<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT HAVE 1934
For the fiscal year ended November 30, 1999
Commission file number 000-25349
HOOKER FURNITURE CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0251350
----------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
440 East Commonwealth Boulevard Martinsville, VA 24112
------------------------------------------------------
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (540) 632-2133
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes (x) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of common equity held by non-affiliates of the
registrant: $56.2 million (based on the closing price as of February 14, 2000 as
reported to the NASD by its member firms); there is no established public
trading market for the Company's common stock.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of February 14, 2000:
Common Stock, no par value 7,617,298
-------------------------- ---------
(Class of Common Stock) (Number of Shares)
Documents incorporated by reference: Portions of the registrant's Proxy
Statement for its Annual Meeting of Stockholders scheduled to be held March 30,
2000 are incorporated by reference into Part III.
<PAGE>
HOOKER FURNITURE CORPORATION
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I
Item 1. Business........................................................ 3
Item 2. Properties...................................................... 7
Item 3. Legal Proceedings............................................... 8
Item 4. Submission of Matters to a Vote of Security Holders............. 8
Part II
- -------
Item 5. Markets for Registrant's Common Equity and Related Stockholder
Matters......................................................... 10
Item 6. Selected Financial Data......................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...... 15
Item 8. Financial Statements and Supplementary Data..................... 15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................ 15
Part III
- --------
Items 10. through 13...................................................... 15
Part IV
- -------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 16
Signatures.................................................................. 18
Index to Financial Statements and Schedules................................. F-1
</TABLE>
2
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Hooker Furniture Corporation
Part I
ITEM 1. BUSINESS.
General
- -------
Incorporated in Virginia in 1924, Hooker Furniture Corporation ("Hooker" or the
"Company") is a leading manufacturer and importer of residential furniture
primarily targeted at the upper-medium price range. The Company offers
diversified products, consisting primarily of home office, entertainment
centers, imported lines, bedroom and wall systems, across many style categories
within this price range. Its product depth and extensive style selections make
the Company an important furniture resource for retailers in its price range and
allows the Company to respond more quickly to shifting consumer preferences. The
Company has established a broad distribution network that includes independent
furniture stores, department stores, specialty retailers, catalog merchandisers
and national and regional furniture chains. The Company emphasizes continuous
improvement in its manufacturing processes to enable it to continue providing
competitive advantages to its customers, such as quick delivery, reduced
inventory investment, high quality, and value.
Products and Styles
- -------------------
The Company's product lines cover most major design categories. The Company
believes that the diversity of its product lines enables it to anticipate and
respond quickly to changing consumer preferences and provides retailers an
important furniture resource in the upper-medium price range. The Company
intends to continue expanding its product styles with particular emphasis on
home office, entertainment centers, occasional furniture and bedroom. The
Company believes that its products represent good value and that the quality and
style of its furniture compare favorably with more premium-priced products.
The Company provides furniture products in a variety of materials, woods,
veneers, and finishes. The number of patterns by product line are:
<TABLE>
<CAPTION>
Number of Patterns
------------------
<S> <C>
Home office........................... 43
Wall systems.......................... 26
Entertainment centers................. 50
Imported lines........................ 86
Bedroom............................... 16
</TABLE>
These product lines cover most major design categories including European
traditional, transitional, American traditional, and country/casual designs.
The Company designs and develops new product styles semi-annually to replace
discontinued items or styles and, if desired, expand product lines. The
Company's product design process begins with marketing personnel identifying
customer needs and conceptualizing product ideas, which generally consist of a
group of related furniture pieces. A variety of sketches are produced, usually
by independent designers, from which prototype furniture pieces are built. The
Company invites key dealers and independent sale representatives to view and
critique the prototypes. From this input, changes in design are made and the
Company's engineering department prepares a sample for actual full-scale
production. The Company introduces its new product styles at the fall and spring
international furniture markets.
3
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Distribution
- ------------
The Company has developed a broad domestic customer base and also sells to a
limited international market. The Company sells its furniture through
approximately 80 independent sales representatives to independent furniture
retailers, catalog merchandisers, and national and regional chain stores.
Representative customers include Federated Department Stores, Homelife, Neiman
Marcus, Dillard's Department Stores, Nebraska Furniture Mart and Haverty's. The
Company believes this broad network reduces its exposure to regional recessions,
and allows it to capitalize on emerging channels of distribution. The Company
offers tailored merchandising programs to address each channel of distribution.
The general marketing practice followed in the furniture industry is to exhibit
products at international and regional furniture markets. In the spring and fall
of each year, a nine-day furniture market is held in High Point, North Carolina,
which is attended by most buyers and is regarded by the industry as the
international market. The Company utilizes approximately 32,000 square feet of
showroom space at the High Point market to introduce new products, increase
sales of its existing products, and test ideas for future products.
The Company has sold to over 3,700 customers during the past fiscal year, and
approximately 1.7% of the Company's sales in 1999 were to international
customers. No single customer accounted for more than five percent of the
Company's sales in 1999. No material part of the Company's business is dependent
upon a single customer, the loss of which would have a material effect on the
business of the Company. The loss of several of the Company's major customers
could have a material impact on the business of the Company.
Manufacturing
- -------------
The Company's manufacturing strategy is to produce products, which are on the
leading edge of changing consumer demand for the home, such as home theater,
home office and computer furniture, as well as traditional bedroom. The Company
stresses strong customer relationships in developing new products as well as
improving existing ones. The Company believes strongly in employee involvement
with employee and management teams working and communicating in all areas of
manufacturing to improve production and quality related issues, stressing
quality improvement not quality control. To meet customer expectations of just-
in-time inventory delivery, the Company's strategy has been to strike a balance
between minimizing cutting size together with increasing the frequency of
cuttings on the one hand, and the efficiencies gained from longer production
runs on the other. In recent years, cutting sizes have been reduced, frequencies
of cuttings increased, and finished goods inventory levels increased. The
Company manufactures products using a flexible plant philosophy structure with
all plants capable of making and sharing product lines according to customer
demands and plant loads, which allows for quicker delivery of high demand
products. The Company is in constant contact with key suppliers in forming
partnerships which communicate both quality and delivery issues which are
imperative for both the Company and supplier to adjust to ever changing customer
requirements.
The Company operates manufacturing facilities in North Carolina and Virginia
consisting of an aggregate of approximately 1.8 million square feet. The Company
considers its present equipment to be generally modern, adequate and well
maintained.
The Company schedules production of its various styles based upon actual and
anticipated orders. The Company's backlog of unshipped orders was $33.6 million
at November 30, 1999 and $32.8 million at November 30, 1998. With the emphasis
in recent years on inventory-on-demand, dealers no longer find it necessary to
place orders as far in advance as was once the case. In addition, it is the
Company's policy and industry practice to allow order cancellation up to time of
shipment, therefore customer orders are not firm until shipped. For these
reasons, management does not consider order backlogs to be an accurate indicator
4
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of expected business. Historically, however, 92% of all orders booked are
ultimately shipped. Backlogs are normally shipped within six months.
Imported Lines
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The Company imports finished furniture in a variety of styles and materials, and
markets the products under the Company name through its normal distribution
channels. Product lines include occasional tables, consoles, chests, casual
dining pieces, bedroom pieces and accent items. The Company imports products
from China, the Philippines, Mexico, Indonesia, Honduras and Egypt from
approximately 16 agents representing 35 factories. All transactions are in U.S.
dollars. Because of the large number and diverse nature of foreign factories,
the Company has flexibility in the placement of product in any particular
country or factory. Factories located in China have become an important resource
for the Company. The sudden disruption in the Company's supply chain from China
could significantly impact the Company's ability to fill customer orders for
products manufactured in that country for a three to six month period. However,
the Company believes that such a disruption in supply would not have a material
adverse effect on the Company's financial condition or results of operations.
Raw Materials
- -------------
The principal materials used by the Company in manufacturing its products
include lumber, veneers, plywood, particleboard, hardware, glue, finishing
materials, glass products and fasteners. The Company uses a variety of species
of lumber, including cherry, oak, poplar, pine and maple. The Company's five
largest suppliers accounted for approximately 16.1% of its purchases in 1999.
The Company believes that its sources of supply for these materials are adequate
and that it is not dependent on any one supplier.
Competition
- -----------
The Company is the sixteenth largest furniture manufacturer in North America
based on 1998 sales, according to Furniture/Today, a trade publication. The
furniture industry is highly competitive and includes a large number of foreign
and domestic manufacturers, none of which dominates the market. The markets in
which the Company competes include a large number of relatively small
manufacturers; however, certain competitors of the Company have substantially
greater sales volumes and financial resources than the Company. Competitive
factors in the upper-medium price range include style, price, quality, delivery,
design, service and durability. The Company believes that its long-standing
customer relationships, customer responsiveness, consistent support of existing
diverse product lines that are high quality and good value and experienced
management are competitive advantages.
Employees
- ---------
At November 30, 1999, the Company had approximately 2,050 employees. None of the
Company's employees are represented by a labor union. The Company considers its
relations with its employees to be good.
The Corporation sponsors the Hooker Furniture Corporation Employee Stock
Ownership Plan (the "ESOP") to provide ownership and retirement benefits for
eligible employees. The ESOP covers substantially all the Company employees. The
ESOP enables employees to share in the growth of the Company and to accumulate a
beneficial ownership interest in the Company's Common Stock.
5
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Patents and Trademarks
- ----------------------
The trade name of the Company represents many years of continued business. The
Company believes such name is well recognized and associated with quality in
the furniture industry. The Company owns a number of patents, trademarks and
licenses, none of which is considered to be material to the Company.
Governmental Regulations
- ------------------------
The Company is subject to federal, state, and local laws and regulations in the
areas of safety, health and environmental pollution controls. Compliance with
these laws and regulations has not in the past had any material effect on the
Company's earnings, capital expenditures, or competitive position; however, the
effect of such compliance in the future cannot be predicted. Management believes
that the Company is in material compliance with applicable federal, state, and
local environmental regulations.
Regulations issued in December 1995 under the Clean Air Act Amendments of 1990
as part of the National Emission Standards for Hazardous Air Pollutants program
and negotiated into the Furniture Maximum Achievable Control Technology
Standard, requires the Company to reformulate certain furniture finishes and
institute process and administrative changes to reduce emissions of hazardous
air pollutants. The Company believes it is in compliance with these regulations
by its use of compliant coatings and by training its associates in work practice
standards. The Company cannot at this time estimate the future impact of these
standards on the Company's operations and capital expenditure requirements. See
"Item 8. Legal Proceedings."
Forward-Looking Statements
- --------------------------
Certain statements made in this registration statement are not based on
historical facts, but are forward-looking statements. These statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy. These statements reflect the Company's reasonable judgment with
respect to future events and are subject to risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements. Such risks and uncertainties include the cyclical nature of the
furniture industry, fluctuations in the price of lumber which is the most
significant raw material used by the Company, competition in the furniture
industry, capital costs and general economic or business conditions, either
nationally or internationally.
6
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ITEM 2. PROPERTIES.
Set forth below is certain information with respect to the Company's principal
properties. The Company believes that all these properties are well maintained
and in good condition. The Company believes its manufacturing facilities are
being efficiently utilized. The Company estimates that its facilities are
currently being operated at approximately 95% capacity, on a one-shift basis.
Each manufacturing facility is flexible in regard to product lines manufactured,
allowing the Company to shift products between plants according to customer
sales and delivery demands. All Company plants are equipped with automatic
sprinkler systems and modern fire and spark detection systems, which the Company
believes are adequate. All facilities set forth below are active and
operational.
<TABLE>
<CAPTION>
Approximate
Facility Size
Location Primary Use (Square Feet) Owned or Leased
- -------- ----------- ------------- ---------------
<S> <C> <C> <C>
Martinsville, VA Corporate Headquarters 32,000 Owned
Martinsville, VA Manufacturing 760,000 Owned
Martinsville, VA Distribution/Imports 400,000 Owned (1)
Martinsville, VA Distribution 189,200 Owned (2)
Martinsville, VA Plywood Production 146,000 Owned
Kernersville, NC Manufacturing 115,000 Owned
Roanoke, VA Manufacturing 265,000 Owned
Pleasant Garden, NC Manufacturing 300,000 Owned
Maiden, NC Manufacturing 200,000 Owned
High Point, NC Showroom 32,000 Leased (3)
</TABLE>
(1) An additional 180,000 square feet is under construction at this location
that will house the imports division. The addition will be completed by
March 2000. The 100,000 square feet of the existing facility, currently
housing the imports division, will then be utilized for distribution.
(2) The Company is presently contemplating the sale, lease or alternate
utilization of this facility.
(3) Lease expires April 30, 2005.
7
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ITEM 3. LEGAL PROCEEDINGS.
