UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION





Washington,
D.C.  20549





Form
10-Q





Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934





For the
quarterly period endedNovember
2, 2008




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 incorporation or organization)
              
              (IRS
      employer 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
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.


Large
      accelerated Filer o
                    Accelerated
      filer xNon-accelerated
      Filer o (Do
      not check if a smaller reporting company)
                    Smaller
      reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes  ̈ No x





Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as ofDecember 8,
2008.





Common
      stock, no par value
              10,761,438(Class
      of common stock)
              (Number
      of shares)





PART
I.  FINANCIAL INFORMATION





Item
1.  Financial Statements





HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands, including share data)


(Unaudited)





November 2,
                    
                    
                    February 3,2008
                    
                    
                    2008AssetsCurrent
      assetsCash
      and cash equivalents
                    
                    $
                    12,419
                    
                    
                    $
                    33,076Trade
      accounts receivable, less allowance for doubtful accounts of $2,134 and $1,750 on
      each date
                    
                    
                    37,817
                    
                    
                    
                    38,229Inventories
                    
                    
                    56,035
                    
                    
                    
                    50,560Prepaid
      expenses and other current assets
                    
                    
                    4,641
                    
                    
                    
                    3,552Total
      current assets
                    
                    
                    110,912
                    
                    
                    
                    125,417Property,
      plant and equipment, net
                    
                    
                    24,859
                    
                    
                    
                    25,353Goodwill
                    
                    
                    3,803
                    
                    
                    
                    3,774Intangible
      assets
                    
                    
                    5,924
                    
                    
                    
                    5,892Cash
      surrender value of life insurance policies
                    
                    
                    13,230
                    
                    
                    
                    12,173Other
      assets
                    
                    
                    2,124
                    
                    
                    
                    2,623Total
      assets
                    
                    $
                    160,852
                    
                    
                    $
                    175,232Liabilities
      and Shareholders’ EquityCurrent
      liabilitiesTrade
      accounts payable
                    
                    $
                    10,611
                    
                    
                    $
                    13,025Accrued
      salaries, wages and benefits
                    
                    
                    3,622
                    
                    
                    
                    3,838Other
      accrued expenses
                    
                    
                    3,201
                    
                    
                    
                    3,553Current
      maturities of long-term debt
                    
                    
                    2,846
                    
                    
                    
                    2,694Total
      current liabilities
                    
                    
                    20,280
                    
                    
                    
                    23,110Long-term
      debt, excluding current maturities
                    
                    
                    3,064
                    
                    
                    
                    5,218Deferred
      compensation
                    
                    
                    6,194
                    
                    
                    
                    5,369Other
      long-term liabilities
                    
                    
                    216
                    
                    
                    
                    709Total
      liabilities
                    
                    
                    29,754
                    
                    
                    
                    34,406Shareholders’
      equityCommon
      stock, no par value, 20,000 shares
      authorized, 10,761
      and 11,561 shares issued and outstanding on each date
                    
                    
                    16,975
                    
                    
                    
                    18,182Retained
      earnings
                    
                    
                    114,246
                    
                    
                    
                    122,835Accumulated
      other comprehensive loss
                    
                    
                    (123
                    )
                    
                    
                    (191
                    )Total
      shareholders’ equity
                    
                    
                    131,098
                    
                    
                    
                    140,826Total
      liabilities and shareholders’ equity
                    
                    $
                    160,852
                    
                    
                    $
                    175,232





The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.


2


HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(In
thousands, except per share data)


(Unaudited)





Thirteen Weeks Ended
                
                
                Thirty-Nine Weeks EndedNovember 2,
                
                
                October 28,
                
                
                November 2,
                
                
                October 28,2008
                
                
                2007
                
                
                2008
                
                
                2007Net
      sales
                
                $
                68,996
                
                
                $
                83,768
                
                
                $
                204,651
                
                
                $
                234,503Cost
      of sales
                
                
                49,188
                
                
                
                57,132
                
                
                
                145,251
                
                
                
                162,788Gross
      profit
                
                
                19,808
                
                
                
                26,636
                
                
                
                59,400
                
                
                
                71,715Selling
      and administrative expenses
                
                
                15,661
                
                
                
                17,312
                
                
                
                48,440
                
                
                
                48,385Restructuring
      and asset impairment (credit) charge
                
                
                (561
                )
                
                
                419
                
                
                
                (819
                )
                
                
                763Operating
      income
                
                
                4,708
                
                
                
                8,905
                
                
                
                11,779
                
                
                
                22,567Other
      income, net
                
                
                36
                
                
                
                309
                
                
                
                391
                
                
                
                1,150Income
      before income taxes
                
                
                4,744
                
                
                
                9,214
                
                
                
                12,170
                
                
                
                23,717Income
      taxes
                
                
                1,794
                
                
                
                3,303
                
                
                
                4,541
                
                
                
                8,662Net
      income
                
                $
                2,950
                
                
                $
                5,911
                
                
                $
                7,629
                
                
                $
                15,055Earnings
      per share:Basic
                
                $
                0.27
                
                
                $
                0.48
                
                
                $
                0.68
                
                
                $
                1.19Diluted
                
                $
                0.27
                
                
                $
                0.48
                
                
                $
                0.68
                
                
                $
                1.19Weighted
      average shares outstanding:Basic
                
                
                10,761
                
                
                
                12,266
                
                
                
                11,176
                
                
                
                12,676Diluted
                
                
                10,767
                
                
                
                12,270
                
                
                
                11,182
                
                
                
                12,680Cash
      dividends declared per share
                
                $
                0.10
                
                
                $
                0.10
                
                
                $
                0.30
                
                
                $
                0.30





The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.


3


HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)





Thirty-Nine Weeks EndedNovember 2,
                    
                    
                    October 28,2008
                    
                    
                    2007Cash
      flows from operating activitiesCash
      received from customers.
                    
