SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended May 31, 2002 or
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 (IRS Employer
incorporation or organization) Identification No.)
440 East Commonwealth Boulevard, Martinsville, VA 24112
(Address of principal executive offices, Zip Code)
(276) 632-0459
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock as of July 1, 2002.
Common stock, no par value 7,271,821
(Class of common stock) (Number of shares)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HOOKER FURNITURE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, including share data)
(Unaudited)
May 31, November 30,
2002 2001
Assets
Current assets
Cash, primarily interest-bearing deposits.............................. $ 19,076 $ 7,926
Trade receivables, less allowances of $674 and $650.................... 27,928 29,430
Inventories............................................................ 29,948 33,522
Income tax recoverable................................................. 97 1,359
Prepaid expenses and other............................................. 3,641 2,368
-------- --------
Total current assets................................................ 80,690 74,605
Property, plant, and equipment, net....................................... 49,256 49,952
Other assets.............................................................. 5,941 6,138
-------- --------
Total assets........................................................ $135,887 $130,695
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable................................................. $ 3,326 $ 4,088
Accrued salaries, wages, and benefits.................................. 5,404 4,789
Other accrued expenses................................................. 4,505 3,374
Current maturities of long-term debt................................... 2,794 2,730
-------- --------
Total current liabilities............................................ 16,029 14,981
Long-term debt............................................................ 22,797 24,181
Other long-term liabilities............................................... 4,056 4,395
-------- --------
Total liabilities...................................................... 42,882 43,557
-------- --------
Common stock held by ESOP................................................. 9,961 9,397
Shareholders' equity
Common stock, no par value, 10,000 shares authorized,
7,274 and 7,304 shares issued and outstanding.......................... 2,868 2,789
Unearned ESOP shares (1,615 and 1,663 shares)............................. (20,188) (20,793)
Retained earnings ........................................................ 101,895 97,432
Accumulated other comprehensive loss ..................................... (1,531) (1,687)
-------- --------
Total shareholders' equity........................................... 83,044 77,741
-------- --------
Total liabilities and shareholders' equity......................... $135,887 $130,695
======== ========
The accompanying notes are an integral part of the financial statements.
2
HOOKER FURNITURE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Six Months
Ended May 31, Ended May 31,
2002 2001 2002 2001
Net sales ..................................... $ 62,253 $ 55,578 $123,182 $111,502
Cost of sales ................................. 46,231 42,948 91,760 85,272
-------- -------- -------- --------
Gross profit ............................. 16,022 12,630 31,422 26,230
Selling and administrative expenses ........... 10,690 10,247 20,538 19,709
-------- -------- -------- --------
Operating income ......................... 5,332 2,383 10,884 6,521
Other income, net ............................. 140 330 308 635
Interest expense .............................. 502 509 1,014 1,013
-------- -------- -------- --------
Income before taxes ...................... 4,970 2,204 10,178 6,143
Income taxes .................................. 1,887 836 3,866 2,332
-------- -------- -------- --------
Net income ............................... $ 3,083 $ 1,368 $ 6,312 $ 3,811
======== ======== ======== ========
Earnings per share:
Basic and diluted ........................ $ .55 $ .23 $ 1.12 $ .65
======== ======== ======== ========
Weighted average shares outstanding....... 5,636 5,877 5,628 5,867
======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
3
HOOKER FURNITURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
May 31, May 31,
2002 2001
Cash flows from operating activities:
Cash received from customers .......................................... $ 124,878 $ 117,356
Cash paid to suppliers and employees .................................. (104,508) (102,548)
Income taxes paid, net ................................................ (2,656) (3,497)
Interest paid, net .................................................... (843) (887)
--------- ---------
Net cash provided by operating activities ............................ 16,871 10,424
--------- ---------
Cash flows from investing activities:
Purchase of property, plant, and equipment, net of disposals .......... (3,121) (4,680)
Sale of property ...................................................... 17 2,732
--------- ---------
Net cash absorbed by investing activities .......................... (3,104) (1,948)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt .......................................... 2,500
Payments on long-term debt ............................................ (1,320) (3,409)
Cash dividends paid ................................................... (752) (1,131)
Purchase and retirement of common stock ............................... (545)
--------- ---------
Net cash absorbed by financing activities ............................ (2,617) (2,040)
--------- ---------
Net increase in cash ..................................................... 11,150 6,436
Cash at beginning of year ................................................ 7,926 1,243
--------- ---------
Cash at end of period .................................................... $ 19,076 $ 7,679
========= =========
Reconciliation of net income to net cash provided
by operating activities:
Net income ............................................................ $ 6,312 $ 3,811
Depreciation and amortization ....................................... 3,805 3,584
Non-cash ESOP cost .................................................. 696 562
Gain on disposal of property ........................................ (5) (20)
Changes in assets and liabilities:
Trade receivables ................................................. 1,502 5,292
Inventories ....................................................... 3,574 5,519
Income tax recoverable ............................................ 1,262 (1,165)
Prepaid expenses and other assets ................................. (1,076) (1,932)
Trade accounts payable ............................................ (762) (2,260)
Other accrued expenses ............................................ 1,999 (2,892)
Other long-term liabilities ....................................... (436) (75)
--------- ---------
Net cash provided by operating activities ........................... $ 16,871 $ 10,424
========= =========
The accompanying notes are an integral part of the financial statements.