The Company owns a 50% interest in a joint venture that produced particleboard
for furniture manufacturing. During 1998, the joint venture was cited by the
U.S. Environmental Protection Agency ("EPA") for a violation of certain
regulations under the Clean Air Act Amendments of 1990. The joint venture
members determined that the cost of modification to the plant to come into
compliance, together with other needed capital improvements, would be
prohibitive and the joint venture elected to cease operations in November 1998.
Effective June 1, 1999, the joint venture entered into a lease for the land and
building owned by the joint venture with a third party lessee. The lease term is
for two years with an option to purchase for $2.7 million. The Company believes
the option will be exercised during the term of the lease. The Company's equity
in the anticipated proceeds from the sale of the property, together with other
net assets of the joint venture are approximately equal to the Company's
carrying value of the investment at November 30, 1999. No final action has been
taken by EPA in this matter, including the assessment of fines against the joint
venture. The Company believes that any fines that might be levied by the EPA
will not have a material adverse affect on the Company's financial condition or
results of operations.
Based upon performance tests conducted in November 1998, the EPA issued the
Company a Notice of Violation in March 1999 for the failure of two boilers at
the Company's Martinsville facility to meet particulate emission limitations
under the Clean Air Act. The Company made adjustments to one non-compliant
boiler and conducted a second performance test in February 1999. The results of
that second performance test indicated that the boiler was in compliance with
its particulate limitations. The Company has forwarded those results to EPA. The
Company has analyzed the operations of the second non-compliant boiler and has
formulated a plan to bring that boiler into compliance with its particulate
emission limitations. No final action has been taken by EPA in this matter,
including the assessment of fines against the Company. Company management
anticipates that costs incurred by the Company in connection with bringing both
boilers into compliance, including any fines that might be levied by the EPA,
will not have a material adverse affect on the Company's financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
8
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HOOKER FURNITURE CORPORATION
Executive Officers of the Registrant
The Company's executive officers and their ages as of February 14, 2000 and the
year each joined the Company or its Board are as follows:
<TABLE>
<CAPTION>
Year Joined
Name Age Position Company
---- --- --------- -------
<S> <C> <C> <C>
J. Clyde Hooker, Jr. 79 Chairman and Chief Executive Officer 1946
Paul B. Toms, Jr. 45 President and Chief Operating Officer 1983
Douglas C. Williams 52 Executive Vice President - Manufacturing 1971
Raymond T. Harm 50 Senior Vice President - Sales 1999
Henry P. Long, Jr. 48 Senior Vice President - Merchandising and 1983
Design
E. Larry Ryder 52 Senior Vice President - Finance and 1977
Administration, Assistant Secretary, and
Assistant Treasurer
</TABLE>
J. Clyde Hooker, Jr. has been Chairman of the Board since 1987 and Chief
Executive Officer since 1966. He was President from 1960 to 1987 and again in
1999. Prior to 1960, Mr. Hooker held various positions in sales and marketing.
Mr. Hooker joined the Company in 1946 and has been a Director since 1947. He is
the first cousin of A. Frank Hooker, Jr. (a director of the Company) and the
uncle of Paul B. Toms, Jr.
Paul B. Toms, Jr. has been President - Chief Operating Officer since December
1999. Mr. Toms was Executive Vice President - Sales & Marketing from December
1994 to December 1999, Senior Vice President - Sales & Marketing during 1993 and
1994 and Vice President - Sales from 1987 to 1993. Mr. Toms joined the Company
in 1983 and has been a Director since 1993. Mr. Toms is the nephew of J. Clyde
Hooker, Jr.
Douglas C. Williams was elected Executive Vice President - Manufacturing in
December 1999. He was Senior Vice President - Manufacturing from 1987 to 1999
and Vice President - Manufacturing from 1986 to 1987. Prior to 1986, he held
various positions in production. Mr. Williams joined the Company in 1971 and has
been a Director since 1987.
Raymond T. Harm has been Senior Vice President - Sales since joining the Company
in 1999. Prior to joining the Company, he served as Vice President - Sales for
The Barcalounger Company from 1992 to 1999. Prior to 1992, Mr. Harm served in
various sales management positions with The Barcalounger Company.
Henry P. Long, Jr. has been Senior Vice President - Merchandising and Design
since 1994. He was Vice President - Sales from 1987 to 1994. Mr. Long joined the
Company in 1983 and has been a Director since 1993.
E. Larry Ryder has been Senior Vice President - Finance and Administration since
1987, Assistant Treasurer since 1998 and Assistant Secretary since 1990. He was
Treasurer from 1989 to 1998 and Vice President - Finance and Administration from
1983 to 1987. Prior to 1983, Mr. Ryder served in various financial capacities.
Mr. Ryder joined the Company in 1977 and has been a Director since 1987.
9
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Hooker Furniture Corporation
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The table below sets forth the high and low sales prices per share for the
Company's Common Stock for the periods indicated as reported to the National
Association of Securities Dealers, Inc. (the "NASD") by the NASD's member firms.
The Company's Common Stock is not listed for trading on any securities exchange
or on Nasdaq and there is no established public trading market for the Company's
Common Stock. The stock price information reported in the tables below
represents a limited number of transactions in the Company's Common Stock in the
"over-the-counter" market during the periods indicated.
<TABLE>
<CAPTION>
1999 High Low
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<S> <C> <C>
First Quarter...................... $15.75 $13.00
Second Quarter..................... 15.13 12.00
Third Quarter...................... 15.00 11.00
Fourth Quarter..................... 14.50 9.00
1998
First Quarter...................... $15.00 $12.50
Second Quarter..................... 17.00 13.88
Third Quarter...................... 16.88 12.50
Fourth Quarter..................... 16.00 11.50
</TABLE>
As of February 14, 2000 the Company had approximately 770 beneficial
stockholders and 1,550 employees participating in the Company's ESOP. The
Company pays quarterly dividends on its Common Stock on or about the last
day of February, May, August and November, when declared by the Board of
Directors, to stockholders of record approximately two weeks earlier. Although
the Company presently intends to declare cash dividends at historical levels
on a quarterly basis for the foreseeable future, the determination as to the
payment and the amount of any future dividends will be made by the Board of
Directors from time to time and will depend on the Company's then current
financial condition, capital requirements, results of operations and any other
factors then deemed relevant by the Board of Directors. The following table
sets forth the dividends per share paid by the Company with respect to its
Common Stock during the Company's two most recent fiscal years:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
First Quarter...................... $0.075 $0.070
Second Quarter..................... 0.075 0.070
Third Quarter...................... 0.075 0.070
Fourth Quarter..................... 0.075 0.070
</TABLE>
All per share information reflected above has been adjusted to reflect a two-
for-one stock split distributed in the form of a stock dividend on January 31,
2000.
10
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for each of the last five fiscal years
ended November 30, 1999 has been derived from the Company's audited financial
statements. The selected financial data should be read in conjunction with the
Financial Statements, including the Notes thereto, and "Management's Discussion
and Analysis" included elsewhere herein.
<TABLE>
<CAPTION>
For the Year Ended November 30,
(In thousands, except per share data)
--------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data (1):
Net sales............................. $227,785 $205,308 $175,385 $161,202 $144,689
Cost of goods sold.................... 168,603 156,344 133,092 118,675 108,825
Selling and administrative expenses... 35,648 32,051 26,685 25,172 22,474
Income from operations................ 23,534 16,913 15,608 17,355 13,390
Other income (expense), net........... (358) 114 (31) 148 718
Income before income taxes............ 23,176 17,027 15,577 17,503 14,108
Income taxes.......................... 8,881 6,241 5,530 6,715 4,939
Net income............................ 14,295 10,786 10,047 10,788 9,169
Per Share Data (2):
Basic and diluted earnings per share.. 1.87 1.40 1.30 1.39 1.18
Cash dividends per share.............. 0.30 0.28 0.26 0.22 0.18
Net book value per share (including
common stock held by ESOP).......... 12.52 10.97 9.86 8.85 7.68
Weighted number of shares
outstanding......................... 7,636 7,692 7,734 7,750 7,753
Balance Sheet Data:
Cash.................................. 157 3,625 827 1,997 2,543
Inventories........................... 37,051 35,812 33,475 26,013 19,818
Working capital....................... 54,557 51,793 47,153 37,555 33,840
Total assets.......................... 116,423 111,233 98,290 87,370 71,144
Long-term debt (including current
maturities)......................... 7,000 12,062 9,985 7,228 1,000
Common stock held by ESOP............. 10,129 10,213 10,044 9,230 6,740
Stockholders' equity.................. 85,234 73,900 66,210 59,326 52,760
</TABLE>
(1) Certain items in the financial statements for periods prior to 1999 have
been reclassified to conform to the 1999 method of presentation.
(2) All share and per share data reflect the effect of a two-for-one stock split
distributed in the form of a stock dividend on January 31, 2000.
11
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Financial Data above and the Financial Statements and Notes thereto contained
elsewhere in this report.
Results of Operations
- ---------------------
The following table sets forth the percentage relationship to net sales of
certain items included in the statements of income:
<TABLE>
<CAPTION>
For the Year Ended November 30,
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.......................... 100.0% 100.0% 100.0%
Cost of sales...................... 74.0 76.2 75.9
----- ----- -----
Gross profit..................... 26.0 23.8 24.1
Selling & administrative expenses.. 15.7 15.6 15.2
----- ----- -----
Operating income................. 10.3 8.2 8.9
Other income (expense), net........ (0.1) 0.1
----- ----- -----
Income before income taxes...... 10.2 8.3 8.9
Income taxes....................... 3.9 3.0 3.2
----- ----- -----
Net income....................... 6.3% 5.3% 5.7%
===== ===== =====
</TABLE>
1999 Compared to 1998
- ---------------------
Net sales increased $22 million or 10.9% in 1999 compared to 1998. The increase
was due principally to continued increased unit volume in two major product
lines: imported furniture and home office furniture.
Gross profit margin for 1999 increased to 26.0% compared to 23.8% for 1998. The
increase was due primarily to improved operating efficiencies, lower raw
material costs offset partially by the higher delivered cost of imported
furniture, and higher average unit selling prices.
Selling and administrative expenses rose $3.6 million to 15.7% of net sales
compared to 15.6% for 1998. The increase was primarily due to increased costs of
warehousing and shipping. During 1999, the Company moved to centralized finished
goods warehousing, requiring a duplicity of facilities during much of the year.
The Company anticipates that dual facilities will not be necessary by the
beginning of the second quarter of 2000.
As a result of the above, operating income increased from 8.2% of net sales in
1998 to 10.3% of net sales in 1999.
The Company's effective tax rate increased from 36.6% in 1998 to 38.3% in 1999.
1998 Compared to 1997
- ---------------------
Net sales increased $30 million or 17.1% in 1998 compared to 1997. The increase
was due principally to higher unit volume, particularly in three major product
lines: imported occasional furniture, home entertainment furniture and home
office furniture.
12
<PAGE>
Gross profit margin for 1998 decreased to 23.8% compared to 24.1% for 1997. The
decline was due primarily to lower average unit selling prices.
Selling and administrative expenses rose from 15.2% of net sales in 1997 to
15.6% in 1998. The increase was primarily due to the Company's planned
investment upgrades in year-2000 compliant hardware, software and network
technology.
As a result of the above, operating income dropped from 8.9% of net sales in
1997 to 8.2% of net sales in 1998.
The Company's effective tax rate was 36.6% of income before taxes in 1998 and
35.5% in 1997.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
As of November 30, 1999, assets totaled $116.4 million, up from $111.2 million
in 1998 and $98.3 million in 1997. Stockholders' equity at November 30, 1999,
was $85.2 million, rising from $73.9 million in 1998 and $66.2 million in 1997.
Cash generated from operating activities was $13.3 million during 1999 compared
to $15.1 million in 1998 and $4.6 million in 1997.
Investing activities consumed $8.6 million in cash during 1999 compared to $11.5
million during 1998 and $6.2 million in 1997. Cash absorbed by investing
activities in all three years was for capital expenditures as the Company
continued to invest in property, plant and equipment for expanded furniture
manufacturing capacity and distribution. In 1999, the Company began construction
of raw lumber grading, storage and drying facilities at the Maiden, North
Carolina plant to enable the Company to improve control of lumber cost and
availability. These facilities should be completed and operational during the
second quarter of 2000. The Company also began a 180,000 square foot addition to
the central distribution center ("CDC") in Martinsville, Virginia. The Company
substantially completed the consolidation of finished inventory formerly kept in
three separate warehouses into the CDC in 1999. One of the former warehouses was
under lease, which expired in April 1999, management is considering the sale,
lease or alternate utilization of one facility, and the final facility will be
used for additional manufacturing needs. Management anticipates that the
consolidation will provide improved inventory control, less handling and
improved efficiency for the distribution of its product.