                    $
                    205,466
                    
                    
                    $
                    234,868Cash
      paid to suppliers and employees
                    
                    
                    (199,962
                    )
                    
                    
                    (192,939
                    )Income
      taxes paid, net
                    
                    
                    (5,031
                    )
                    
                    
                    (10,188
                    )Interest
      received, net
                    
                    
                    270
                    
                    
                    
                    977Net
      cash provided by operating activities
                    
                    
                    743
                    
                    
                    
                    32,718Cash
      flows from investing activitiesAcquisition
      of Sam Moore, net of cash acquired
                    
                    
                    
                    
                    
                    
                    (10,571
                    )Additional
      payments related to the acquisition of Opus Designs
                    
                    
                    (181
                    )Purchase
      of property, plant and equipment
                    
                    
                    (1,755
                    )
                    
                    
                    (1,514
                    )Proceeds
      from the sale of property and equipment
                    
                    
                    17
                    
                    
                    
                    2,129Net
      cash used in investing activities
                    
                    
                    (1,919
                    )
                    
                    
                    (9,956
                    )Cash
      flows from financing activitiesPurchases
      and retirement of common stock
                    
                    
                    (14,097
                    )
                    
                    
                    (26,785
                    )Cash
      dividends paid
                    
                    
                    (3,382
                    )
                    
                    
                    (3,847
                    )Payments
      on long-term debt
                    
                    
                    (2,002
                    )
                    
                    
                    (1,860
                    )Net
      cash used in financing activities
                    
                    
                    (19,481
                    )
                    
                    
                    (32,492
                    )Net
      decrease in cash and cash equivalents
                    
                    
                    (20,657
                    )
                    
                    
                    (9,730
                    )Cash
      and cash equivalents at beginning of period
                    
                    
                    33,076
                    
                    
                    
                    47,085Cash
      and cash equivalents at end of period
                    
                    $
                    12,419
                    
                    
                    $
                    37,355Reconciliation
      of net income to net cash provided by operating
activities:Net
      income
                    
                    $
                    7,629
                    
                    
                    $
                    15,055Depreciation
      and amortization
                    
                    
                    2,154
                    
                    
                    
                    2,530Non-cash
      restricted stock awards
                    
                    
                    54
                    
                    
                    
                    33Restructuring
      (credit) charge
                    
                    
                    (819
                    )
                    
                    
                    763Loss
      on disposal of property
                    
                    
                    122Provision
      for doubtful accounts
                    
                    
                    1,475
                    
                    
                    
                    834Deferred
      income tax (benefit) expense
                    
                    
                    (667
                    )
                    
                    
                    3,203Changes
      in assets and liabilities, net of effect from
acquisitions:Trade
      accounts receivable
                    
                    
                    (1,019
                    )
                    
                    
                    (505
                    )Inventories
                    
                    
                    (5,416
                    )
                    
                    
                    16,261Prepaid
      expenses and other assets
                    
                    
                    (1,049
                    )
                    
                    
                    (1,160
                    )Trade
      accounts payable
                    
                    
                    (2,414
                    )
                    
                    
                    937Accrued
      salaries, wages and benefits
                    
                    
                    603
                    
                    
                    
                    (1,211
                    )Accrued
      income taxes
                    
                    
                    177
                    
                    
                    
                    (4,728
                    )Other
      accrued expenses
                    
                    
                    (419
                    )
                    
                    
                    (139
                    )Other
      long-term liabilities
                    
                    
                    332
                    
                    
                    
                    845Net
      cash provided by operating activities
                    
                    $
                    743
                    
                    
                    $
                    32,718





The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.


4


HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE
INCOME


(In
thousands, except per share data)


(Unaudited)





For the
thirty-nine weeks ended November 2, 2008





AccumulatedOther
                        
                        
                        TotalCommon Stock
                        
                        
                        Retained
                        
                        
                        Comprehensive
                        
                        
                        Shareholders’Shares
                        
                        
                        Amount
                        
                        
                        Earnings
                        
                        
                        Loss
                        
                        
                        EquityBalance
      at February 3, 2008
                        
                        
                        11,561
                        
                        
                        $
                        18,182
                        
                        
                        $
                        122,835
                        
                        
                        $
                        (191
                        )
                        
                        $
                        140,826Net
      income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        7,629
                        
                        
                        
                        
                        
                        
                        
                        7,629Unrealized
      gain on interest rate swap, net of tax
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        68
                        
                        
                        
                        68Total
      comprehensive income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        7,697Cash
      dividends ($0.30 per share)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (3,382
                        )
                        
                        
                        
                        
                        
                        
                        (3,382
                        )Restricted
      stock compensation cost
                        
                        
                        
                        
                        
                        
                        54
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        54Repurchases
      of common stock
                        
                        
                        (800
                        )
                        
                        
                        (1,261
                        )
                        
                        
                        (12,836
                        )
                        
                        
                        
                        
                        
                        
                        (14,097
                        )Balance
      at November 2, 2008
                        
                        
                        10,761
                        
                        
                        $
                        16,975
                        
                        
                        $
                        114,246
                        
                        
                        $
                        (123
                        )
                        
                        $
                        131,098





The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.


5


HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollar
and share amounts in tables, except per share amounts, in thousands unless
otherwise indicated)


(Unaudited)


For the
Thirty-Nine Weeks Ended November 2, 2008





1.
            Preparation of Interim
      Financial Statements





The
condensed consolidated financial statements of Hooker Furniture Corporation and
subsidiaries (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 statement 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 U.S. generally accepted accounting principles
(“GAAP”) 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 audited consolidated
financial statements and accompanying notes included in the Company’s annual
report on Form 10-K for the fiscal year ended February 3, 2008.





The
financial statements contained herein are being filed as part of a quarterly
report on Form 10-Q covering the thirteen-week period (also referred to as
“three months,” “three-month period,” “quarter” or “quarterly period”) that
began August 4, 2008 and the thirty-nine week period (also referred to as “nine
months” or “nine-month period”) that began February 4, 2008, both ended on
November 2, 2008.  These financial statements also include the
thirteen-week period that began July 30, 2007 and the thirty-nine week period
that began January 29, 2007, both ended on October 28, 2007.





References
to the 2009 fiscal year and comparable terminology in the notes to the condensed
consolidated financial statements mean the fiscal year that began February 4,
2008 and will end February 1, 2009.  References to the 2008 fiscal
year and comparable terminology in the notes to the consolidated financial
statements mean the fiscal year that began January 29, 2007 and ended February
3, 2008.





