares of Common Stock from 10,000,000 shares to 25,000,000 shares
(the "Charter Amendment"). It is intended that the proxies solicited by this
Proxy Statement will be voted in favor of approving the Charter Amendment,
unless authority to do so is withheld. The approval of the Charter Amendment
requires the vote of a majority of the shares of Common Stock outstanding.
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, $.01 par value. On May 5, 1998, 8,942,155 shares of Common
Stock were issued and outstanding. If the Charter Amendment is approved, the
Company would have approximately 16,058,000 authorized and unissued shares of
Common Stock that it could issue from time to time in the future to raise
capital.
The Common Stock is traded on the American Stock Exchange. The Board of
Directors deems it advisable to amend the Certificate of Incorporation in order
to increase the number of authorized shares of Common Stock. The proposed
Charter Amendment would provide the Company with flexibility in the future by
insuring that the Company would have an adequate number of authorized and
unissued shares available for corporate purposes, such as future public and
private equity offerings. The Board of Directors has adopted a resolution
approving the amendment of the Certificate of Incorporation to affect such an
increase, subject to stockholder approval.
The additional shares of Common Stock may generally be used for any proper
corporate purpose approved by the Board of Directors and upon such terms and for
such consideration as they determine without further action by the stockholders,
unless stockholder approval is required by applicable law or by the rules of the
American Stock Exchange or such other exchange upon which the Company's stock is
then listed. The Company has no present agreements or commitments to issue any
additional shares of Common Stock.
The issuance of additional shares of Common Stock may have a dilutive
effect on the equity and voting rights of the Company's stockholders.
10
<PAGE> 13
Article Four of the Certificate of Incorporation would be amended to read
as follows:
"The Corporation shall be authorized to issue two classes of stock to
be designated, respectively, Common Stock and Preferred Stock; the total
number of shares which the Corporation shall have authority to issue is
twenty-eight million (28,000,000); the total number of shares of Common
Stock shall be twenty-five million (25,000,000) and each such share shall
have a par value of one cent ($.01); and the total number of shares of
Preferred Stock shall be three million (3,000,000) and each such share
shall have a par value of one cent ($.01).
Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized to fix the voting
rights, designations, powers, preferences and the relative, participating,
optional or other rights, if any, and the qualifications, limitations or
restrictions thereof, of any wholly unissued series of Preferred Stock, and
to fix the number of shares constituting such series, and to increase or
decrease the number of shares of any such series (but not below the number
of shares thereof then outstanding)."
11
<PAGE> 14
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The stock performance graph set forth below illustrates the Company's
performance in total stockholder return over the period February 1, 1993 through
January 31, 1998 relative to the following external indices: (a) the American
Stock Exchange market value index ("AMEX Market Index") and (b) a peer group(1).
Each line on the stock performance graph assumes that $100.00 was invested in
the Common Stock and the respective indices on February 1, 1993. The graph then
tracks the value of these investments, assuming reinvestment of dividends,
through January 31, 1998.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS
OF COMPANY, AMEX MARKET INDEX AND PEER GROUP
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Virco Mfg. Corporation $100.00 132.29 165.33 195.80 346.43 934.69
Peer Group $100.00 121.19 99.70 127.52 189.11 287.62
AMEX Market Index $100.00 119.40 104.21 133.57 143.76 163.98
</TABLE>
- ---------------
(1) The peer group comprises all companies identified by Media General Financial
Services as being within the "other business and institutional equipment"
industry group, as follows: Educational Development Corporation,
Geographics, Inc., Hon Industries Inc., Kimball International, Inc., Knoll,
Inc., Lear Seating Corp., Herman Miller, Inc., Mity-Lite, Inc., Norwood
Promotional Products, Inc., Open Plan Systems, Inc., PolyVision Corp., Smed
International Inc., Tab Products Co., Winsloew Furniture, Inc. and the
Company.
The cumulative total return shown on the stock performance graph indicates
historical results only and is not necessarily indicative of future results.
12
<PAGE> 15
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young, upon the recommendation of the Audit Committee of the Board
of Directors of the Company, continues as the accounting firm selected by the
Board of Directors to examine the accounts of the Company for the current year.
Representatives of Ernst & Young will be present at the Annual Meeting, will
have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
OTHER MATTERS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company by February 17, 1999,
for inclusion in the Company's proxy statement and form of proxy relating to
that meeting.
The Board of Directors does not know of any matters to be presented at the
1998 Annual Meeting other than as stated herein. If other matters do properly
come before the Annual Meeting, the persons named on the accompanying proxy card
will vote the proxies in accordance with their judgment in such matters.
The Annual Report to the Stockholders of the Company for the fiscal year
ended January 31, 1998, including financial statements, is being mailed to
stockholders concurrently herewith.
THE COMPANY WILL ALSO PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND RELATED SCHEDULES, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UPON REQUEST IN WRITING FROM ANY PERSON WHO
WAS HOLDER OF RECORD, OR WHO REPRESENTS IN GOOD FAITH HE WAS A BENEFICIAL OWNER,
OF COMMON STOCK OF THE COMPANY ON MAY 5, 1998. ANY SUCH REQUEST SHALL BE
ADDRESSED TO THE COMPANY AT 2027 HARPERS WAY, TORRANCE, CALIFORNIA 90501,
ATTENTION: CORPORATE SECRETARY.
Stockholders are urged to date and sign the enclosed proxy and return it
promptly in the enclosed envelope.
By Order of the Board of Directors
James R. Braam, Secretary
Torrance, California
May 18, 1998
13
<PAGE> 16
PROXY PROXY
VIRCO MFG. CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 23, 1998
The undersigned hereby appoints ROBERT A. VIRTUE, DOUGLAS V. VIRTUE and
JAMES R. BRAAM, and each of them, with full power of substitution in each, as
proxies of the undersigned to attend and vote, as designated on the reverse
side, all shares of Virco Mfg. Corporation, a Delaware Corporation (the
"Company"), which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders to be held June 23, 1998 and any adjournment or postponement
thereof:
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 17
Please mark
your votes at [X]
indicated in
this example
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for all
to the contrary). nominees listed. FOR AGAINST ABSTAIN
1. Election of directors: [ ] [ ] 2. Amendment to Article Four of the [ ] [ ] [ ]
George W. Ott Virco Mfg. Corporation Certificate
John H. Stafford of Incorporation to increase the
Douglas A. Virtue number of authorized shares of
Common Stock:
3. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before
such meeting.
(INSTRUCTION: To withhold authority to vote for any ANY PREVIOUS PROXY EXECUTED BY THE UNDERSIGNED IS
individual nominee, write nominee's name on the space HEREBY REVOKED.
provided below.)
Receipt of the notice of meeting, the proxy statement
and the annual report of the Company for the year
- ------------------------------------------------- ended January 31, 1998, is hereby acknowledged.
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE, IN THE
ABSENCE OF ANY DIRECTOR, THIS PROXY WILL BE VOTED
FOR THE ELECTION AS SPECIFIED OF ALL OF THE
NOMINEES LISTED, AND IN THE DISCRETION OF THE PROXIES
ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
Signature(s)___________________________________________________________________________ Date ____________________________1998
(Note: Please sign exactly as addressed hereon. If the stock is jointly held each owner must sign. Executor,
trustees, guardian and attorneys should so indicate when signing. Attorneys should submit proxies of attorney.
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