The Company used $8.1 million for financing activities in 1999 compared to using
$850,000 in 1998 and provided cash from financing activities in the amount of
$408,000 in 1997. During 1997, the Company incurred $2.8 million of additional
debt through its revolving line of credit for working capital needs primarily to
fund a $7.5 million increase in inventories. During 1998, total long-term debt
increased $2.1 million, primarily to fund the purchase of additional warehouse
capacity during the fourth quarter. In 1999, long-term debt was reduced by $5.1
million. The Company made dividend payments of $2.3 million, $2.2 million and
$2.0 million in 1999, 1998 and 1997, respectively.
At November 30, 1999, the Company had $8 million available under its revolving
line of credit and $10.8 million of availability under additional lines of
credit to fund working capital needs. The Company believes it has the financial
resources needed to meet business requirements in the foreseeable future,
including capital expenditures for the expansion of manufacturing capacity,
working capital requirements, and the Company's dividend program.
13
<PAGE>
Environmental Matters
- ---------------------
Hooker Furniture Corporation is committed to protecting the environment as
evidenced by its products and its manufacturing operations. The Company's
manufacturing sites generate both hazardous and non-hazardous wastes, the
treatment, storage, transportation and disposal of which are subject to various
local, state and national laws relating to protecting the environment. The
Company is in various stages of investigation or remediation of alleged or
acknowledged contamination at current manufacturing sites, and at its 50% owned
subsidiary. The Company's policy is to record environmental liabilities when
loss amounts are probable and can be reasonably estimated. The Company's
assessment of the costs associated with its environmental responsibilities,
compliance with federal, state and local laws regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, has not had, and in the opinion of management, will not have a
material effect on the Company's financial position, results of operations,
capital expenditures or competitive position.
Year 2000
- ---------
Since 1996, the Company had been planning for the advent of the year 2000.
Review and, where necessary, the upgrade or replacement of critical business
system software and hardware, and other equipment was made prior to 2000, at a
cost of approximately $3 million. These actions allowed the transition to occur
without material disruption to the Company's business systems, supply of
materials or the subsequent distribution of product. The Company will continue
to monitor exposures both internally and with its business partners. Such
ongoing costs are expected to be minimal and a part of normal operating costs.
Accounting Pronouncements
- -------------------------
In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"), which establishes accounting and reporting
standards for derivative instruments. SFAS 133 requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000 and requires
application prospectively. Management believes that the adoption of SFAS 133
will not have a material impact on the Company's financial statements.
14
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's obligations under its lines of credit and industrial revenue bonds
bear interest at variable rates. The Company has entered into an interest rate
swap agreement that, in effect fixes the rate of interest on the industrial
revenue bonds at 4.71% through 2006. At November 30, 1999 the Company had no
debt outstanding under its lines of credit. A 10% fluctuation in market interest
rates would not have a material impact on the Company's results of operations or
financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and schedule listed in Items 14(a)(1) and 14(a)(2) of
this report are incorporated herein by reference and are filed as a part of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Hooker Furniture Corporation
Part III
In accordance with General Instruction G(3) of Form 10-K, the information called
for by Items 10, 11, 12 and 13 of Part III is incorporated by reference to the
registrant's definitive Proxy Statement for its Annual Meeting of Stockholders
scheduled to be held March 30, 2000, except for information concerning the
executive officers of the registrant which is included in Part I of this report
under the caption "Executive Officers of the Registrant."
15
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report on Form 10-K:
(1) The following financial statements are included in this report on Form 10-
K:
Report of Independent Certified Public Accountants.
Balance Sheets as of November 30, 1999 and 1998.
Statements of Income for each of the three fiscal years ended November 30,
1999.
Statements of Cash Flows for each of the three fiscal years ended November
30, 1999.
Statements of Stockholders' Equity for each of the three fiscal years ended
November 30, 1999.
Summary of Significant Accounting Policies.
Notes to Financial Statements.
(2) Financial Statement Schedules:
Report on Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts for each of the three
fiscal years ended November 30, 1999.
(b) The following reports on Form 8-K were filed by the registrant during the
last quarter covered by this report:
None.
(c) Exhibits:
3.1 Amended and Restated Articles of Incorporation of the Company (incorporated
by reference to Exhibit 3.1 to the Company's Registration Statement on Form
10 (Commission File No. 000-25349)).
3.2 Articles of Amendment to Amended and Restated Articles of Incorporation of
the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form 10 (Commission File No. 000-25349)).
3.3 Amended and Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.3 to the Company's Registration Statement on Form 10 (Commission
File No. 000-25349)).
4.1 Amended and Restated Articles of Incorporation of the Company (See Exhibit
3.1).
4.2 Articles of Amendment to Amended and Restated Articles of Incorporation of
the Company (See Exhibit 3.2).
16
<PAGE>
4.3 Bylaws of the Company (See Exhibit 3.3).
Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments evidencing
long-term debt less than 10% of the Company's total assets have been
omitted and will be furnished to the Securities and Exchange Commission
upon request.
10.1 Lease, dated August 11, 1999, between International Home Furnishings
Center, Inc. and the Company. *
10.2 Form of Salary Continuation Agreement (incorporated by reference to Exhibit
10.3 to the Company's Registration Statement on Form 10 (Commission File
No. 000-25349)). **
10.3 Form of Split Dollar Agreement (incorporated by reference to Exhibit 10.4
to the Company's Registration Statement on Form 10 (Commission File No.
000-25349)). **
10.4 Commitment Letter for line of credit ("BB&T Line of Credit") and related
Promissory Note dated June 5, 1998 between Branch Banking & Trust Company
and the Company. *
10.5 Commitment Letter dated March 23, 1999 between Branch Banking & Trust
Company and the Company renewing BB&T Line of Credit. *
27.1 Financial Data Schedule. *
_______________
*Filed herewith.
**Management contract or compensatory plan.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HOOKER FURNITURE CORPORATION
February 14, 2000
/s/ J. Clyde Hooker, Jr.
----------------------------------------
J. Clyde Hooker, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ J. Clyde Hooker, Jr. Chairman, Chief Executive Officer and February 14, 2000
- -----------------------------
J. Clyde Hooker, Jr. Director (Principal Executive Officer)
/s/ Paul B. Toms, Jr. President - Chief Operating Officer and February 14, 2000
- ------------------------------
Paul B. Toms, Jr. Director
/s/ Douglas C. Williams Executive Vice President - Manufacturing February 14, 2000
- ------------------------------
Douglas C. Williams and Director
/s/ Henry P. Long, Jr. Senior Vice President - Merchandising and February 14, 2000
- ------------------------------
Henry P. Long, Jr. and Design and Director
/s/ E. Larry Ryder Senior Vice President - Finance and February 14, 2000
- ------------------------------
E. Larry Ryder Administration and Director
(Principal Financial and Accounting Officer)
/s/ W. Christopher Beeler, Jr. Director February 14, 2000
- ------------------------------
W. Christopher Beeler, Jr.
/s/ John L. Gregory III Director February 14, 2000
- ------------------------------
John L. Gregory III
/s/ Irving M. Groves, Jr. Director February 14, 2000
- ------------------------------
Irving M. Groves, Jr.
/s/ A. Frank Hooker, Jr. Director February 14, 2000
- ------------------------------
A. Frank Hooker, Jr.
/s/ L. Dudley Walker Director February 14, 2000
- ------------------------------
L. Dudley Walker
</TABLE>
18
<PAGE>
HOOKER FURNITURE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Financial Statements
- --------------------
Report of Independent Certified Public Accountants........................ F-2
Balance Sheets as of November 30, 1999 and 1998........................... F-3
Statements of Income for each of the three fiscal years ended November
30, 1999.................................................................. F-4
Statements of Cash Flows for each of the three fiscal years ended
November 30, 1999......................................................... F-5
Statements of Stockholders' Equity for each of the three fiscal years
ended November 30, 1999................................................... F-6
Summary of Significant Accounting Policies................................ F-7
Notes to Financial Statements............................................. F-8
Financial Statement Schedules
- -----------------------------
Report on Financial Statement Schedule.................................... S-1
Schedule II-Valuation and Qualifying Accounts for each of the three
fiscal years ended November 30, 1999...................................... S-2
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Hooker Furniture Corporation
Martinsville, Virginia
We have audited the accompanying balance sheets of Hooker Furniture Corporation
as of November 30, 1999 and 1998 and the related statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended November 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hooker Furniture Corporation at
November 30, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended November 30, 1999 in conformity
with generally accepted accounting principles.
/S/ BDO Seidman, LLP
--------------------
December 15, 1999, except for Note 7, which is as of January 10, 2000
Richmond, Virginia
F-2
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets (In thousands, including share data) Hooker Furniture Corporation
- -----------------------------------------------------------------------------------------
As of November 30, 1999 1998
- -----------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash, primarily interest-bearing deposits............. $ 157 $ 3,625
Trade receivables, less allowance of $525 and $500.... 26,599 23,346
Inventories........................................... 37,051 35,812
Prepaid expenses and other............................ 2,408 1,637
-------- --------
Total current assets............................ 66,215 64,420
Property, plant and equipment, net......................... 45,138 41,500
Other assets............................................... 5,070 5,313
-------- --------
Total assets.......................................... $116,423 $111,233
======== ========
- -----------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------
Current liabilities
Trade accounts payable................................ $ 3,776 $ 4,757
Accrued salaries, wages and benefits.................. 5,387 4,464
Other accrued expenses................................ 2,495 3,406
-------- --------
Total current liabilities....................... 11,658 12,627
Long-term debt............................................. 7,000 12,062
Deferred liabilities....................................... 2,402 2,431
-------- --------
Total liabilities......................... 21,060 27,120
-------- --------
Common Stock held by ESOP.................................. 10,129 10,213
Stockholders' equity
Common stock, no par value, 10,000 shares authorized,
7,617 and 7,671 shares issued and outstanding...... 2,418 2,435
Retained earnings..................................... 82,816 71,465
-------- --------
Total stockholders' equity....................... 85,234 73,900
-------- --------
Total liabilities and stockholders' equity........ $116,423 $111,233
======== ========
</TABLE>
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Statements of Income (In thousands, excluding per share data) Hooker Furniture Corporation
- -----------------------------------------------------------------------------------------------------------------
For The Year Ended November 30, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales............................................................. $227,785 $205,308 $175,385
Cost of sales......................................................... 168,603 156,344 133,092
-------- -------- --------
Gross profit....................................................... 59,182 48,964 42,293
Selling and administrative expenses................................... 35,648 32,051 26,685
-------- -------- --------
Operating income................................................. 23,534 16,913 15,608
Other income (expense), net........................................... (358) 114 (31)
-------- -------- --------
Income before taxes.............................................. 23,176 17,027 15,577
Income taxes.......................................................... 8,881 6,241 5,530
-------- -------- --------
Net income....................................................... $ 14,295 $ 10,786 $ 10,047
======== ======== ========
Earnings per share:
Basic and diluted................................................ $ 1.87 $ 1.40 $ 1.30
======== ======== ========
Weighted average shares outstanding.................................. 7,636 7,692 7,734
======== ======== ========
</TABLE>
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows (In thousands) Hooker Furniture Corporation
- ----------------------------------------------------------------------------------------------------------------
For The Year Ended November 30, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers............................ $ 225,167 $ 205,376 $ 173,398
Cash paid to suppliers and employees.................... (202,044) (183,745) (162,882)
Income taxes paid....................................... (9,288) (6,038) (5,310)
Interest paid, net...................................... (570) (459) (572)
--------- --------- ---------
Net cash provided by operating activities............ 13,265 15,134 4,634
--------- --------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment, net.......... (8,626) (11,486) (6,212)
--------- --------- ---------
Net cash absorbed by investing activities............ (8,626) (11,486) (6,212)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............................ 4,738 6,877 6,757
Payments on long-term debt.............................. (9,800) (4,800) (4,000)
Cash dividends paid..................................... (2,290) (2,152) (2,011)
Purchase and retirement of common stock................. (755) (775) (338)
--------- --------- ---------
Net cash provided (absorbed) by financing activities.. (8,107) (850) 408
--------- --------- ---------
Net increase (decrease) in cash............................. (3,468) 2,798 (1,170)
Cash at beginning of year................................... 3,625 827 1,997
--------- --------- ---------
Cash at end of year......................................... $ 157 $ 3,625 $ 827
========= ========= =========
Reconciliation of net income to net cash provided
by operating activities:
Net income.................................................. $ 14,295 $ 10,786 $ 10,047
Depreciation and amortization........................... 4,988 4,900 4,770
Increase in trade receivables........................... (3,253) (369) (2,536)
Increase in inventories................................. (1,239) (2,337) (7,462)
Increase in prepaid expenses and other assets........... (528) (853) (660)
Increase (decrease) in trade accounts payable........... (981) 582 (331)
Increase (decrease) in other accrued expenses........... 12 2,192 (104)
Increase (decrease) in deferred liabilities............. (29) 233 910
--------- --------- ---------
Net cash provided by operating activities............ $ 13,265 $ 15,134 $ 4,634
========= ========= =========
</TABLE>
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements.