4
HOOKER FURNITURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in tables, in thousands unless
otherwise indicated)
1. Preparation of Interim Financial Statements
The consolidated financial statements of Hooker Furniture Corporation (referred
to as "Hooker" or the "Company") have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission ("SEC"). In the
opinion of management, these statements include all adjustments necessary for a
fair presentation of the results of all interim periods reported herein. All
such adjustments are of a normal recurring nature. Certain information and
footnote disclosures prepared in accordance with generally accepted accounting
principles are condensed or omitted pursuant to SEC rules and regulations.
However, management believes that the disclosures made are adequate for a fair
presentation of results of operations and financial position. Operating results
for the interim periods reported herein may not be indicative of the results
expected for the year. These financial statements should be read in conjunction
with the financial statements and accompanying notes included in the Company's
Annual Report on Form 10K for the fiscal year ended November 30, 2001.
2. Inventories
(Unaudited)
May 31, November 30,
2002 2001
Finished furniture......................................... $ 32,298 $ 33,481
Furniture in process....................................... 1,716 1,712
Materials and supplies..................................... 7,550 9,685
-------- --------
Inventories at FIFO.................................... 41,564 44,878
Reduction to LIFO basis.................................... 11,616 11,356
-------- --------
Inventories............................................ $ 29,948 $ 33,522
======== ========
3. Property, Plant, and Equipment
(Unaudited)
May 31, November 30,
2002 2001
Buildings.................................................. $ 44,682 $ 44,314
Machinery and equipment.................................... 47,098 46,231
Furniture and fixtures..................................... 19,628 17,404
Other...................................................... 2,909 3,291
-------- --------
Total depreciable property at cost..................... 114,317 111,240
Accumulated depreciation................................... 66,347 62,574
-------- --------
Total depreciable property, net........................ 47,970 48,666
Land....................................................... 1,286 1,286
-------- --------
Property, plant, and equipment, net.................... $ 49,256 $ 49,952
======== ========
5
Notes to Consolidated Financial Statements - Continued
4. Long-Term Debt
(Unaudited)
May 31, November 30,
2002 2001
Term loan.............................................. $19,191 $20,511
Industrial revenue bonds .............................. 6,400 6,400
------- -------
Total debt outstanding............................. 25,591 26,911
Less current maturities................................ 2,794 2,730
------- -------
Long-term debt..................................... $22,797 $24,181
======= =======
5. Assets Held For Sale
The Company owns an 189,000 square foot warehouse facility located in
Martinsville, Virginia that is idle and presently held for sale or lease. This
facility has a carrying value of $1.7 million, stated at the lower of carrying
value, or fair value net of estimated selling expenses, and is classified in the
balance sheets as "other assets."
On May 31, 2001, the Company's wholly-owned subsidiary, Triwood, Inc.
("Triwood"), sold land and a building that was being leased to a third party for
$2.7 million in cash. The property had been leased with an option to purchase.
The transaction did not have a material impact on results of operations or
financial position. The Company continues to operate its import furniture
business as a wholly-owned subsidiary through Triwood.
6. Common Stock
During the first six months of 2002, the Company redeemed approximately 30,000
shares from terminating ESOP participants at a total cost of $545,000, or $17.95
per share as required by the terms of the ESOP plan. Approximately 13,000 of the
shares redeemed were from ESOP participants who terminated in connection with
the Martinsville downsizing, which occurred in August 2001.