2.
            Inventories


November 2,
                    
                    
                    February 3,2008
                    
                    
                    2008Finished
      furniture
                    
                    $
                    61,129
                    
                    
                    $
                    52,602Furniture
      in process
                    
                    
                    1,199
                    
                    
                    
                    1,217Materials
      and supplies
                    
                    
                    8,461
                    
                    
                    
                    7,814Inventories
      at FIFO
                    
                    
                    70,789
                    
                    
                    
                    61,633Reduction
      to LIFO basis
                    
                    
                    14,754
                    
                    
                    
                    11,073Inventories
                    
                    $
                    56,035
                    
                    
                    $
                    50,560





3.
            Property, Plant and
      Equipment


November 2,
                    
                    
                    February
      3,2008
                    
                    
                    2008Buildings
      and land improvements
                    
                    $
                    23,473
                    
                    
                    $
                    23,076Machinery
      and equipment
                    
                    
                    3,619
                    
                    
                    
                    3,425Furniture
      and fixtures
                    
                    
                    26,608
                    
                    
                    
                    27,516Other
                    
                    
                    4,076
                    
                    
                    
                    3,740Total
      depreciable property at cost
                    
                    
                    57,776
                    
                    
                    
                    57,757Less
      accumulated depreciation
                    
                    
                    34,946
                    
                    
                    
                    34,558Total
      depreciable property, net
                    
                    
                    22,830
                    
                    
                    
                    23,199Land
                    
                    
                    1,387
                    
                    
                    
                    1,387Construction
      in progress
                    
                    
                    642
                    
                    
                    
                    767Property,
      plant and equipment, net
                    
                    $
                    24,859
                    
                    
                    $
                    25,353




6


4.           Goodwill and Intangible
Assets


November 2,
                    
                    
                    February
      3,2008
                    
                    
                    2008Goodwill
                    
                    $
                    3,803
                    
                    
                    $
                    3,774Non-amortizable
      Intangible AssetsTrademarks
      and trade names – Bradington-Young
                    
                    $
                    4,400
                    
                    
                    $
                    4,400Trademarks
      and trade names – Sam Moore
                    
                    
                    396
                    
                    
                    
                    396Trademarks
      and trade names – Opus Designs
                    
                    
                    1,057
                    
                    
                    
                    1,000Total
      trademarks and trade names
                    
                    
                    5,853
                    
                    
                    
                    5,796Amortizable
      Intangible AssetsNon-compete
      agreements
                    
                    
                    700
                    
                    
                    
                    700Furniture
      designs
                    
                    
                    100
                    
                    
                    
                    100Total
      amortizable intangible assets
                    
                    
                    800
                    
                    
                    
                    800Less
      accumulated amortization
                    
                    
                    729
                    
                    
                    
                    704Net
      carrying value
                    
                    
                    71
                    
                    
                    
                    96Intangible
      assets
                    
                    $
                    5,924
                    
                    
                    $
                    5,892





5.           Acquisitions





On
December 14, 2007, the Company completed its acquisition of certain assets of
Opus Designs Furniture LLC, a specialist in imported moderately-priced youth
bedroom furniture.  The Company has integrated this business with its
existing imported wood and metal furniture business and offers this brand to
customers as Opus Designs by Hooker.  During the 2009 second quarter
the Company paid additional acquisition related expenses and settled certain
purchase price adjustments with the seller, which resulted in an adjustment to
the recorded purchase price and the values of certain acquired
assets.  After taking these adjustments into account, the Company paid
an aggregate purchase price of $5.4 million, including $116,000 in
acquisition-related fees, for the accounts receivable, inventory, intangible
assets and goodwill of Opus Designs Furniture LLC.





The
recorded values of the assets acquired were:


As
      ofDecember 14,2007Current
      assets
                    
                    $
                    2,876Goodwill
      and intangible assets
                    
                    
                    2,557Total
      assets acquired
                    
                    $
                    5,433





6.           Long-Term Debt


November 2,
                  
                  
                  February
      3,2008
                  
                  
                  2008Term
      loan
                  
                  $
                  5,910
                  
                  
                  $
                  7,912Less
      current maturities
                  
                  
                  2,846
                  
                  
                  
                  2,694Long-term
      debt, less current maturities
                  
                  $
                  3,064
                  
                  
                  $
                  5,218





7.           Restructuring





Severance and
                    Related Benefits
                  
                  
                  Other
                  
                  
                  TotalAccrued
      balance at February 3, 2008
                  
                  $
                  829
                  
                  
                  $
                  193
                  
                  
                  $
                  1,022Restructuring
      credit
                  
                  
                  (819
                  )
                  
                  
                  
                  
                  
                  
                  (819
                  )Cash
      payments
                  
                  
                  (6
                  )
                  
                  
                  27
                  
                  
                  
                  21Balance
      at November 2, 2008
                  
                  $
                  16
                  
                  
                  $
                  166
                  
                  
                  $
                  182




7


8.        
 Other Comprehensive Income (Loss)


Thirteen Weeks Ended
                  
                  
                  Thirty-Nine Weeks EndedNovember 2,
                  
                  
                  October 28,
                  
                  
                  November 2,
                  
                  
                  October 28,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Net
      income
                  
                  $
                  2,950
                  
                  
                  $
                  5,911
                  
                  
                  $
                  7,629
                  
                  
                  $
                  15,055Loss
      on interest rate swap
                  
                  
                  (32
                  )
                  
                  
                  (79
                  )
                  
                  
                  (33
                  )
                  
                  
                  (92
                  )Portion
      of swap agreement’s fair value reclassified to interest
      expense
                  
                  
                  45
                  
                  
                  
                  11
                  
                  
                  
                  143
                  
                  
                  
                  32Other
      comprehensive income (loss) before tax
                  
                  
                  13
                  
                  
                  
                  (68
                  )
                  
                  
                  110
                  
                  
                  
                  (60
                  )Income
      tax (expense) benefit
                  
                  
                  (4
                  )
                  
                  
                  26
                  
                  
                  
                  (42
                  )
                  
                  
                  23Other
      comprehensive income (loss), net of tax
                  
                  
                  9
                  
                  
                  
                  (42
                  )
                  
                  
                  68
                  
                  
                  