F-5
<PAGE>
Statements of Stockholders' Equity (In thousands) Hooker Furniture Corporation
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Retained
-----------------
Shares Amount Earnings
------ ------ --------
<S> <C> <C> <C>
Balance at November 30, 1996.......................... 7,749 $2,460 $56,866
Net income............................................ 10,047
Cash dividends on common stock ($0.26 per share)...... (2,011)
Increase in fair value of shares held by ESOP......... (814)
Purchase and retirement of common stock............... (19) (6) (332)
----- ------ -------
Balance at November 30, 1997........................ 7,730 2,454 63,756
Net income............................................ 10,786
Cash dividends on common stock ($0.28 per share)...... (2,152)
Increase in fair value of shares held by ESOP......... (169)
Purchase and retirement of common stock............... (59) (19) (756)
----- ------ -------
Balance at November 30, 1998........................ 7,671 2,435 71,465
----- ------ -------
Net income............................................ 14,295
Cash dividends on common stock ($0.30 per share)...... (2,290)
Decrease in fair value of shares held by ESOP......... 84
Purchase and retirement of common stock............... (54) (17) (738)
----- ------ -------
Balance at November 30, 1999........................ 7,617 $2,418 $82,816
===== ====== =======
</TABLE>
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements.
F-6
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Hooker Furniture Corporation
- --------------------------------------------------------------------------------
Nature of Business
- ------------------
The Company manufactures and imports household and office furniture for sale to
wholesale and retail merchandisers located primarily throughout North America.
The Company operates predominantly in one business segment. Substantially all
revenues result from the sale of residential furniture products. Substantially
all of the Company's trade accounts receivable are due from retailers in this
market, which consists of a large number of entities with a broad geographical
dispersion.
Certain items in the financial statements for periods prior to 1999 have been
reclassified to conform to the 1999 method of presentation.
Inventories
- -----------
Inventories are stated at the lower of cost, using the last-in, first-out (LIFO)
method, or market.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment is stated at cost, less allowances for
depreciation. Provision for depreciation has been computed (generally by the
declining balance method) at annual rates that will amortize the cost of the
depreciable assets over their estimated useful lives.
Income Taxes
- ------------
Deferred income taxes reflect the future tax consequences of differences between
the tax basis of assets and liabilities and their financial reporting amounts at
each year end.
Fair Value of Financial Instruments
- -----------------------------------
The Company's financial instruments' (consisting of cash, accounts receivable,
accounts payable and accrued salaries) carrying values approximate fair value
because of the short-term nature of those instruments. The fair value of the
Company's industrial development revenue bonds is estimated based on the quoted
market rates for similar debt with remaining maturity. At November 30, 1999, the
carrying value of the industrial revenue bonds approximated fair value.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reported period. Actual
results could differ from those estimates.
Revenue Recognition
- -------------------
Sales are recognized when products are shipped to customers. Substantially all
of the Corporation's trade accounts receivable are from customers in the retail
furniture industry. Management periodically performs credit evaluations of its
customers and generally does not require collateral. The Corporation uses credit
insurance to minimize the risk on certain accounts.
Long-Lived Assets
- -----------------
Long-lived assets, such as property, plant and equipment, are evaluated for
impairment when events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable through the estimated undiscounted
future cash flows from the use of those assets. When any such impairment exists,
the related assets will be written down to fair value. No impairment losses have
been recorded through November 30, 1999.
F-7
<PAGE>
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - CONTINUED Hooker Furniture Corporation
- --------------------------------------------------------------------------------
Earnings Per Share
- ------------------
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilutive effect of
securities that could share in earnings of the Company. At November 30, 1999,
there were no securities that had a dilutive effect. Earnings per share has been
computed based upon the weighted average number of common shares outstanding
during the year.
NOTES TO FINANCIAL STATEMENTS
(Dollar amounts in tables or text, in thousands unless otherwise indicated)
NOTE 1 - INVENTORIES
<TABLE>
<CAPTION>
November 30,
------------------
1999 1998
------- ---------
<S> <C> <C>
Finished furniture................................. $31,673 $29,787
Furniture in process............................... 1,665 1,663
Materials and supplies............................. 13,244 13,628
------- -------
Inventories at FIFO.............................. 46,582 45,078
Reduction to LIFO basis............................ 9,531 9,266
------- -------
Inventories...................................... $37,051 $35,812
======= =======
</TABLE>
If the first-in, first-out (FIFO) method had been used in valuing all
inventories, net income would have been $14,459, $11,357 and $10,757 for the
three years ended November 30, 1999, 1998 and 1997, respectively.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Depreciable November 30,
------------------------
Lives (In years) 1999 1998
---------------- ---- ----
<S> <C> <C> <C>
Buildings................................................ 15 - 40 $ 40,047 $ 32,621
Machinery and equipment.................................. 8 - 20 40,888 37,007
Furniture and fixtures................................... 5 - 10 6,323 6,082
Other.................................................... 3 - 30 5,894 9,199
-------- -------------
Total depreciable property at cost..................... 93,152 84,909
Accumulated depreciation................................. (49,385) (44,590)
-------- -------------
Total depreciable property, net........................ 43,767 40,319
Land..................................................... 1,371 1,181
-------- -------------
Property, plant and equipment, net..................... $ 45,138 $ 41,500
======== =============
</TABLE>
F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED Hooker Furniture Corporation
- --------------------------------------------------------------------------------
NOTE 3 - LONG-TERM DEBT
<TABLE>
<CAPTION>
November 30,
-------------
1999 1998
-------- --------
<S> <C> <C>
Industrial development revenue bonds issued in 1996,
secured by a $7 million letter of credit, maturing annually
from 2004 through 2006 with a variable interest rate
(4.0% at November 30, 1999).................................. $ 7,000 $ 7,062
Revolving line of credit, with a maximum of
$8 million at November 30, 1999, variable rate (6.7%
at November 30, 1999) unsecured, interest payable
monthly...................................................... 5,000
-------- --------
Long-term debt.............................................. $ 7,000 $ 12,062
======== ========
</TABLE>
During 1998, the Company entered into an interest rate swap agreement, which
effectively provides a fixed interest rate of 4.71% on the industrial
development revenue bonds through 2006.
Maturities of long-term debt are $2.4 million in 2004, $2.4 million 2005 and
$2.2 million in 2006.
The debt instruments contain, among other things, certain restrictions as to
minimum tangible net worth, net equity ratio, current ratio, and debt coverage
ratio. The Company was in compliance with these restrictions as of November 30,
1999.
The Company has available additional lines of credit totaling $20 million to
fund its working capital needs. The Company utilizes letters of credit to
collateralize imported inventory purchases against these credit lines.
Outstanding letters of credit at November 30, 1999 were $ 9.2 million. As of
November 30, 1999, $10.8 million of additional borrowings were available under
these lines of credit.
NOTE 4 - EMPLOYEE BENEFIT PLANS
Salary Continuation Agreements
The Company maintains a salary continuation plan for certain management
employees. These are un-funded agreements with all benefits paid out of the
general assets of the Company when the employee retires. The amount of benefits
to be paid is specified in each individual agreement. The accrued liabilities
relating to this plan of $2.3 million and $1.9 million at November 30, 1999 and
1998, respectively, are included in "accrued salaries, wages and benefits" and
"deferred liabilities." The cost of the plan recognized in the statements of
income was $406 in 1999, $218 in 1998 and $188 in 1997.
Employee Stock Ownership Plan
The Company sponsors the Employee Stock Ownership Plan (ESOP) to provide
retirement benefits for eligible employees by allowing them to share on a
noncontributory basis in the growth of the Company, and allow them to accumulate
a beneficial ownership interest in the common stock of the Company. The ESOP
covers substantially all employees. Shares contributed to the ESOP are valued
at fair market value as determined by an independent appraisal. Dividends paid
on shares held by the ESOP are charged to retained earnings. The Company is
obligated under certain circumstances to repurchase shares covered by the ESOP.
Therefore the estimated value of the allocated ESOP shares is classified outside
of stockholder's equity. At November 30, 1999, 282,135 shares were allocated to
participants. Contributions to the ESOP are at the discretion of the Board of
Directors and amounted to $798 in 1999, $725 in 1998 and $359 in 1997.
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED Hooker Furniture Corporation
- ------------------------------------------------------------------------------
Employee Savings Plan
The Company sponsors the Employee's Savings Plan (the "Plan") covering
substantially all employees. The Plan is a qualified 401(k) savings plan that
is designed to permit employees of the Company to meet their savings goals and
share in the Company's profits as a way of providing them with funds for
retirement. A participant in the Plan may contribute an amount not less than
1%, nor more than 16% of their compensation. The Company will contribute 50% of
the amount contributed by the participant, up to 6% of their compensation, as a
matching contribution. Contributions to the Plan by the Company amounted to
$667 in 1999, $571 in 1998 and $549 in 1997.
<TABLE>
<CAPTION>
NOTE 5 - INCOME TAXES
The provision for income taxes: For The Years Ended November 30,
----------------------------------
1999 1998 1997
------ ------- ---------
<S> <C> <C> <C>
Federal.............................. $7,917 $ 5,483 $ 5,009
State................................ 964 758 521
------ ------- ---------
Total............................ $8,881 $ 6,241 $ 5,530
====== ======= =========
Deferred income tax assets (liabilities): November 30,
-------------
1999 1998
---- ----
Assets
Deferred compensation................. $ 869 $ 740
Inventory............................. 90 94
Investment in 50% owned subsidiary.... 217 134
Other................................. 109
----- -----
Total deferred tax assets......... 1,285 968
----- -----
Liabilities
Property.............................. (1,445) (1,302)
Allowance for bad debts............... (35) (162)
Other................................. (70)
----- -----
Total deferred tax liabilities.... (1,480) (1,534)
----- -----
Net deferred tax liability................. $ (195) $ (566)
===== =====
</TABLE>
The net deferred tax liability is included in the balance sheets under "deferred
liabilities."
The effective tax rate on income before taxes differed from the federal
statutory tax rate. The following table reconciles the federal statutory rate
with the effective rate:
<TABLE>
<CAPTION>
For The Year's Ended November 30,
------------------------------------
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Income taxes at statutory rate................... 35.0% 35.0% 35.0%
Increase (decrease) in tax rate resulting from:
State taxes, net of federal benefit.......... 2.7 2.5 2.5
Federal tax rate differential
due to lower tax brackets................. (0.2) (0.5)
Contribution of land......................... (1.6)
Other........................................ 0.6 (0.7) 0.1
---- ---- ----
Effective income tax rate................. 38.3% 36.6% 35.5%
==== ==== ====
</TABLE>
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED Hooker Furniture Corporation
- -------------------------------------------------------------------------------
NOTE 6 - INVESTMENT IN 50% OWNED SUBSIDIARY
The Company owns a 50% interest in a joint venture, accounted for by the equity
method, which produced particleboard for furniture manufacturing. During 1998,
the joint venture was cited by the Environmental Protection Agency ("EPA") for a
violation of certain regulations under the Clean Air Act Amendments of 1990.
The joint venture members determined that the cost of modification to the plant
to come into compliance, together with other needed capital improvements, would
be prohibitive and the joint venture elected to cease operations in November
1998. Effective June 1, 1999, the joint venture entered into a lease for the
land and building owned by the joint venture with a third party lessee. The
lease term is for two years with an option to purchase for $2.7 million. The
Company's equity in the anticipated proceeds from the sale of the property,
together with other net assets of the joint venture are approximately equal to
the Company's carrying value at November 30, 1999. The Company's carrying value
of $2.1 million and $2.4 million at November 30, 1999 and 1998, respectively,
are included in "other assets". The Company's proportionate share of income
(loss) in the joint venture of $(218) in 1999, $68 in 1998 and $(1) in 1997 are
included in "other income (expense), net."
NOTE 7 - SUBSEQUENT EVENT
Subsequent to November 30, 1999, the Board of Directors approved a two-for-one
stock split, effected in the form of a 100% stock dividend. The record date for
the split was January 10, 2000, and the dividend was distributed to stockholders
on January 31, 2000. All share and per share data in the financial statements
has been adjusted to reflect the split.
F-11
<PAGE>
REPORT ON FINANCIAL STATEMENT SCHEDULE
The audits referred to in our report dated December 15, 1999, except for Note 7
dated January 10, 2000, relating to the financial statements of Hooker Furniture
Corporation, which are contained in Item 8 of this Form 10-K included the audit
of the financial statement schedule listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based upon our audits.