7. Other Comprehensive Income
(Unaudited)
Three Months Six Months
Ended May 31, Ended May 31,
2002 2002
Portion of interest rate swaps' fair value
reclassified to interest expense....................... $362 $693
Loss on interest rate swaps................................ 136 441
---- ----
Other comprehensive income before tax.................. 226 252
Income tax expense......................................... 86 96
---- ----
Other comprehensive income, net of tax................. $140 $156
==== ====
The amount reclassified to interest expense includes $44,000 related to the
ineffective portion of the interest rate swap agreements.
6
HOOKER FURNITURE CORPORATION
Item 2. Management's Discussion and Analysis
Results of Operations
The Company's net sales for the second quarter ended May 31, 2002, increased
12.0% to $62.3 million from $55.6 million in the second quarter of 2001. For the
first half of 2002, net sales of $123.2 million increased 10.5% from $111.5 in
the first half of 2001. During the 2002 periods, increased unit volume in
imported product lines and home office furniture was partially offset by lower
unit volume in bedroom furniture, wall systems, and entertainment centers.
Average selling prices were lower during the 2002 periods due to the mix of
products shipped (primarily higher imported furniture shipments). In the prior
year second quarter, the Company reported a marked downturn in shipments,
reflecting the industry-wide recession experienced during most of last year.
Gross profit margin increased to 25.7% in the 2002 first quarter, compared to
22.7% in the 2001 period. For the first half of 2002, gross profit margin
increased to 25.5%, compared to 23.5% in the 2001 period. Most of the
improvement during the 2002 periods can be attributed to a decrease in raw
material costs, principally lumber and wood products, as a percentage of sales
volume. The Company also shipped more "higher margin" goods (principally
imported products) as a percentage of total volume. In addition, operating the
Company's factories at full production schedules contributed to the improvement
in gross profit margin; as a result, overhead decreased as a percentage of sales
volume. For the six-month period of 2002, the delivered cost of imported
furniture also decreased as a percentage of sales volume.
Selling and administrative expenses increased $443,000 to $10.7 million for the
2002 second quarter from $10.2 million in the comparable 2001 period. For the
first half of 2002, selling and administrative expenses increased $829,000 to
$20.5 million from $19.7 million in the comparable 2001 period. The increase in
expenses for both the three and six-month periods was due principally to higher
selling expenses to support increased sales (principally sales commissions). A
decrease in selling and administrative expenses as a percentage of net sales
also contributed to the improvement in operating margins. Selling and
administrative expenses as a percentage of net sales decreased to 17.2% in the
2002-second quarter from 18.4% in the 2001 period. As a percentage of net sales,
selling and administrative expenses decreased to 16.7% for the first half of
2002 from 17.7% in the same six-month period one year ago. Selling and
administrative expenses as a percentage of net sales decreased as a result of
higher net sales in the 2002 periods.
As a result of the above, operating income as a percentage of net sales improved
to 8.6% in the 2002 quarterly period, compared to 4.3% for the 2001 first
quarter. Operating income as a percentage of net sales improved to 8.8% in the
2002 first half, compared to 5.9% for the 2001 first half.
Other income for the 2002-second quarter declined to $140,000 from $330,000 in
the prior year quarter. For the first half of 2002, other income declined to
$308,000 from $635,000 in the first half of 2001. The decline in other income
for both the three and six month periods of 2002 is due principally to lower
rental income. During the first half of 2001, the Company received rental income
for land and a building that was sold on May 31, 2001 and for a warehouse
facility under a lease agreement that terminated in August 2001. The warehouse
facility, which is presently held for sale or lease, has a carrying value of
$1.7 million stated at the lower of carrying value, or fair value net of
estimated selling expenses.
The Company's effective tax rate approximated 38.0% in each of the 2002 and 2001
three and six month periods.
7
Management's Discussion & Analysis - Continued
Results of Operations - Continued
Net income increased 125.4% to $3.1 million for second quarter 2002, compared to
$1.4 million in the comparable 2001 period. Earnings per share increased 139.1%
to $0.55 for the 2002-quarter from $0.23 in the year-earlier period.
For the first half of 2002, net income increased 65.6% to $6.3 million from $3.8
million in the 2001 first half. Earnings per share for the first half of 2002
increased 72.3% to $1.12 from $0.65 for the same period of 2001.
Outlook
Retail activity has been slow since early April and order rates for domestically
manufactured products have softened. However, order rates for imported products
remain strong. The Company has planned reduced work schedules on a selective
basis at some of its production facilities during June and July 2002 in order to
maintain a proper balance between orders, production, and inventory levels.