                  (37
                  )Comprehensive
      net income
                  
                  $
                  2,959
                  
                  
                  $
                  5,869
                  
                  
                  $
                  7,697
                  
                  
                  $
                  15,018





9.           Share-Based
Compensation





The
Hooker Furniture Corporation 2005 Stock Incentive Plan permits incentive awards
of restricted stock, restricted stock units, stock appreciation rights and
performance grants to key employees and non-employee directors.  The
Company has issued annual restricted stock awards to each non-employee member of
the board of directors since January 2006.  These shares will vest if
the director remains on the board through a 36-month service period or may vest
earlier in accordance with terms specified in the plan.  Prior to
vesting the Company accounts for these awards as “non-vested equity
shares.”  For each restricted common stock issuance, the following
table summarizes the actual number of shares that have been issued and
outstanding, vested or forfeited, the weighted average issue price of those
shares on the grant date, the fair value of each grant on the grant date,
compensation expense recognized for the non-vested shares of each grant and the
remaining fair value of the non-vested shares of each grant as of November 2,
2008:





Whole
                    
                    
                    Grant-Date
                    
                    
                    Aggregate
                    
                    
                    Compensation
                    
                    
                    Grant-Date Fair ValueNumber of
                    
                    
                    Fair Value
                    
                    
                    Grant-Date
                    
                    
                    Expense
                    
                    
                    Unrecognized AtShares
                    
                    
                    Per Share
                    
                    
                    Fair Value
                    
                    
                    Recognized
                    
                    
                    November 2, 2008Shared
      Issued on January 16, 2006Issued
                    
                    
                    4,851
                    
                    
                    $
                    15.31
                    
                    
                    $
                    74Forfeited
                    
                    
                    (784
                    )
                    
                    
                    15.31
                    
                    
                    
                    (12
                    )Vested
                    
                    
                    (147
                    )
                    
                    
                    15.31
                    
                    
                    
                    (2
                    )3,920
                    
                    
                    
                    
                    
                    
                    
                    60
                    
                    
                    $
                    56
                    
                    
                    $
                    4Shares
      Issued on January 15, 2007Issued
                    
                    
                    4,875
                    
                    
                    $
                    15.23
                    
                    
                    
                    74
                    
                    
                    
                    45
                    
                    
                    
                    29Shares
      Issued on January 15, 2008Issued
                    
                    
                    4,335
                    
                    
                    $
                    19.61
                    
                    
                    
                    85
                    
                    
                    
                    24
                    
                    
                    
                    61Awards
      outstanding at November 2,
      2008:
                    
                    
                    13,130
                    
                    
                    
                    
                    
                    
                    $
                    219
                    
                    
                    $
                    125
                    
                    
                    $
                    94





10.           Performance
Grants





On April
30, 2008, the Compensation Committee of the Company’s board of directors awarded
two performance grants to certain senior executives of the Company under the
2005 Stock Incentive Plan.  Payments under each fixed dollar grant
will be based on the Company’s cumulative earnings per share (“EPS”) and average
annual return on equity (“ROE”) for the grant’s designated performance and
service period.  The respective performance periods for the two grants
are the fiscal two-year period ending January 31, 2010 and the fiscal three-year
period ending January 30, 2011.  Payment, if any, under each
performance grant will be paid in cash, shares of the Company’s common stock or
a combination of both, at the discretion of the Compensation
Committee.





These
performance grants have been classified as liabilities since the (i) settlement
amount for each grant will not be known until after the applicable performance
period is completed and (ii) settlement of the grants may be made in common
stock, cash or a combination of both.  The estimated cost of each
grant will be recorded as compensation expense over the respective performance
periods when it becomes probable that the EPS and ROE performance targets will
be achieved.  The expected cost of the grants will be revalued each
reporting period.  As assumptions change regarding the expected
achievement of target performance levels, a cumulative adjustment will be
recorded and future compensation expense will increase or decrease based on the
currently projected performance levels.  If the Company determines
that it is not probable that the minimum EPS and ROE performance thresholds for
the grants will be met, no further compensation cost will be recognized and any
previously recognized compensation cost will be reversed.  A maximum
of $3.2 million could be paid under these grants.   In the 2009
second quarter, the Company reversed $130,000 previously accrued for these
grants.  As a result, through the nine-month period ended November 2,
2008, no compensation expense has been recorded for these performance
grants.


8





11.           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.  Restricted shares awarded to non-employee members of the
board of directors that have not yet vested are considered only when computing
diluted earnings per share.  As of November 2, 2008, there were
approximately thirteen thousand shares of non-vested restricted stock
outstanding.




Thirteen Weeks Ended
                        
                        
                        Thirty-Nine Weeks EndedNovember 2,
                        
                        
                        October 28,
                        
                        
                        November 2,
                        
                        
                        October 28,2008
                        
                        
                        2007
                        
                        
                        2008
                        
                        
                        2007Net
      income
                        
                        $
                        2,950
                        
                        
                        $
                        5,911
                        
                        
                        $
                        7,629
                        
                        
                        $
                        15,055Weighted
      average shares outstanding for basic earnings per share
                        
                        
                        10,761
                        
                        
                        
                        12,266
                        
                        
                        
                        11,176
                        
                        
                        
                        12,676Dilutive
      effect of non-vested restricted stock awards
                        
                        
                        6
                        
                        
                        
                        4
                        
                        
                        
                        6
                        
                        
                        
                        4Weighted
      average shares outstanding for diluted earnings per share
                        
                        
                        10,767
                        
                        
                        
                        12,270
                        
                        
                        
                        11,182
                        
                        
                        
                        12,680Basic
      earnings per share
                        
                        $
                        0.27
                        
                        
                        $
                        0.48
                        
                        
                        $
                        0.68
                        
                        
                        $
                        1.19Diluted
      earnings per share
                        
                        $
                        0.27
                        
                        
                        $
                        0.48
                        
                        
                        $
                        0.68
                        
                        
                        $
                        1.19





12.           Common Stock





During
the fiscal 2008 first and second quarters, the Company’s board of directors
authorized the repurchase of up to $30 million of the Company’s common
stock.  The Company completed these repurchases in November
2007.  In December 2007, the Company announced that its board of
directors had approved a new authorization to repurchase up to $10 million of
the Company’s common stock.  In April 2008, the Company announced that
the board had increased this authorization by an additional $10 million, to $20
million.  The Company completed these repurchases in August
2008.  During the 2009 fiscal year the Company has spent
$14.1 million, excluding commissions, to repurchase 800,000 shares of
Company common stock under these authorizations at an average price of $17.62
per share.