In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/S/BDO Seidman, LLP
Richmond, Virginia
December 15, 1999
S-1
<PAGE>
HOOKER FURNITURE CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (In thousands)
For Each of the Three Fiscal Years Ended November 30, 1999
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Costs and at End of
Year Description of Period Expenses Deductions(1) Period
- ---- ----------- ---------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C>
1999 Allowance for doubtful accounts......... $500 $387 $362 $525
1998 Allowance for doubtful accounts......... 500 353 353 500
1997 Allowance for doubtful accounts......... 500 404 404 500
</TABLE>
(1) Uncollectible receivables written off, net of recoveries.
S-2
<PAGE>
Exhibit 10.1
LEASE OF SPACE IN INTERNATIONAL HOME FURNISHINGS CENTER
<TABLE>
<S> <C>
IHFC: International Home Furnishings Center, Inc. LESSEE: Hooker Furniture Corp.
Post Office Box 828 P0 Box 4708
High Point, North Carolina 27261 440 East Commonwealth Blvd.
Martinsville, VA 24115
</TABLE>
DESCRIPTION OF PREMISES: Space No.W1047 including bays C1003, H1042, H1043,
H1045 and W1041 in the International Home Furnishings Center, High Point, North
Carolina
TERM: 5 Years
COMMENCEMENT DATE: May 1, 2000.
EXPIRATION DATE: April 30, 2005.
ANNUAL RENTAL: 31,865 sq. ft. @ $10.50 per sq. ft. per year $334,582.50
ADDITIONAL OR SUPPLEMENTAL TERMS AND PROVISIONS:
Addendum A for Hamilton Wing Leases is attached hereto and made a part of this
lease.
IHFC, by this Agreement, leases to Lessee and Lessee leases from IHFC, the
Premises described above, at the rental, for the term and upon the other terms
and conditions contained on this page and in IHFC's Standard Terms and
Conditions of Lease (IHFC Form No.900103) which are incorporated by reference in
and made a part of this Lease.
IHFC and Lessee have caused this Lease to be executed by their duly authorized
officers, this the 11th day of August, 1999.
<TABLE>
<S> <C>
IHFC: EXHIBITOR:
International Home Furnishings Center, Inc. Hooker Furniture Corporation
-----------------------------------
Complete Formal Business Name
By: Signature appears here Corporation
------------------------------ -----------------------------------
Vice President LEGAL FORM OF BUSINESS:
CORPORATION, PARTNERSHIP OR
INDIVIDUAL AND STATE OF PRINCIPAL
OFFICE
By: Edwin L. Ryder-Sr. VP Fin.& Admin.
-------------------------------------
NAME TITLE
PRESIDENT, VICE PRESIDENT, GENERAL PARTNER, OWNER
Attest: /S/ Jane S. Lain
---------------------------
SECRETARY Attest: Robert W. Sherwood CORPORATE SEAL
------------------
SECRETARY IF LESSEE IS A CORPORATION
</TABLE>
CORPORATE SEAL
<PAGE>
Page 1 of 5
STANDARD TERMS AND CONDITIONS OF LEASE
IHFC FORM NO. 900103
1.0 (S)1.1. Description. Lessee acknowledges receipt of a drawing or
PREMISES floor plan showing the exact location of the Premises in the
Intentional Home Furnishings Center showroom complex owned and
operated by IHFC (the "Home Furnishings Center"). The Home
Furnishings Center is more particularly described on a map or
plat prepared by Davis-Martin-Powell and Associates, Inc. and
designated Job No. S-18512, a copy of which is on file at the
office of IHFC and is incorporated in this Lease by reference.
The lease of the Premises includes the right of access to the
Premises through the common areas of the Home Furnishings Center.
(S)1.2. Relocation. Lessee acknowledges and agrees that it is
essential to the orderly and efficient operation of the Home
Furnishings Center by IHFC that IHFC have the right from time to
time to relocate lessees in order to achieve optimum utilization
of all space in the Home Furnishings Center. Consequently, IHFC
shall be entitled to relocate Lessee as provided in this section
if IHFC determines that relocation of Lessee is in the best
interest of the Home Furnishings Center in the conduct of its
business. IHFC shall exercise its right to relocate Lessee in the
following manner: (a) the premises to which Lessee is to be
relocated (the "New Premises") shall be selected by IHFC and
shall be equivalent (as determined by IHFC in its sole
discretion) in size and value to the Premises; (b) IHFC shall
notify Lessee of its intent to relocate Lessee within a time
period prior to the commencement of the next regularly scheduled
Market such that the Lessee has a reasonable period of time (as
determined by IHFC in its sole discretion) to refixture,
redecorate, and prepare to show at that Market and identify the
proposed New Premises; (c) within ten (10) days after notice of
relocation by IHFC, Lessee, at its option, may terminate this
Lease by written notice to IHFC; (d) if Lessee fails to terminate
this Lease as provided in (c) above, the New Premises shall be
substituted for the original Premises, this Lease shall continue
in full force and effect without any other change, and IHFC, at
its expense, shall move Lessees property to the New Premises and
shall pay the costs (less a reasonable allowance for
depreciation) of replacing (as nearly as possible) all
installations and improvements of Lessee which cannot be moved to
the New Premises.
2.0 (S)2.1. Commencement and Expiration Date. The Commencement Date
TERM and Expiration Date of the Lease term are the dates set forth on
the first page of this Lease.
(S)2.2. Holding Over. If Lessee remains in possession of the
Premises after the expiration or termination of this Lease,
Lessee shall be only a tenant at will but its occupancy shall
otherwise be subject to all of the terms and provisions of this
Lease, except that Lessee shall pay per diem rent for each day
Lessee occupies the premises, in an amount equal to one hundred
fifty percent (150%) of the then prevailing annual rates for
comparable space charged by IHFC to new tenants, prorated on a
daily basis.
3.0 (S)3.1. Annual Rental. Lessee shall pay to IHFC without offset or
RENT deduction the Annual Rental for the Premises set forth on the
first page of this Lease, in semiannual installments, each such
semiannual installment being due and payable in advance on or
<PAGE>
before the first day of November and on or before the first day
of May (the "Rental Payment Dates") of each calendar year during
the Lease term, except as provided in (S)3.2.
(S)3.2. No Reduction. If the Commencement Date is a day other
than a Rental Payment Date, Lessee acknowledges and agrees that
by receiving possession of the Premises on the Commencement Date,
Lessee will be able to show its merchandise at the next ensuing
Market and will receive the same benefits as would have been the
case had the Lease term commenced on the Rental Payment Date next
preceding the actual Commencement Date. Lessee therefore agrees
to pay a full semiannual rental payment for the period of time
beginning with the Commencement Date and ending on the day before
the next Rental Payment Date.
(S)3.3. Rent Adjustment. In addition to the Annual Rental
provided for in (S)3.1, Lessee agrees to pay IHFC, for each Lease
Year, an amount determined by multiplying the Annual Rental by a
percentage equal to the cumulative percentage increase, if any,
in the CPI, determined as follows:
(a) "CPI" means the Consumer Price Index, All Urban
Consumers -U.S. City Average - All items (1982-4=100) as
published by the Bureau of Labor Statistics of the United
States Department of Labor;
(b) If the Commencement Date is a Rental Payment Date, A
Lease Year is the annual period commencing on the
Commencement Date and on each anniversary thereof. If the
Lease Term commences on any other date, a Lease Year is the
annual period commencing on the Rental Payment Date next
preceding the Commencement Date, and on each anniversary
thereof;
(c) The cumulative percentage increase in the CPI shall be
the percentage increase, if any, in the CPI for the sixth
month prior to the Lease Year in question over the CPI for
the same month next preceding the Commencement Date;
(d) If the CPI ceases to use the 1982-4 average equaling 100
as the basis of calculation, or if a change is made in the
term or number of items contained in the CPI, or if the CPI
is altered, modified, converted or revised in any other way,
then the foregoing computations shall be made with the use
of such conversion factor, formula or table for converting
the CPI as may be published by the Bureau of Labor
Statistics or, if the Bureau shall not publish the same,
then with the use of a conversion factor which adjusts the
modified CPI to the figure that would have been arrived at
had the change in the manner of computing the CPI in effect
on the date of this lease not been altered. If the Bureau
shall cease publication of the CPI, then any substitute or
successor index published by the Bureau or other
governmental agency of the United States shall be used,
similarly adjusted. If neither the CPI or a successor or
substitute index similarly adjusted is available, then a
reliable governmental or other reputable publication
selected by IHFC and evaluating the information theretofore
used in determining the CPI shall be used;
(e) IHFC shall bill the Lessee for the cumulative increase
in the Annual Rental at the same time as its normal invoices
for Annual Rental are sent prior to each Lease Year, and,
upon request by Lessee, shall furnish Lessee with a
statement explaining the method of computation of the CPI
increase; and
<PAGE>
Page 2 of 5
(f) IHFC shall not be obliged to make any adjustments or
recomputations, retroactive or otherwise, by reason of any
revision which may later be made in the amount of the CPI
first published for any month.
4.0 (S)4.1. Use. Lessee shall use the Premises for the display,
USE AND exhibition, and sale of home furnishings, furniture, accessories,
OCCUPANCY carpeting and wall coverings, and for office or clerical purposes
OF PREMISES to the extent reasonably required for the conduct of such
BY LESSEE activities at the Premises, and for no other purpose.
(S)4.2. Operation During Markets. Lessee shall open the Premises,
exhibit its products and staff the Premises with employees for
the entire period of each regularly scheduled Market.
(S)4.3. Rules and Regulations. IHFC has established rules,
regulations, guidelines and policies (the "Guidelines") regarding
the operation of the Home Furnishings Center, and shall be
entitled to establish Guidelines from time to time after the
execution of this Lease. Lessee acknowledges receipt of a copy of
the current Guidelines and agrees to comply, and to cause its
employees, contractors, agents and others occupying the Premises
to comply, with all current and future Guidelines, provided that
(a) IHFC notifies Lessee of any Guidelines established after the
date of this Lease and (b) the Guidelines established by IHFC do
not unreasonably interfere with Lessee's use of the Premises for
the purposes set forth in (S)4.1.
(S)4.4. Restriction on Other Operations of Lessee. Lessee agrees
(insofar as and to the extent Lessee may lawfully do so) that
during all regularly scheduled Markets or other times at which
the Home Furnishings Center is officially open to buyers during
the term of this Lease, Lessee will not, within a five (5) mile
radius of the Home Furnishings Center (a) operate any other
showroom under the same trade name or names under which Lessee
does business from the Premises or (b) exhibit in any other
location the same merchandise which Lessee exhibits in the
Premises. Lessee acknowledges and agrees that it is in the best
interest of Lessee and other tenants in the Home Furnishings
Center as exhibitors, and in the best interest of the successful
operation of the Home Furnishings Center as a national market for
home furnishings, to maximize buyer traffic in, and the duration
of buyer visits to, the Home Furnishings Center. Lessee agrees
that the foregoing provisions are reasonably necessary to
accomplish these purposes, and that a breach of these provisions
by Lessee will constitute a material breach of the Lease.
(S)4.5. Property of Others. Lessee will not place or permit to be
placed in the Premises property of any other person or entity,
unless it has first secured the written consent of IHFC.
(S)4.6. Market Dates; Admission. IHFC shall have the sole right
to prescribe the dates of regularly scheduled Markets applicable
to Lessee's lines of merchandise, and qualifications, conditions
and times of admission to the Home Furnishings Center. IHFC may
restrict admission to accredited buyers and condition admission
upon the presentation of credentials prescribed or provided by
IHFC. Without limiting the generality of the foregoing, Lessee
agrees not to admit any buyers to the Premises during the seven
day period prior to each Market.
<PAGE>
(S)4.7. Compliance. Lessee agrees not to use or occupy the
Premises, or permit them to be used or occupied, in any manner
which violates applicable laws or regulations affecting the
Premises or the Home Furnishings Center established by any
governmental or public authority having jurisdiction to
promulgate such laws or regulations, or by any insurance carrier
insuring the Premises, property located therein, or the Home
Furnishings Center.
(S)4.8. Inspection by IHFC. IHFC and its representatives shall be
entitled to enter the Premises at any reasonable time for the
purpose of inspecting the Premises, performing any work required
or permitted to be performed by IHFC under this Lease, and
exhibiting the Premises to prospective mortgagees and tenants.
IHFC agrees that to the extent practical, it will not
unreasonably interfere with the operation of Lessee's business in
the exercise of its rights under this Section.
5.0 (S)5.1. Transfers by Lessee. Lessee agrees not to assign this
ASSIGNMENT Lease or sublet all or any part of the Premises without Lessor's
AND prior written consent in each instance. In the event of an
SUBLETTING assignment or sublease, Lessee shall remain primarily liable for
payment and performance of all obligations under this Lease upon
default by the assignee or subtenant, notwithstanding the
acceptance of rent or performance directly from the assignee or
subtenant by IHFC.