Additionally, the Company's production facilities will be closed for one week in
July for annually scheduled maintenance. Prior to the end of July, management
will evaluate the need to adjust production work schedules for August and
beyond. The Company expects that shipments during the third quarter of fiscal
2002 will reflect an increase of 15-20% from the comparable 2001 period.
Financial Condition, Liquidity, and Capital Resources
As of May 31, 2002, assets totaled $135.9 million, increasing from $130.7
million at November 30, 2001. Shareholders' equity at May 31, 2002, was $83.0
million, compared to $77.7 million at November 30, 2001. The Company's long-term
debt, including current maturities, was $25.6 million at May 31, 2002, declining
from $26.9 million at November 30, 2001. Working capital increased to $64.7
million as of May 31, 2002, from $59.6 million at the end of fiscal 2001,
reflecting an $11.2 million increase in cash, partially offset by declines of
$1.5 million in trade receivables and $3.6 million in inventories; and, an
increase of $1.0 million in current liabilities.
During the six months ended May 31, 2002, cash generated from operations ($16.9
million) funded an increase in available cash ($11.2 million), capital
expenditures ($3.1 million), repayment of long-term debt ($1.3 million),
dividend payments ($752,000), and the purchase and retirement of common stock
($545,000). During the comparable 2001 period, cash generated from operations
($10.4 million) and the sale of property ($2.7 million) funded an increase in
available cash ($6.4 million), capital expenditures ($4.7 million), dividend
payments ($1.1 million), and net repayments of long-term debt ($909,000).
Cash generated from operations of $16.9 million during the 2002 period increased
$6.4 million from $10.4 million in the comparable 2001 period. The increase is
due to higher payments received from customers and lower tax and interest
payments, partially offset by higher payments to suppliers and employees. Cash
received from customers increased $7.5 million as a result of higher sales,
partially offset by higher trade receivables. Payments to suppliers and
employees increased $2.0 million, principally a reflection of higher production
levels partially offset by higher current liabilities. Tax payments decreased
$841,000 attributable to the timing of amounts due in each respective period.
Investing activities consumed $3.1 million during the 2002 period compared to
$1.9 million in the comparable 2001 period. Expenditures in each year were
incurred principally for plant, equipment, and
8
Management's Discussion & Analysis - Continued
Financial Condition - Continued
other assets to maintain and enhance the Company's facilities and business
operating systems. On May 31, 2001, the Company's wholly-owned subsidiary,
Triwood, Inc., sold land and a building that was being leased to a third party
for $2.7 million in cash.
The Company used cash of $2.6 million for financing activities in the 2002
period compared to $2.0 million in the 2001 period. During the 2002 period, the
Company repaid $1.3 million of long-term debt, paid dividends of $752,000, and
redeemed approximately 30,000 shares of common stock from terminating ESOP
participants at a total cost of $544,000, or $17.95 per share, as required by
the terms of the ESOP plan. During the 2001 period, the Company paid dividends
of $1.1 million.
In 2001, the Company's Board of Directors authorized the repurchase of up to an
aggregate of $5.2 million of the Company's common stock. Repurchases may be made
from time to time in the open market, or in privately negotiated transactions,
at prevailing market prices that the Company deems appropriate. Through May 31,
2002, the Company has repurchased 286,000 shares at a total cost of $2.4 million
or an average of $8.47 per share. Based on the market value of the common stock
as of June 28, 2002, the remaining $2.8 million of the authorization would allow
the Company to repurchase approximately 2.4% of the 7.3 million shares
outstanding, or 3.5% of the Company's outstanding shares excluding the 2.3
million shares held by the ESOP.
Since May 31, 2002, the Company increased its existing lines of credit by $22.0
million to collateralize letters of credit for imported inventory purchases. As
of July 3, 2002, the Company had $9.6 million available under its revolving line
of credit and $20.7 million available under additional lines of credit to fund
working capital needs. The Company believes it has the financial resources
(including available cash, cash flow from operations, and lines of credit)
needed to meet business requirements for the foreseeable future including
capital expenditures, working capital, purchases under the stock repurchase
program, and dividends on the Company's common stock. Cash flow from operations
is highly dependent on order rates and the Company's operating performance.
Recent Events
On June 25, 2002 the Company announced that it would be listed on the Nasdaq
SmallCap Market, a nationally recognized electronic stock market, effective June
27, 2002. The Company's stock will be traded under the symbol HOFT. The Company
believes that listing on the Nasdaq SmallCap Market will increase its visibility
in the public markets and facilitate greater liquidity and price efficiency for
investors in the Company's stock.