Since
February 2007, the Company has spent $50 million, excluding commissions to
repurchase 2.5 million shares of Company common stock under these authorizations
at an average price of $19.90 per share.





13.           Accounting
Pronouncements





In March
2008, the Financial Accounting Standards Boards (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.”  This statement requires enhanced disclosures about an entity’s
derivative and hedging activities and is thereby intended to improve the
transparency of financial reporting.  This statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008.  This statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption.  The
adoption of SFAS 161 is not expected to have a material impact on the Company’s
financial position or results of operations.





14.           
Supplier
Commitments





The
Company has made advance payments to one of its finished goods suppliers against
the Company’s purchase orders placed with that supplier.  The purpose
of the advances was to facilitate the supplier’s purchase of raw materials in
order to ensure timely delivery of furniture shipments to the
Company.  The current balance of the advances is approximately
$216,000.  Also, the Company assisted the supplier in obtaining
additional bank financing by issuing a standby letter of credit in the amount of
$600,000, which expires in July 2009, as security for that financing.  In
conjunction with the issuance of the letter of credit, the Company entered into
a security agreement with the supplier, which provides the Company with a
security interest in certain assets of the supplier and its
shareholders.  The Company does not intend to make additional advances
to the supplier.  The Company’s maximum exposure under the advances
and the standby letter of credit as of November 2, 2008 is approximately
$816,000.  The Company believes its financial exposure under this
arrangement is adequately secured.


9


Item
2.   Management’s Discussion and Analysis of Financial Condition and
Results of Operations





This
quarterly report on Form 10-Q includes the Company’s unaudited condensed
consolidated financial statements for the thirteen-week period (also referred to
as “three months,” “three-month period,” “quarter” or “quarterly period”) that
began August 4, 2008 and thirty-nine week period (also referred to as “nine
months” or “nine-month period”) that began February 4, 2008, both ended on
November 2, 2008.  This report discusses the Company’s:


·
            results
      of operations for these periods compared to the fiscal 2008 thirteen-week
      third quarter that began July 30, 2007 and the thirty-nine week period
      that began January 29, 2007, both ended on October 28, 2007;
      and


·
            financial
      condition as of November 2, 2008.


References
in this report to the 2009 fiscal year, or comparable terminology, refer to the
Company’s fiscal year that began February 4, 2008 and will end February 1,
2009.





Overview





Hooker
Furniture Corporation is a home furnishings design, marketing and logistics
company with world-wide sourcing capabilities.  With the closing of
its last domestic wood furniture plant during the fiscal 2008 first quarter, the
Company is now focused on imported wood and metal and domestically-produced and
imported upholstered home furnishings.





Results
of operations for the thirteen and thirty-nine week periods ended November 2,
2008 continue to reflect the weak retail environment for home furnishings that
has carried over from last year.  Discretionary purchases of
furniture, particularly at the upper-middle price points where the Company
competes, are significantly affected by consumer confidence.





Current
economic factors, such as the significantly weakened and volatile securities
markets, high food costs, lower consumer confidence, a weak housing market and
reduced availability of consumer credit have all contributed to cause an
extremely weak retail environment for home furnishings.  The Company
continues to believe, however, that its current business model, resulting from
the elimination of significant fixed overhead through recent restructurings,
provides the flexibility necessary to adjust to changing market conditions by
controlling inventory purchases from suppliers.  The Company expects
that the current economic malaise could last for another 9-12
months.  The Company also continues to believe that upon recovery, it
will be well positioned to respond quickly to increased demand.





During
the 2009 fiscal third quarter, the Company continued to address profitability
by:


·
            increasing
      selling prices on most of its
products;


·
            deferring,
      reducing or eliminating certain spending plans;
  and,


·
            reducing
      its work force by approximately 80
employees.


Principally
as a result of higher net sales in the 2009 third quarter and these actions,
operating margins improved to 6.8% of net sales during the 2009 third quarter
compared to 4.8% for the 2009 second quarter and 5.2% for the 2009 first
half.





Following
are the principal factors that impacted the Company’s results of operations
during the three and nine-month periods ended November 2, 2008 as compared with
the same prior year periods:





·
            Net
      sales declined principally due to:




o
            the
      industry-wide slow down in business at
retail,


o
            the
      Company’s exit from domestic wood furniture manufacturing,
    and


o
            overall
      lower average selling prices resulting primarily from the mix of products
      shipped,


however,
the sales decline was partially offset by an increase in selling prices on most
of the Company’s products effective September 1, 2008.




·
            Lower
      gross profit margins resulting
from:




o
            the
      rising cost of imported wood products and higher raw material
      costs  for upholstered products;
and


o
            increased
      overhead absorption as a percentage of net sales for domestically-produced
      upholstered furniture.





·
            Higher
      selling and administrative expenses to support new businesses (Sam Moore
      upholstered seating and Opus Designs youth bedroom furniture) and expanded
      warehousing and distribution.  In addition, selling and
      administrative expenses increased as a percentage of net sales principally
      through the effect of lower sales for both fiscal 2009
      periods.




10


Results
of Operations





The
following table sets forth the percentage relationship to net sales of certain
items included in the consolidated statements of operations.


Thirteen Weeks Ended
                  
                  
                  Thirty-Nine Weeks EndedNovember 2,
                  
                  
                  October 28,
                  
                  
                  November 2,
                  
                  
                  October 28,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Net
      sales
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Cost
      of sales
                  
                  
                  71.3
                  
                  
                  
                  68.2
                  
                  
                  
                  71.0
                  
                  
                  
                  69.4Gross
      profit
                  
                  
                  28.7
                  
                  
                  
                  31.8
                  
                  
                  
                  29.0
                  
                  
                  
                  30.6Selling
      and administrative expenses
                  
                  
                  22.7
                  
                  
                  
                  20.7
                  
                  
                  
                  23.7
                  
                  
                  
                  20.6Restructuring
      (credit) charge
                  
                  
                  (0.8
                  )
                  
                  
                  0.5
                  
                  
                  
                  (0.4
                  )
                  
                  
                  0.3Operating
      income
                  
                  
                  6.8
                  
                  
                  
                  10.6
                  
                  
                  
                  5.7
                  
                  
                  
                  9.6Other
      income, net
                  
                  
                  0.1
                  
                  
                  