(S)5.2. Subleasing Policy. All proposed subleases which IHFC is
requested to approve pursuant to (S)5.1 must conform to
subleasing policies established by IHFC from time to time, and
Lessee acknowledges and agrees that IHFC's subleasing policies,
among other things, may provide for selection of sublessees from
a priority waiting list, the use of standard forms, direct
billing by IHFC, the imposition of subleasing fees by IHFC, and
the retention by IHFC of the excess of any amounts payable under
the sublease over the rent and other charges payable under this
Lease. Nothing in this section may be construed to create any
inference that IHFC is obligated to approve any sublease which
complies with the provisions of this section.
(S)5.3. Change of Ownership. For purposes of this Paragraph, an
assignment includes: (1) one or more sales or transfers by
operation of law or otherwise by which an aggregate of more than
fifty percent (50%) of Lessee's shares or ownership shall be
vested in a party or parties who are not shareholders or owners
of Lessee as of the date of this Lease; (2) any transfer by
operation of law; (3) any assignment among co-tenants; and (4)
any assignment of a part interest in this lease.
6.0 (S)6.1. Acceptance. Lessee has examined the Premises and accepts
REPAIRS them in their present conditions, without any representation on
AND the part of IHFC as to the present or future condition of the
MAINTENANCE Premises except as otherwise specifically provided in this Lease.
(S)6.2. IHFC's Repair Obligations. IHFC shall at IHFC's expense
maintain the exterior walls, roof, structural supports and common
areas of the Home Furnishings Center in good order and repair;
provided, however, that (a) IHFC is not an insuror and its
responsibility to do so shall be confined to making the proper
repairs within a reasonable time after it has received notice of
the necessity, nature and location of the repairs and (b) Lessee
shall repair any damage to the Home Furnishings Center caused by
Lessee or its agents.
<PAGE>
Page 3 of 5
(S)6.3. Lessee's Repair Obligations. Lessee agrees to maintain
the Premises in a neat and clean condition, in good order and
repair, and in full compliance with applicable laws, ordinances,
regulations, and codes.
(S)6.4. Surrender. At the expiration or termination of this
Lease, Lessee agrees to quit and surrender the Premises to IHFC
in as good a condition as when received, reasonable wear and tear
and damage by fire or other casualty excepted.
7.0 (S)7.1. Lessee's Property. Subject to the security interest
LESSEE'S granted in (S)12.4 of this Lease, all merchandise, office
PROPERTY; furniture and equipment, samples, inventory and other unattached
ALTERATIONS movable property placed in the Premises by Lessee shall remain
AND the property of Lessee, and Lessee, if it is not in default under
IMPROVEMENTS this Lease, shall be entitled to remove such items from the
Premises, provided Lessee repairs any damage to the Premises or
the Home Furnishings Center caused by such removal.
(S)7.2. Placing Property in or Removing Property From Premises.
Except as otherwise specifically permitted by IHFC's Guidelines,
all property of Lessee shall be moved to or from the Premises by
the employees or designated contractors of IHFC, at the expense
and risk of Lessee, and Lessee agrees to pay IHFC upon receipt of
IHFC's invoice, IHFC's standard charges for moving such items to
and from the Premises. IHFC shall not be liable for any loss or
damage to property of Lessee, unless caused by the negligence of
IHFC or its employees.
(S)7.3. Alterations and Improvements. Lessee shall be entitled to
make alterations, additions, and improvements to the Premises,
provided Lessee first obtains IHFC's written consent, which IHFC
will not unreasonably withhold. Any alteration, addition,
improvement or other property attached to the Premises by Lessee
(including, without limitation, electrical wiring, lighting
fixtures, carpeting and track lighting) shall become the property
of IHFC upon the expiration or termination of this Lease, unless
IHFC elects to require Lessee to remove the same, repair any
damages occasioned by such installation or removal, and restore
the Premises to their original condition.
(S)7.4. Performance of Work. All work in connection with
alterations, additions, or improvements to the Premises (a) shall
be performed in a first class, workmanlike manner with all
required governmental and utility permits obtained in advance by
Lessee; (b) shall not weaken or impair the structural integrity
of the Home Furnishings Center; and (c) shall be in accordance
with plans and specifications, and performed by contractors,
approved by IHFC. All contractors performing such work shall
carry insurance satisfactory to IHFC and shall execute lien
waivers, and indemnity agreements satisfactory to IHFC. IHFC
shall have no duty to Lessee or anyone else to enforce these
requirements or inspect the work of Lessee's contractors.
8.0 IHFC agrees to pay all ad valorem taxes and assessments levied,
TAXES assessed or charged against the Home Furnishings Center. Lessee
agrees to list and pay all license, privilege, ad valorem or
other taxes levied, assessed or charged against Lessee or IHFC on
account of the operation of Lessee's business in the Premises or
on account of property owned by Lessee.
<PAGE>
9.0 IHFC agrees to furnish heat, electricity, air conditioning, and
UTILITIES elevator service to the Premises for a period beginning thirty
(30) days prior to the commencement of each regularly scheduled
Market, and ending fourteen (14) days following the close of each
such Market; provided, however, that IHFC shall not be liable for
interruptions in service due to breakdowns or other causes beyond
its control. If Lessee uses the Premises at any other times,
Lessee agrees to pay such additional charges as may be imposed by
IHFC for such excess utility use.
10.0 (S)10.1. Insurance. Lessee agrees to keep its property located in
INSURANCE; the Premises, including all alterations, additions and
INDEMNITY improvements made by it, insured against loss or damage by fire
or other casualty, under an "all risks" policy in an amount equal
to full replacement cost value thereof. Lessee agrees to maintain
in force comprehensive general liability insurance coverage on
the Premises, with a minimum combined single limit of $500,000
for death, personal injury or property damage, naming IHFC as an
additional insured. This general liability coverage may be either
on an "occurrence" or a "claims made" basis. If on a "claims
made" basis, Lessee must either:
(a) Agree to provide certificates of insurance evidencing
the above coverages for a period of three years after
expiration of the lease, which certificate shall evidence a
"retroactive date" no later than the Commencement Date; or
(b) Purchase the extended reporting period endorsement for
the policy or policies in force during the term of this
lease and evidence the purchase of this extended reporting
period endorsement by means of a certificate of insurance or
a copy of the endorsement itself.
All policies shall provide that unless IHFC is given ten (10)
days written notice of any cancellation, failure to renew, or
material change, the insurance shall remain in full force and
effect, without change. On or before the Commencement Date,
Lessee agrees to provide IHFC with satisfactory evidence that all
required insurance is in force. Lessee may provide any insurance
required under this Article through its corporate or blanket
policies.
(S)10.2. Waiver of Subrogation. To the extent that any business
interruption or loss or damage to property occurring in the
Premises or in the Home Furnishings Center, or in any manner
growing out of or connected with Lessee's occupation of the
Premises or the condition thereof (whether or not caused by the
negligence of IHFC or Lessee or their respective agents,
employees, contractors, tenants, licensees, or assigns) is
covered by insurance (regardless of whether the insurance is
payable to or protects IHFC or Lessee, or both) neither IHFC nor
Lessee, nor their respective officers, directors, employees,
agents, invitees, assignees, tenants, or subtenants, shall be
liable to the other for such business interruption or loss or
damage to property, it being understood and agreed that each
party will look to its insuror for reimbursement. This release
shall be effective only so long as the applicable insurance
policies contain a clause to the effect that it shall not affect
the right of the insured to recover under the policies. Such
clauses shall be obtained by the parties wherever possible.
Nothing in this Section may be construed to impose any other or
greater liability upon either IHFC or Lessee than would have
existed in its absence.
<PAGE>
Page 4 of 5
(S)10.3. Assumption of Risks, Release, and Indemnity. Lessee (1)
assumes all risks with respect to, (2) releases IHFC from
liability for, and (3) agrees (except to the extent IHFC is
effectively protected by insurance) to protect, indemnify and
save harmless IHFC from and to defend IHFC (through counsel
acceptable to IHFC) against any claim liability, loss, or damage
arising out of or connected with the following, however caused
and wherever originating and regardless of whether the cause or
means of repairing the same is accessible to or under the control
of Lessee:
(a) Damage to property of Lessee, or its agents, employees
or subtenants occurring in or about the Home Furnishings
Center;
(b) Damage to property of anyone occurring in or about the
Premises;
(c) Any injury to or interruption of business or loss of
profits attributable to or connected with any damage to
property referred to in subparagraphs (a) or (b), above.
(d) Death or personal injury occurring in or about the
Premises (unless resulting from the negligence of IHFC or
its employees); or(e) Any other risks with respect to which
Lessee is required to insure by the terms of this Lease
(whether or not such insurance is actually in force).
In addition to and without limiting the generality of the
foregoing. Lessee's assumption of risk, release, and indemnity
obligations as set forth above shall apply to any claim,
liability, loss or damage arising out of or in connection with
(1) Lessee's occupancy of or conduct of business in the Premises;
(2) the condition of the Premises; (3) any default of Lessee
under this Lease; and (4) mechanic's or materialmen's liens
asserted by persons claiming to have dealt with Lessee or
Lessee's contractors.
11.0 (S)11.1. Option to Terminate. If the Premises are damaged or
DAMAGE OR destroyed by fire or other casualty to such extent that they are
DESTRUCTION completely untenantable, or if the area of the Home Furnishings
Center in which the Premises are located is so severely damaged
that IHFC elects to demolish, or completely rebuild it, IHFC may
terminate this Lease by notifying Lessee within thirty (30) days
following the damage or destruction, and rent and other charges
payable by Lessee under this lease shall be apportioned to the
date of the damage or destruction.
(S)11.2. Obligation to Repair or Restore. If the Premises are
damaged by fire or other casualty, unless IHFC has exercised its
right to terminate, if any, under (S)11.1, IHFC shall with
reasonable dispatch, and in any event within one hundred eighty
(180) days, repair and restore the Premises to their condition
existing at the date of the damage or destruction (except for
alterations and improvements installed by Lessee and other
property of Lessee, which Lessee shall repair and restore within
that time) and this Lease shall remain in full force and effect
except that rent shall abate as provided in (S).11.3.
(S)11.3. Rent Abatement. If the Premises are damaged or destroyed
by fire or other casualty and this Lease is not terminated, rent
<PAGE>
and other charges under this Lease shall abate in the same
percentage as the rentable area of the Premises available for use
bears to the entire rentable area of the Premises; provided,
however, that if the Premises are damaged or destroyed to such
extent that it is unreasonable to expect Lessee to continue to
operate the Premises as a showroom, all rent shall abate from the
date of the damage or destruction until the earlier of the date
the Premises are repaired and restored, or the date Lessee
reopens the Premises as a showroom. Notwithstanding the
foregoing, if IHFC is able to repair and restore the Premises
within such time as to permit Lessee (in the exercise of
reasonable dispatch and considering the time required for Lessee
to complete Lessee's restorations to the Premises and redecorate
them) to use the Premises for a showroom at the next ensuing
Market after the damage or destruction, there shall be no
abatement of rent.
12.0 (S)12.1. Events of Default. Lessee shall be in default under this
DEFAULT Lease if any one of the following Events of Default occurs:
(a) Lessee fails to pay when due any installment of rent or
other amount due under the terms of this Lease;
(b) Lessee fails to pay when due any other amount owed to
IHFC; or
(c) Lessee repudiates or fails to perform any obligation
under (S).1.2 (Relocation), (S).4.0 (Use), (S).5.0
(Assignment and Subletting), (S).7.3 (Alterations), (S).13.0
(Subordination) or (S).14.0 (Estoppel Certificates).
(d) Lessee vacates or abandons the Premises;
(e) Lessee becomes insolvent, executes an assignment for the
benefit of creditors, is adjudicated a bankrupt, files for
relief under the reorganization provisions of any Federal
bankruptcy law or state insolvency law, or a permanent
receiver of the property of Lessee is appointed by any court
of competent jurisdiction.
(f) Lessee repudiates or, within ten (10) days after notice
of nonperformance by IHFC, fails to perform any other
obligation which it is required to perform under the terms
of this Lease or, if performance cannot reasonably be had
within ten (10) days after notice from IHFC, Lessee fails to
commence performance within that period and diligently
proceed to completion of performance.