Forward-Looking Statements
Certain statements made in this report 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. Those
risks and uncertainties include the cyclical nature of the furniture industry,
domestic and international competition in the furniture industry, general
economic or business conditions, both domestically and internationally,
fluctuations in the price of lumber, which is the most significant raw material
used by the
9
Management's Discussion & Analysis - Continued
Forward-Looking Statements - Continued
Company, supply disruptions or delays affecting imported products, adverse
political acts or developments in the international markets from which the
Company imports products, fluctuations in foreign currency exchange rates
affecting the price of the Company's imported products, and capital costs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates and foreign
currency exchange rates, which could impact its results of operations and
financial condition. The Company manages its exposure to these risks through its
normal operating and financing activities and through the use of interest rate
swap agreements with respect to interest rates.
The Company's obligations under its lines of credit, industrial revenue bonds,
and term loan bear interest at variable rates. The Company has entered into
interest rate swap agreements that, in effect, fix the rate of interest on the
industrial revenue bonds at 4.7% through 2006 and on the term loan at 7.4%
through 2010. There were no other material derivative instrument transactions
during any of the periods presented. As of May 31, 2002, $6.4 million was
outstanding under the Company's industrial revenue bonds and $19.2 million was
outstanding under the term loan. No balance was outstanding under the Company's
lines of credit as of May 31, 2002. A 10% fluctuation in market interest rates
would not have a material impact on the Company's results of operations or
financial condition.
For imported products, the Company generally negotiates firm pricing with its
foreign suppliers, for periods typically of up to one year. The Company accepts
the exposure to exchange rate movements beyond these negotiated periods without
using derivative financial instruments to manage this risk. Since the Company
transacts its purchases of import products in U.S. Dollars, a decline in the
relative value of the U.S. Dollar could increase the cost of the products the
Company imports. As a result, a weakening U.S. Dollar exchange rate could
adversely impact sales volume and profit margins during such periods.
10
HOOKER FURNITURE CORPORATION
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On March 28, 2002, the Company held its Annual Meeting of Shareholders. At the
meeting, the following business was transacted:
Messrs. Toms, Williams, Ryder, Long, J. C. Hooker, Jr., Beeler, Gregory, Groves,
A. F. Hooker, Jr., and Walker were elected to serve as directors of the Company
for a term of one year. The votes cast for the election of each Director were:
Director For Withheld*
Paul B. Toms, Jr. 6,700,029 280,399
Douglas C. Williams 6,700,114 280,314
E. Larry Ryder 6,654,065 326,363
Henry P. Long, Jr. 6,700,114 280,314
J. Clyde Hooker, Jr. 6,976,666 3,762
W. Christopher Beeler, Jr. 6,976,666 3,762
John L. Gregory, III 6,976,666 3,762
Irving M. Groves, Jr. 6,930,515 49,913
A. Frank Hooker, Jr. 6,930,666 49,762
L. Dudley Walker 6,974,968 5,460
*Including abstentions and broker non-votes.
The shareholders also ratified the selection of BDO Seidman, LLP as the
Company's independent auditors. The votes cast were:
For - 6,971,910 Against - 5,150 Abstain - 3,368 (including broker
non-votes)
Item 5. Other Information
On June 25, 2002 the Company announced that it would be listed on the Nasdaq
SmallCap Market, a nationally recognized electronic stock market, effective June
27, 2002. The Company's stock will be traded under the symbol HOFT.
11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Commitment Letter renewing the BB&T Credit Line and related
Promissory Note, each dated April 19, 2002, between Branch
Banking & Trust Company of Virginia and the Company.
10.2 Commitment Letter renewing and increasing the BB&T Credit Line
and related Promissory Note, each dated July 3, 2002, between
Branch Banking & Trust Company of Virginia and the Company.
(b) Reports on Form 8-K
Form 8-K, filed July 2, 2002, announcing that the Company's
common stock would be listed on the Nasdaq SmallCap Market
effective June 27, 2002, under the symbol HOFT.