                  0.4
                  
                  
                  
                  0.2
                  
                  
                  
                  0.5Income
      before income taxes
                  
                  
                  6.9
                  
                  
                  
                  11.0
                  
                  
                  
                  5.9
                  
                  
                  
                  10.1Income taxes
                  
                  
                  2.6
                  
                  
                  
                  3.9
                  
                  
                  
                  2.2
                  
                  
                  
                  3.7Net
      income
                  
                  
                  4.3
                  
                  
                  
                  7.1
                  
                  
                  
                  3.7
                  
                  
                  
                  6.4





Fiscal 2009 Third Quarter
Compared to the Fiscal 2008 Third Quarter





Net sales
for the fiscal year 2009 third quarter declined $14.8 million, or 17.6%, to
$69.0 million compared to $83.8 million for the fiscal 2008 third quarter, due
principally to:


·
            lower
      unit volume attributed to:


o
            the
      continued industry-wide slow down in business at retail;
    and


o
            lower
      shipments of discontinued domestically-produced wood furniture;
      and


·
            lower
      average selling prices principally due
to:


o
            the
      higher proportion of lower-priced imported products shipped;
      and


o
            higher
      sales discounts extended to dealers to promote and stimulate
      sales.


Excluding
discontinued domestically-produced wood furniture, net sales declined 16.3%
year-over-year.





Third
quarter 2009 unit volume decreased compared to the same 2008 period across most
all wood and upholstery product categories, but increased for:


·
            youth
      bedroom products due to the acquisition of the Opus Designs product line
      in December 2007; and


·
            upholstered
      seating manufactured by Sam Moore.





Overall
average selling prices decreased during the fiscal 2009 third quarter compared
to the fiscal 2008 third quarter principally due to the higher proportion of
imported products shipped.  Average selling prices also declined
for:


·
            imported
      wood furniture and upholstered seating manufactured or imported by Sam
      Moore due to increased shipments of lower-priced products (such as Opus
      Designs youth bedroom furniture sold at more moderate price points in the
      case of wood furniture) and higher sales discounts;
  and


·
            domestically-produced
      wood furniture principally due to aggressive discounting on those
      discontinued products.


These
declines were partially offset by higher average selling prices for upholstered
furniture manufactured or imported by Bradington-Young due to an overall
increase in per unit selling prices implemented to compensate for cost increases
received from suppliers.





Gross
profit margin decreased to 28.7% of net sales in the fiscal 2009 third quarter
compared to 31.8% in the fiscal 2008 third quarter, principally as a result
of:


·
            an
      increase in the delivered cost of imported wood furniture as a percentage
      of net sales coupled with higher sales discounts to stimulate sales,
      partially offset by a price increase on most
  products;


·
            higher
      raw material and overhead costs as a percentage of net sales for
      domestically-produced upholstered furniture;
and


·
            substantial
      discounts on discontinued domestically-produced wood
      furniture.





Higher
costs for raw materials, fuel, offshore labor and ocean freight, along with
weakness of the dollar, negatively impacted the Company’s gross profit margin
during the fiscal 2009 third quarter.  Since the spring, the Company
has experienced cost increases for imported furniture from its offshore
suppliers, as well as for transportation, raw materials for its upholstered
furniture and other operating expenses.  Early in the third quarter
2009 the Company implemented price increases for most of its products intended
to offset these cost increases and to improve margins.  The impact of
these price increases is reflected in improved gross margin for the 2009 third
quarter compared to the 2009 second quarter.


11





Selling
and administrative expenses decreased to $15.7 million for the fiscal 2009 third
quarter, compared to $17.3 million for the fiscal 2008 third
quarter.  The decrease in spending during the 2009 third quarter was
principally the result of:


·
            lower
      selling expenses as a result of lower
sales;


·
            a
      decline in legal and professional fees;
and


·
            lower
      compensation and benefits expense, which the Company implemented in
      response to lower sales and
profitability.


These
cost decreases were partially offset by:


·
            the
      costs to operate two new distribution centers during the current year
      quarter, one located in California, which opened in  January
      2008 and one in China, which opened in May 2008, both of which are owned
      and operated by third parties.


·
            higher
      allowances for doubtful accounts.  As a result of the difficult
      retail furniture environment, write offs compared to the prior period and
      the risk of higher credit defaults has increased.  Consequently,
      the Company has increased its allowance for doubtful accounts as a
      percentage of outstanding accounts
receivable.


Selling
and administrative expenses increased as a percentage of net sales to 22.7% for
the fiscal 2009 third quarter compared to 20.7% for the fiscal 2008 third
quarter, principally through the effect of lower net sales in the current year
quarter.





During
the 2009 third quarter, the Company recorded a restructuring credit of $561,000
($350,000 after tax , or $0.03 per share) for previously accrued health care
benefits that are not expected to be paid for terminated employees at the former
Roanoke and Martinsville, Va. manufacturing facilities.  In the 2008
third quarter, the Company recorded restructuring charges of $419,000 ($260,000
after tax, or $0.02 per share) principally for asset impairment and disassembly
costs related to the closure of the Martinsville, Va. manufacturing
facility.





As a
result of the above, operating income for the fiscal 2009 third quarter
decreased to $4.7 million, or 6.8% of net sales, compared to $8.9 million, or
10.6% of net sales, in the fiscal 2008 third quarter.




Other
income, net was $36,000, or 0.05% of net sales, for the fiscal 2009 third
quarter compared to $309,000, or 0.4% of net sales, for the fiscal 2008 third
quarter.  This decline was largely due to a decrease in interest
income in the fiscal 2009 third quarter, due to lower cash and cash equivalent
balances and lower rates of return earned on those balances, partially offset by
a decrease in interest expense as a result of lower debt levels.




The
Company recorded income tax expense of $1.8 million for the fiscal 2009 third
quarter and $3.3 million for the fiscal 2008 third quarter.  The
effective tax rate increased to 37.7% for the fiscal 2009 third quarter from
35.9% for the fiscal 2008 third quarter.  The effective rate increase
in the fiscal 2009 third quarter is principally due to lower non-taxable income
from corporate-owned life insurance and higher state income tax expense
attributed to California state income taxes incurred as a result of the new west
coast distribution center which opened in January 2008.