(S)12.2. Remedies. If an Event of Default occurs, IHFC, at its
option and without further notice to Lessee, may pursue any
remedy now or hereafter available to IHFC under the laws of the
State of North Carolina. Without limiting the generality of the
foregoing, IHFC shall be entitled to reenter the Premises by
force, summary proceedings or otherwise, expelling Lessee and
removing all property from the Premises, all without liability to
Lessee or anyone else and either:
(a) attempt to relet the Premises for such term and rental
and upon such other terms and conditions as IHFC in its sole
discretion deems advisable. All rentals received by IHFC
from such reletting shall be applied, first, to payment of
any indebtedness other than rent due from Lessee to IHFC;
second, to payment of any expenses of reletting, including,
without limitation, the costs of recovering the Premises,
such
<PAGE>
Page 5 of 5
alterations or repairs as may be necessary to relet the
Premises, brokerage fees, and reasonable attorney's fees;
third to payment of any rent unpaid under the terms of this
Lease; and the residue, if any, to the payment of rent as
the same becomes due and payable under this Lease. If the
amount received from such reletting and applied to rent
during any semiannual period is less than the rent reserved
under this Lease, Lessee agrees to pay the deficiency to
IHFC. The deficiency shall be calculated and paid
semiannually. No reentry or taking possession of the
Premises by IHFC shall be construed as an election upon its
part to terminate this Lease unless IHFC so notifies Lessee
or this Lease is terminated by order of a court of competent
jurisdiction; or
(b) notwithstanding any reletting without termination, at
any time after an Event of Default occurs, elect to
terminate this Lease, and, in addition to IHFC's other
remedies, recover from Lessee all damages incurred by reason
of Lessee's default, including, without limitation, the
costs of recovering the Premises, reasonable attorney's
fees, and the worth, at the time of the termination, of the
excess, if any, of the amount of rent reserved under this
Lease over the then reasonable rental value of the Premises
for the remainder of the term of the Lease, all of which
amounts shall be immediately due and payable from Lessee to
IHFC.
(S)12.3. Late Charges. If any installment of rent or any other
amount due under this Lease is not received by IHFC within ten
(10) days after the date such payment was due, then Lessee shall
be obligated to pay, in addition to the amount due, a late charge
equal to five percent (5%) of the overdue amount. Lessee agrees
that this late charge represents a fair and reasonable estimate
of the additional processing, accounting and other costs IHFC
will incur by reason of late payment by Lessee, the exact amount
of which would be difficult to ascertain. Notification by IHFC to
Lessee that a late payment charge has been added to the amount of
overdue rent or other charges shall not constitute a waiver of
Lessee's default, nor preclude IHFC from exercising any other
remedy.
(S)12.4. Security Interest. As security for performance and
payment of all present and future rents and other obligations
required to be paid or performed by Lessee under the terms of
this Lease, and for any other amounts owed IHFC by Lessee, Lessee
hereby grants unto IHFC a security interest in all installations,
samples, goods, merchandise, furniture, fixtures, and other
property of Lessee, now owned or hereafter acquired, located in
the Premises or the Home Furnishings Center. If an Event of
Default occurs, IHFC at any time thereafter may exercise, in
addition to its other remedies, the rights of a secured party
under Chapter 25 of the North Carolina General Statutes. The
proceeds from any sale of the collateral pursuant to such
remedies shall be applied in the following order: (a) the expense
of taking, removing, holding for sale, and preparing for sale,
specifically including IHFC's reasonable attorney's fees; (b) the
expense of liquidating any liens, security interests or other
encumbrances superior to this security interest; and (c) amounts
owed by Lessee to IHFC under the terms of this Lease or
otherwise, in the order herein provided for. Lessee agrees to
execute such financing statements and other documents as may be
required to perfect the security interest granted to IHFC under
<PAGE>
this Section.
(S)12.5. Partial Payment. IHFC shall not be obligated to accept
partial payments of rent or other charges due under this Lease.
If IHFC accepts any such payment, IHFC shall not be deemed to
have waived the default of Lessee by reason of non-payment of
such charges in full, nor to have waived its right to collect
late charges. IHFC will hold any partial payment so received as a
deposit against full payment of such amounts. At any time prior
to full payment by Lessee of such amounts, IHFC may exercise any
one or more of its remedies on default, and apply the deposit to
any amounts or damages owed IHFC as of the date IHFC elects to
exercise such remedies, including, without limitation, pro rata
rent and other charges payable under this Lease for the current
lease period up through the date of the exercise by IHFC of its
remedies upon default. The acceptance of such deposit by IHFC
shall be entirely without prejudice to IHFC's right thereafter,
at any time prior to payment in full, to assert such default,
apply the deposit as provided in this section, and pursue all
remedies available to IHFC under this Lease or applicable law.
(S)12.6. Default Under Prior Lease. If this Lease is to take
effect at the expiration of an earlier lease between IHFC and
Lessee for space in the Home Furnishings Center (the "Prior
Lease"), then this Lease is subject to Lessee's performing its
obligations under the Prior Lease up through the date of its
expiration. If an Event of Default occurs under the Prior Lease
and IHFC, pursuant to its rights under the Prior Lease, either
(a) terminates Lessee's right to possession of the Premises or
(b) terminates the Prior Lease, then this Lease shall be
automatically terminated, whether or not such termination is
expressly stated in any notice from IHFC to Lessee.
13.0 At the election of IHFC, this Lease shall be subordinate to a
SUBORDINATION first mortgage or deed of trust held by a lending institution and
secured by the Home Furnishings Center; provided, however, that
IHFC agrees to use reasonable efforts to secure from the
mortgagee a nondisturbance agreement providing that in the event
of foreclosure the mortgagee will recognize the validity of this
Lease, and, provided Lessee is not in default, will not disturb
Lessee's possession hereunder.
14.0 Upon ten (10) days prior written notice from IHFC, Lessee agrees
ESTOPPEL to execute, acknowledge and deliver to IHFC, Lessee's
CERTIFICATES certificate: (a) stating whether this Lease is in full force and
effect; (b) stating whether this Lease has been modified, and if
so, the nature of such modification; (c) stating the date through
which rent and other charges are paid in advance; (d) stating
whether, to Lessee's knowledge, there are any uncured defaults of
IHFC under this Lease, specifying the nature of any claimed
default; and (e) providing such other information as IHFC may
reasonably request with respect to the status of the Lease. Any
such certificate may be conclusively relied upon by IHFC or any
prospective purchaser or mortgagee of the Home Furnishings
Center.
15.0 All notices required or permitted by the terms of this Lease
NOTICES shall be deemed given when deposited in the United States
Registered or Certified Mail, Postage Prepaid, or with
verification of delivery by telegram, cable, telex, commercial
courier or any other generally accepted means of business
communication, to either party, at the address set forth for such
party on the first page of this Lease. Either party may change
the address to which notices must be sent by giving notice to the
<PAGE>
other party in accordance with this Section.
16.0 (a) This Lease shall be governed, construed, and enforced
MISCELLANEOUS under the laws of North Carolina and the parties submit to
the jurisdiction of the courts of North Carolina and
stipulate that Guilford County, North Carolina, is proper
venue for the purpose of all controversies which may arise
under this Lease;
(b) This Lease contains the entire understanding of the
parties and there are no conditions precedent to its
effectiveness or collateral understandings with respect to
its subject matter;
(c) It may not be modified except by writing signed by both
parties;
(d) it shall not be construed strictly against either party,
but fairly in accordance with their intent as expressed
herein;
(e) Lessor's remedies are cumulative and not exclusive of
other remedies to which Lessor may be legally entitled;
(f) No waiver of any breach of a provision of this Lease may
be construed to be a waiver of any succeeding breach of the
same or any other provision, nor shall any endorsement or
statement on any check or letter accompanying payment be
deemed an accord and satisfaction, and IHFC may accept
payment without prejudice to its rights to pursue any remedy
provided for in this Lease;
(g) Time is of the essence in every particular, especially
where the obligation to pay money is involved;
(h) Amounts not paid IHFC when due will bear interest on the
unpaid balance at the lower of one and one-half percent (1-
1/2%) per month or the maximum lawful rate; and
(i) This Lease binds the parties, their respective heirs,
personal representatives, successors and assigns.
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM A
- --------------------------------------------------------------------------------
This Addendum contains provisions which modify and supplement the provisions
contained in the standard IHFC Lease and in IHFC's Standard Terms and Conditions
of Lease. If there is any conflict between the terms of this Addendum and the
terms of IHFC's standard Lease or Standard Terms and Conditions of Lease, this
Addendum controls.
1. SIGNAGE
. Lessee agrees to pay for and maintain the standard exterior signage in
accordance with signing specification on all fascias. (Signs are
required on all fascias.) Lessee agrees not to place any other signs,
banners, or other material of any kind on the exterior of the premises.
2. DESIGN STATEMENT
. This Lease is contingent upon Lessee making a professionally designed
showroom statement both interiorly and exteriorly.
3. WINDOWS
. Lessee agrees that draperies, blinds, paper, curtains, or any other
device that limits vision in the Premises will not be installed upon or
near any window or door of the Premises.
[GRAPHIC OF FLOOR PLAN APPEARS HERE]
Wrenn, Commerce & Hamilton Wings
<PAGE>
Exhibit 10.4
June 5, 1998
Mr. Edwin L. Ryder
Senior Vice President - Finance and Administration
Hooker Furniture Corporation
Post Office Box 4708
Martinsville, VA 24112
Dear Larry:
Branch Banking and Trust Company ("Bank") is pleased to increase its
formal line of credit to the amount of $15,000,000 to accommodate the
issuance of Letters of Credit on behalf of Hooker Furniture Corporation.
Terms and conditions of this commitment are as follows:
Borrower: The Borrower shall be Hooker Furniture Corporation.
--------
Purpose: The line of credit shall be used exclusively for the issuance
-------
of Commercial Letters of Credit as required in normal
operations.
Amount: The maximum amount of this line of credit shall be Fifteen
------
Million Dollars ($15,000,000.00).
Term: This commitment shall be outstanding until March 31, 1999,
-----
at which time it will expire and be subject to review. All
Letters of Credit issued under this line shall remain in force
until their respective dates of expiration.
Advances/
---------
Repayment: Each Letter of Credit will be issued under a $15,000,000
---------
Promissory Note, which is enclosed for execution. Any advance
of funds by BB&T resulting from the issuance of Letters of
Credit shall be repayable upon demand. Please note that two
signatures are required according to the Certificate of
Corporate Resolutions we have on file. Any of the following
Corporate Officers may execute the Promissory Note: Chairman,
President, Sr. Vice President - Finance and Administration,
and Secretary.
Interest
--------
Rate: The promissory Note backing Letters of Credit issued under
----
this line shall bear interest at BB&T's Prime Rate adjusted
daily as prime changes.
Collateral: Unsecured.
----------
Fees: All fees shall be agreed upon by Hooker Furniture Corporation
----
and BB&T International Services Division.
Financial
---------
Reporting: The borrower shall furnish to BB&T an audited Annual Report
---------
within 60 days of each fiscal year end and quarterly unaudited
financial statements within 45 days of each fiscal quarter
end.
<PAGE>
Other: The borrower must at all times maintain a financial condition
-----
satisfactory to BB&T, including no events of default with other
lenders. Any such event of default, notice of which must be given
to BB&T immediately, constitutes and event of default under this
commitment.
Larry, we sincerely appreciate your business and look forward to
continuing our mutually beneficial relationship with Hooker Furniture. If
the terms of our commitment described above are acceptable, please indicate
by signing, dating, and returning the original of this letter to my
attention before June 30, 1998.
Thank you for your immediate attention to this matter. If you
have any questions or concerns, please give me a call at 336-733-3259.
Sincerely,
/S/ Cory Boyte
Cory Boyte
Vice President
Accepted this 11th day of June, 1998
HOOKER FURNITURE CORPORATION
By: /S/ Edwin L. Ryder
---------------------------------
Title: Sr. VP Finance & Administration
-------------------------------
Enclosure
<PAGE>
BB&T
PROMISSORY NOTE
Borrower: Hooker Furniture Corporation Account Number: 499-0001192
Address: Post Office Box 4708 Note Number: 90003
Martinsville, VA 24112 Date: June 5, 1998
THE UNDERSIGNED REPRESENTS THAT THE LOAN EVIDENCED HEREBY IS BEING OBTAINED FOR
BUSINESS/COMMERCIAL OR AGRICULTURAL PURPOSES. For value received, the
undersigned, jointly and severally, if more than one, promises to pay to BRANCH
BANKING AND TRUST COMPANY, a North Carolina banking corporation (the "Bank"), or
order, at any of Bank's offices in the above referenced city (or such other
place or places that may be hereafter designated by Bank), the sum of Fifteen
Million Dollars and no/100th ($15,000,000.00), in immediately available coin or
currency of the United States of America.
Interest shall accrue from the date hereof on the unpaid principal balance
outstanding from time to time at the:
. Variable rate of the Bank's Prime Rate per annum to be adjusted daily
as the Bank's Prime Rate changes.
Principal and interest is payable as follows:
. Principal plus accrued interest is due in full at maturity on demand.
. Prior to an event of default, Borrower may borrow, repay, and reborrow
hereunder pursuant to the terms of the Commitment Letter, hereinafter
defined.