SIGNATURE
Pursuant to the requirements 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
Date: July 9, 2002 By: /s/ R. Gary Armbrister
----------------------------------------
R. Gary Armbrister
Chief Accounting Officer
(Principal Accounting Officer)
12
EXHIBIT 10.1
April 19, 2002
Mr. E. Larry Ryder
Executive Vice President-Finance &
Administration
Hooker Furniture Corporation
Post Office Box 4708
Martinsville, VA 24115
Dear Larry:
Branch Banking and Trust Company ("Bank") is pleased to renew its line of credit
in the amount of $20,000,000 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 Twenty Million
Dollars ($20,000,000).
Term: This commitment shall be outstanding until April 30, 2003, 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 $20,000,000
Promissory Note to be 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.
April 19, 2002
Page 2
Financial Reporting: The Borrower shall furnish to BB&T an audited Annual Report
within 120 days of each fiscal year end and quarterly unaudited financial
statements within 45 days of each fiscal quarter end.
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 30, 2002.
Thank you for your assistance in this request. If you have any questions or
concerns, please give me a call at 666-8570.
Sincerely,
/s/ Carolyn S. Shough
- --------------------------------
Carolyn S. Shough
Vice President-Business Services
Officer
Accepted this 24th day of April, 2002
HOOKER FURNITURE CORPORATION
By: /s/ E. Larry Ryder
------------------------------------
E. Larry Ryder
Title: Executive Vice President-Finance &
Administration
By: /s/ Robert W. Sherwood
-----------------------------------
Robert W. Sherwood
Title: Vice President - Credit, Secretary,
& Treasurer
BB&T
PROMISSORY NOTE
Borrower: Hooker Furniture Corporation
Account Number: 9530265983 Note Number: 90001
Address: P.O. Box 4708 Date: April 19, 2002
Martinsville, Virginia 24115
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 OF VIRGINIA, a Virginia 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
Twenty Million Dollars and no/100th ($20,000,000.00), 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 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 April 19, 2002, 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.
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
Page 1 of 2
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 Virginia, 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 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.ss.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 Virginia; 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.
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 W. Sherwood By: /s/ E. Larry Ryder
-------------------------------- ----------------------------
Robert W. Sherwood E. Larry Ryder
Title: Vice President - Credit, Secretary, Title Executive Vice President -
& Treasurer Finance & Administration
By: /s/ Robert W. Sherwood
----------------------------
Robert W. Sherwood
Title: Vice President-Credit,
Secretary & Treasurer
Page 2 of 2
EXHIBIT 10.2
June 24, 2002
Mr. E. Larry Ryder
Executive Vice President-Finance &
Administration
Hooker Furniture Corporation
Post Office Box 4708
Martinsville, VA 24115
Dear Larry:
Branch Banking and Trust Company ("Bank") is pleased to increase its line
of credit from $20,000,000 to $30,000,000 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 Thirty Million
Dollars ($30,000,000).
Term: This commitment shall be outstanding until April 30, 2003, 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
$30,000,000 Promissory Note to be 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.
June 24, 2002
Page 2
Financial Reporting: The Borrower shall furnish to BB&T an audited Annual Report
within 120 days of each fiscal year end and quarterly unaudited financial
statements within 45 days of each fiscal quarter end.
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 July 15, 2002.
Thank you for your assistance in this request. If you have any questions or
concerns, please give me a call at 666-3257.
Sincerely,
/s/ Scott Taylor
- --------------------------
Scott Taylor
City Executive
Accepted this 24th day of June, 2002
HOOKER FURNITURE CORPORATION
By: /s/ E. Larry Ryder
----------------------------------------------
E. Larry Ryder
Title: Executive Vice President-Finance &
Administration
By: /s/ Robert W. Sherwood
----------------------------------------------
Robert W. Sherwood
Title: Vice President - Credit, Secretary, &
Treasurer
BB&T
PROMISSORY NOTE
Borrower: Hooker Furniture Corporation
Account Number: 9530265983 Note Number: 90002
Address: P.O. Box 4708 Date: June 24, 2002
Martinsville, Virginia 24115
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 OF VIRGINIA, a Virginia 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
Thirty Million Dollars and no/100th ($30,000,000.00), 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 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 24, 2002, 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.
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
Page 1 of 2
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 Virginia, 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 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.ss.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 Virginia; 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.
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 W. Sherwood By: /s/ E. Larry Ryder
----------------------------------- -------------------------------
Robert W. Sherwood E. Larry Ryder
Title: Vice President- Credit, Secretary, Title: Executive Vice President -
& Treasurer Finance & Administration
By: /s/ Robert W. Sherwood
-------------------------------
Robert W. Sherwood
Title: Vice President-Credit,
Secretary & Treasurer
Page 2 of 2