Fiscal
year 2009 third quarter net income was $3.0 million, or $0.27 per share,
compared to net income of $5.9 million, or $0.48 per share, in the fiscal 2008
third quarter.  The decrease in earnings per share resulting from
lower net income was mitigated by a decrease in weighted average shares
outstanding resulting from the repurchase of 2.5 million shares of common stock
since February 2007.





Fiscal 2009 First
Nine-Months Compared to the Fiscal 2008 First Nine-Months





Net sales
for the fiscal year 2009 first nine months declined $29.9 million, or 12.7%, to
$204.7 million compared to $234.5 million for the fiscal 2008 first nine months,
principally due to:


·
            lower
      unit volume attributed to:


o
            the
      continued industry-wide slow down in business at retail;
    and


o
            lower
      shipments of discontinued domestically-produced wood furniture;
      and


·
            lower
      average selling prices principally due
to:


o
            the
      higher proportion of lower-priced imported products shipped;
      and


o
            aggressive
      discounting on discontinued domestically-produced wood
      furniture.


These
factors were partially offset by the addition of net sales from upholstered
seating specialist Sam Moore.  Net sales for Sam Moore amounted to
$20.1 million during the 2009 first nine months compared to $13.9 million for
the 2008 six-month period following its acquisition at the end of April
2007.





During
the first nine months of 2009 unit volume decreased compared to the same 2008
period across all wood and upholstery product categories with the exception of
youth bedroom products, due to the acquisition of the Opus Designs product line
in December 2007, and Sam Moore upholstered products.


12





Overall
average selling prices decreased during the fiscal 2009 first nine months
compared to the fiscal 2008 first nine months principally due to the higher
proportion of imported products shipped and aggressive discounting on
discontinued domestically-produced wood furniture.  Average prices for
imported wood furniture declined due to the increased shipments of lower-priced
products (such as Opus Designs youth bedroom furniture, which is sold at more
moderate price points) and higher sales discounts intended to stimulate
sales.  The generally lower selling prices of Sam Moore products
decreased the average selling price for upholstered products; however, average
selling prices increased slightly for upholstered furniture manufactured or
imported by Bradington-Young due to an overall increase in per unit selling
prices implemented to offset cost increases for imported products, and for raw
materials, fuel and transportation.





Gross
profit margin decreased to 29.0% of net sales in the fiscal 2009 first nine
months compared to 30.6% in the fiscal 2008 first nine months, principally as a
result of:


·
            an
      increase in the delivered cost of imported wood and upholstered furniture
      as a percentage of net sales;


·
            substantial
      discounts on discontinued domestically-produced wood furniture;
      and


·
            higher
      raw material and overhead costs as a percentage of net sales for
      domestically-produced upholstered
furniture.





In the
first nine months of fiscal 2009, selling and administrative expenses increased
by $55,000, or 0.1%, and approximated $48.4 million in each
period.  As a percentage of net sales, selling and administrative
expenses increased to 23.7% in the fiscal 2009 first nine months from 20.6% in
the fiscal 2008 nine-month period principally through the effect of lower net
sales in the current year.  Selling and administrative spending was
impacted by:


·
            selling
      and administrative expenses incurred at Sam Moore, which was acquired at
      the end of the first quarter of fiscal
2008;


·
            costs
      to operate two new third-party distribution centers during the 2009 first
      nine-months, one located in California, which opened in January 2008, and
      one in China, which opened in May
2008;


·
            higher
      allowances for bad debts; and


·
            start-up
      advertising and promotional spending to market Opus Designs youth bedroom
      furniture.


These
cost increases were partially offset by lower selling expenses for Hooker
imported wood and Bradington-Young upholstered furniture and lower legal and
professional expenses.  Also, in the fiscal 2008 nine-month period the
Company recognized a gain on the settlement of a corporate-owned life insurance
policy in connection with the death of a former executive of the Company, which
reduced selling and administrative expenses.





During
the 2009 first nine months, the Company recorded a restructuring credit of
$819,000 for previously accrued health care benefits that are not expected to be
paid for terminated employees at the former Roanoke and Martinsville, Va.
manufacturing facilities.





During
the first nine months of fiscal 2008, the Company recorded aggregate
restructuring charges (net of restructuring credits) of $763,000 ($473,000 after
tax, or $0.04 per share) consisting of:





·
            $893,000
      for additional severance and related benefit costs, asset impairment,
      disassembly and exit costs associated with the closing of the
      Martinsville, Va.  domestic wood manufacturing facility in March
      2007; net of


·
            a
      restructuring credit of $130,000 principally for previously accrued
      health care benefits for the Pleasant Garden, N.C.  facility
      that are not expected to be paid.





As a
result of the above, the Company’s operating income for the first nine months of
fiscal 2009 decreased to $11.8 million, or 5.8% of net sales, compared to
operating income of $22.6 million, or 9.6% of net sales, in the first nine
months of fiscal 2008.





Other
income, net decreased $759,000 to $391,000, or 0.2% of net sales, for the first
nine months of fiscal 2009 from $1.2 million, or 0.5% of net sales, for the
fiscal 2008 nine-month period.  This decrease was principally the
result of a decrease in interest income earned on lower cash and cash equivalent
balances.




The
Company recorded income tax expense of $4.5 million for the first nine months of
fiscal 2009 and $8.7 million for the first nine months of fiscal
2008.  The effective tax rate was 37.3% for the first nine months of
fiscal 2009 and 36.5% for the first nine months of fiscal 2008.  The
effective rate increased in the first nine months of fiscal
2009 principally due to lower non-taxable income from corporate-owned life
insurance and higher state income tax expense attributed to the opening of the
new California distribution center in January 2008.




Net
income for the 2009 first nine months declined to $7.6 million, or $0.68 per
share, from $15.1 million, or $1.19 per share, in the fiscal 2008 nine-month
period.  As a percent of net sales, net income declined to 3.7% in the
2009 nine-month period compared to 6.4% for the fiscal 2008 nine-month
period.


13




Outlook





Over the
course of the last several months, the economy has worsened with continued news
reports of business closings, cutbacks and layoffs across many industries,
including the home furnishings industry.  Additionally, consumer confidence is
reported to beextremely
low.  With continued instability in the financial and credit markets
in spite of government intervention and the changing political landscape,
prospects for a near-term economic recovery appear
dim.