In addition, the undersigned promises to pay to Bank, or order, a late fee
in the amount of four percent (4%) of any installment past due for fifteen (15)
or more days. When any installment payment is past due for fifteen (15) or more
days, subsequent payments shall first be applied to the past due balance. All
interest shall be computed and charged for the actual number of days elapsed on
the basis of a year consisting of three hundred sixty (360) days. In the event
periodic accruals of interest shall exceed any periodic fixed payment amount
described above, the fixed payment amount shall be immediately increased, or
additional supplemental interest payments required on the same periodic basis as
specified above (increased fixed payments or supplemental payments to be
determined in the Bank's sole discretion), in such amounts and at such times as
shall be necessary to pay all accruals of interest for the period and all
accruals of unpaid interest from previous periods. Such adjustments to the fixed
payment amount or supplemental payments shall remain in effect for so long as
the interest accruals shall exceed the original fixed payment amount and shall
be further adjusted upward or downward to reflect changes in the variable
interest rate. In no event shall the fixed payment amount be reduced below the
original fixed payment amount specified above.
This note ("NOTE") is given by the undersigned in connection with the following
agreements (if any) between the undersigned and the Bank:
. Commitment Letter dated June 5, 1998 executed by Hooker Furniture
Corporation.
All of the terms, conditions and covenants of the above described
agreements (the "Agreements") are expressly made a part of this Note by
reference in the same manner and with the same effect as if set forth herein at
length and any holder of this Note is entitled to the benefits of and remedies
provided in the Agreements and any other agreements by and between the
undersigned and the Bank.
In addition to collateral pledged pursuant to the terms of the Agreements
(if any) described above, the undersigned, as collateral security for the
indebtedness evidenced by this note, hereby grants the Bank a security interest
and lien in and to all deposit accounts, certificates of deposit, securities and
stocks now or hereafter in Bank's possession or on deposit with the Bank.
If any stock or securities are pledged to Bank herein, the security
interest includes all stock splits, reissued shares, substituted shares, and all
proceeds thereof, which the undersigned promises to deliver to Bank.
BBT472 (9609) Page 1 of 3
<PAGE>
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or of any other right on any future occasion. Every
one of the undersigned and every endorser or guarantor of this note regardless
of the time, order or place of signing waives presentment, demand, protest and
notices of every kind and assents to any one or more extensions or postponements
of the time of payment or any other indulgences, to any substitutions, exchanges
or releases of collateral if at any time there be available to the holder
collateral for this note, and to the additions or releases of any other parties
or persons primarily or secondarily liable.
The failure to pay any part of the principal or interest when due on this
Note or to fully perform any covenant, obligation or warranty on this or on any
other liability to the Bank by any one or more of the undersigned, by any
affiliate of the undersigned (as defined in 11 USC Section (101) (2)), or by any
guarantor or surety of this Note (said affiliate, guarantor, and surety are
herein called Obligor), or if any financial statement or other representation
made to the Bank by any of the undersigned or any Obligor shall be found to be
materially incorrect or incomplete, or in the event the default pursuant to any
of the Agreements or any other obligation of any of the undersigned or any
Obligor in favor of the Bank, or in the event the Bank demands that the
undersigned secure or provide additional security for its obligations under this
Note and security deemed adequate and sufficient by the Bank is not given when
demanded, or in the event one or more of the undersigned or any Obligor shall
die, terminate its existence, allow the appointment of a receiver for any part
of its property, make an assignment for the benefit of creditors, or where a
proceeding under bankruptcy or insolvency laws is initiated by or against any of
the undersigned or any Obligor, or in the event the Bank should otherwise deem
itself, its security interest, or any collateral unsafe or insecure; or should
the Bank in good faith believe that the prospect of payment or other performance
is impaired, or if there is an attachment, execution, or other judicial seizure
of all or any portion of the Borrower's or any Obligor's assets, including an
action or proceeding to seize any funds on deposit with the Bank, and such
seizure is not discharged within 20 days, or if final judgment for the payment
of money shall be rendered against the Borrower or any Obligor which is not
covered by insurance and shall remain undischarged for a period of 30 days
unless such judgment or execution thereon is effectively stayed, or the
termination of any guaranty agreement given in connection with this Note, then
any one of the same shall be a material default hereunder and this Note and
other debts due the Bank by any one or more of undersigned shall immediately
become due and payable without notice, at the option of the Bank. From and after
any event of default hereunder, interest shall accrue on the sum of the
principal balance and accrued interest then outstanding at the variable rate
equal to the Bank's Prime Rate plus 5% per annum ("Default Rate"), provided that
such rate shall not exceed at any time the highest rate of interest permitted by
the laws of the State of North Carolina; and further provided that such rate
shall apply after judgment. In the event of any default, the then remaining
unpaid principal amount and accrued but unpaid interest then outstanding shall
bear interest at the Default Rate called for hereunder until such principal and
interest have been paid in full. In addition, upon default, the Bank may pursue
its full legal remedies at law or equity, and the balance due hereunder may be
charged against any obligation of the Bank to any party including any Obligor.
Bank shall not be obligated to accept any check, money order, or other payment
instrument marked "payment in full" on any disputed amount due hereunder, and
Bank expressly reserves the right to reject all such payment instruments.
Borrower agrees that tender of its check or other payment instrument so marked
will not satisfy or discharge its obligation under this Note, disputed or
otherwise, even if such check or payment instrument is inadvertently processed
by Bank unless in fact such payment is in fact sufficient to pay the amount due
hereunder.
The term "Prime Rate," if used herein, means the rate of interest per annum
announced by the Bank from time to time and adopted as its Prime Rate. The Prime
Rate is one of several rate indexes employed by the Bank when extending credit.
Any change in the interest rate resulting from a change in the Bank's Prime Rate
shall become effective as of the opening of business on the effective date of
the change. If this Note is placed with an attorney for collection, the
undersigned agrees to pay, in addition to principal and interest, all costs of
collection, including but not limited to reasonable attorneys' fees. All
obligations of the undersigned and of any Obligor shall bind his heirs,
executors, administrators, successors, and/or assigns. Use of the masculine
pronoun herein shall include the feminine and the neuter, and also the plural.
If more than one party shall execute this Note, the term "undersigned" as used
herein shall mean all the parties signing this Note and each of them, and all
such parties shall be jointly and severally obligated hereunder. Wherever
possible, each provision of this Note shall be interpreted in such a manner to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under such law, such provision shall be
ineffective but only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note. All of the undersigned hereby waive all exemptions and homestead laws. The
proceeds of the loan evidenced by this Note may be paid to any one or more of
the
BBT472 (9609) Page 2 of 3
<PAGE>
undersigned. From time to time the maturity date of this Note may be extended,
or this Note may be renewed in whole or in part, or a new note of different form
any be substituted for this Note, or the rate of interest may be modified, or
changes may be made in consideration of loan extensions, and the holder hereof,
from time to time may waive or surrender, either in whole or in part any rights,
guaranties, secured interest, or liens, given for the benefit of the holder in
connection with the payment and the securing the payment of this Note; but no
such occurrence shall in any manner affect, limit, modify, or otherwise impair
any rights, guaranties or security of the holder not specifically waived,
released, or surrendered in writing, nor shall the undersigned makers, or any
guarantor, endorser, or any person who is or might be liable hereon, either
primarily or contingently, be released from such event. The holder hereof, from
time to time, shall have the unlimited right to release any person who might be
liable hereon, and such release shall not affect or discharge the liability of
any other person who is or might be liable hereon. No waivers and modifications
shall be valid unless in writing and signed by the Bank. The Bank may, at its
option, charge any fees for the modification, renewal, extension, or amendment
of any of the terms of the Note permitted by N.C.G.S.(S)24-1 .1. In case of a
conflict between the terms of this Note and the Loan Agreement or Commitment
Letter issued in connection herewith, the priority of controlling terms shall be
first this Note, then the Loan Agreement, and then the Commitment Letter. This
Note shall be governed by and construed in accordance with the laws of North
Carolina; provided however that any Mortgage encumbering the Borrower's property
in South Carolina shall be governed by and construed in accordance with the laws
of South Carolina, and the Borrower hereby submits to the jurisdiction of South
Carolina in connection with any foreclosure or enforcement proceeding undertaken
in connection with the Borrower's property situated in South Carolina.
Sharing of Information with Affiliates. Applicable law permits us to share
information with third parties about our credit and account history with you.
Applicable law also permits us to share additional information about you and
your accounts with companies related to BB&T by common ownership or control
("affiliates"). We provide this additional information to our affiliates so that
you may receive special offers and promotions from our affiliates. You may
request that we not furnish this additional information (other than credit and
account history) to our affiliates by writing to Branch Banking and Trust
Company. Client Services Administration, P.O. Box 1847, Wilson, North Carolina
27684-1647. Please include your name, address, telephone number, account number
(if known), and social security (tax identification) number. Due to marketing
programs already in progress, please allow a reasonable period of time for your
request to take affect. In order for us to communicate important loan or deposit
account information, we will continue to notify you through occasional statement
inserts or other customer service mailings. Please be aware that state and
federal laws impose certain mandatory disclosures of customer information by
financial institutions. We must comply with laws that require mandatory
production or disclosure.
IN WITNESS WHEREOF, the undersigned, on the day and year first written
above, has caused this note to be executed under seal.
HOOKER FURNITURE CORPORATION
----------------------------
ATTEST: /S/ Robert G. Sherwood By: /S/ Edwin L. Ryder
-------------------------- ---------------------------------
Title: Secretary Title: Sr. VP Finance & Administration
--------------------------- -------------------------------
By: A. Frank Hooker, Jr.
---------------------------------
[Corporate Seal]
Title: President
-------------------------------
BBT472 (9609) Page 3 of 3
<PAGE>
EXHIBIT 10.5
March 23, 1999
Mr. Edwin L. Ryder
Senior Vice President - Finance and Administration
Hooker Furniture Corporation
Post Office Box 4708
Martinsville, VA 24112
Dear Larry:
Branch Banking and Trust Company ("Bank") is pleased to renew its
formal line of credit in the amount of $15,000,000 to accommodate the
issuance of Letters of Credit on behalf of Hooker Furniture Corporation.
Terms and conditions of this commitment are as follows:
Borrower: The Borrower shall be Hooker Furniture Corporation.
--------
Purpose: The line of credit shall be used exclusively for the
-------
issuance of Commercial Letters of Credit as required in
normal operations.
Amount: The maximum amount of this line of credit shall be Fifteen
------
Million Dollars ($15,000,000.00).
Term: This commitment shall be outstanding until March 31,
-----
2000, at which time it will expire and be subject to review.
All Letters of Credit issued under this line shall remain in
force until their respective dates of expiration .
Advances/
---------
Repayment: Each Letter of Credit will be issued under the $15,000,000
---------
Promissory Note that was previously executed by Borrower.
Any advance of funds by BB&T resulting from the issuance of
Letters of Credit shall be repayable upon demand.
Interest
--------
Rate: The promissory Note backing Letters of Credit issued under
----
this line shall bear interest at BB&T's Prime Rate adjusted
daily as prime changes.
Collateral: Unsecured.
----------
Fees: Hooker Furniture Corporation and BB&T International Services
----
Division shall agree upon all fees.
Financial
---------
Reporting: The borrower shall furnish to BB&T an audited Annual Report
---------
within 60 days of each fiscal year end and quarterly
unaudited financial statements within 45 days of each fiscal
quarter end.
<PAGE>
Other: The borrower must at all times maintain a financial
-----
condition satisfactory to BB&T, including no events of
default with other lenders. Any such event of default,
notice of which must be given to BB&T immediately,
constitutes and event of default under this commitment.
Larry, we sincerely appreciate your business and look forward to
continuing our mutually beneficial relationship with Hooker Furniture. If
the terms of our commitment described above are acceptable, please indicate
by signing, dating, and returning the original of this letter to my
attention before April 1, 1999.
Thank you for your immediate attention to this matter. If you have any
questions or concerns, please give me a call at 336-733-3259.
Sincerely,
/s/ Cory Boyte
Cory Boyte
Vice President
Accepted this 26th day of March, 1999
HOOKER FURNITURE CORPORATION
By: /s/ Edwin L. Ryder
----------------------------------
Title: Sr. VP Finance & Administration
-------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<CASH> 157
<SECURITIES> 0
<RECEIVABLES> 27,124
<ALLOWANCES> 525
<INVENTORY> 37,051
<CURRENT-ASSETS> 66,215
<PP&E> 94,523
<DEPRECIATION> 49,385
<TOTAL-ASSETS> 116,423
<CURRENT-LIABILITIES> 11,658
<BONDS> 7,000
10,129<F1>
0
<COMMON> 2,418
<OTHER-SE> 82,816
<TOTAL-LIABILITY-AND-EQUITY> 116,423
<SALES> 227,785
<TOTAL-REVENUES> 227,785
<CGS> 168,603
<TOTAL-COSTS> 204,251
<OTHER-EXPENSES> (289)
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 647
<INCOME-PRETAX> 23,176
<INCOME-TAX> 8,881
<INCOME-CONTINUING> 14,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,295
<EPS-BASIC> 1.87
<EPS-DILUTED> 1.87
<FN>
<F1>Represents Common Stock held by ESOP
</FN>
</TABLE>