Historically
the Company has experienced an improvement in order rates following the Labor
Day holiday.  Consistent with this pattern, the Company experienced a
modest increase in incoming order rates during the fiscal 2009 third quarter
compared to the 2009 second quarter.  Additionally, while attendance
at the recently completed October 2008  High Point, N.C. furniture
market was significantly lower than at the last several semi-annual markets,
order writing for the Companyat that market was
generally consistent with recent markets.  The Company attributes this
to the appeal of its new product introductions at that market and the acceptance
of these and other products by national account buyers in
attendance.  However, in spite of these positive points,
year-over-year incoming order rates have declined significantly over the past
two months.While
the Company anticipates that overall retail conditions will continue to be
sluggish for the next several quarters, it remains optimistic about its business
model and prospects for the future.





The
Company has takensteps in the following
areas to address sales growth and profitability over the near term in the face
of the weak sales environment:


·
            a
      concerted effort to gain broader access to national markets through
      targetedsales programs and
      thedevelopment of
      proprietary products;


·
            the
      pursuit of additional distribution channels that the Company believes will
      over time generate additional sales
growth;


·
            continued
      market penetration of the Company’s newly- acquired
      youth bedroom line, Opus Designsby
      Hooker;


·
            measures to defer, reduce or
      eliminate certain spending
plans;


·
            reducing
      employment levels to align with the reduced volume of incoming
      business;


·
            continued
      refinements in managing the Company’s supply chain, warehousing and
      distribution operations, including the addition of distribution centers in
      California and China to continue to improve service and delivery and
      reduce freight costs for the Company’s dealers in the western U.S.,
      enhancing the value of the Company’s products to these
      dealers;


·
            reductions
      in inventory purchasing rates in the late third and fourth quarters to
      reflect expected business conditions;
and


·
            evaluation
      of the Company’s domestic upholstery manufacturing work schedules and
      facilities for optimal capacity utilization and operating
      efficiency.


The
Company believes that these initiatives will help mitigate the effects of poor
economic conditionson our sales and
profitability.





Financial
Condition, Liquidity and Capital Resources





Balance Sheet and Working
Capital





As of
November 2, 2008, assets totaled $160.9 million, decreasing from $175.2 million
at February 3, 2008, primarily due to decreases in cash and cash equivalents and
accounts receivable, partially offset by an increase in inventory and cash
surrender value of life insurance policies.  The Company’s long-term
debt, including current maturities, decreased to $5.9 million at November 2,
2008, from $7.9 million at February 3, 2008, as a result of scheduled debt
repayments.  Shareholders’ equity at November 2, 2008 decreased to
$131.1 million, compared to $140.8 million at February 3, 2008, due to common
stock repurchases and dividends paid, partially offset by net income earned for
the period.





Working
capital decreased by $11.7 million, or 11.7%, to $90.6 million as of November 2,
2008, from $102.3 million at the end of fiscal 2008, the net result of a $14.5
million decrease in current assets and a $2.8 million decrease in current
liabilities.  The decrease in current assets is mainly due to
decreases of $20.7 million in cash and cash equivalents and $412,000 in accounts
receivable, partly offset by an increase of $5.5 million in
inventories.  Accounts receivable decreased principally due to lower
sales.





Cash and
cash equivalents declined by $20.7 million to $12.4 million as of November 2,
2008 from $33.1 million on February 3, 2008.  The Company used $14.1
million of cash to repurchase approximately 800,000 shares of its common stock
during the 2009  nine-month period under authorizations approved by
its board of directors since late last year.  Repurchases under those
authorizations were completed early in the 2009 third quarter.  The
Company also used $5.5 million of cash to fund an increase in inventory levels
accounts during the 2009 nine-month period.





Inventories
increased 10.8%, to $56.0 million as of November 2, 2008, from $50.6 million at
February 3, 2008, largely due to:


·
            an
      increase in imported wood furniture inventory in preparation for the fall
      selling season;


·
            lower
      sales than anticipated in the summer and early fall;
  and


·
            an
      increase in raw materials related to Bradington-Young’s leather upholstery
      lines.




14




The
decrease in current liabilities is attributed to decreases of $2.4 million in
accounts payable.





Cash Flows – Operating,
Investing and Financing Activities





During
the nine months ended November 2, 2008, cash generated from operations
($743,000) and expenditures of $20.7 million of cash and cash equivalents funded
the purchase and retirement of common stock ($14.1 million), payment of cash
dividends ($3.4 million), scheduled principal payments on long-term debt ($2.0
million), capital expenditures to maintain and enhance the Company’s business
operating systems and facilities ($1.8 million) and additional expenditures in
connection with the acquisition of the Opus Designs youth bedroom line
($181,000).





During
the nine months ended October 28, 2007, cash generated from operations ($32.7
million), expenditures of $9.9 million of cash and cash equivalents and proceeds
from the sale of property, plant and equipment ($2.1 million) funded the
purchase and retirement of common stock ($26.8 million), the acquisition of Sam
Moore Furniture ($10.6 million), payments of cash dividends ($3.8 million),
principal payments on long-term debt ($1.9 million) and capital expenditures to
maintain and enhance the Company’s business operating systems and facilities
($1.5 million).





Cash
generated from operations during the first nine months of fiscal 2009 decreased
to $743,000 compared with $32.7 million generated during the nine-month period
ended October 28, 2007.  The decrease was primarily due to a decrease
in cash received from customers, higher payments made to suppliers and employees
and a decrease in interest income, net partially offset by a decrease in income
tax payments.  The decline in cash received from customers is
primarily attributed to lower net sales.





Payments
to suppliers and employees increased as a result of higher inventory purchases
and Sam Moore operating costs.  Inventory levels in early fiscal 2008
were higher than the comparable 2009 levels, consequently purchases
during  fiscal 2008 were lower as the Company reduced inventories to
more appropriate levels.  Also, payments to suppliers and employees
for the 2008 first nine months only included the operating costs of Sam Moore
for the six-month period following its acquisition in April 2007.





The
Company used $1.9 million of cash for investing activities during the first nine
months of fiscal year 2009 compared to $10.0 million during the nine-month
period ended October 28, 2007.  The Company invested $1.8 million to
purchase property, plant and equipment and made additional payments of $181,000
in connection with its acquisition of Opus Designs during the fiscal 2009
nine-month period.  During the nine-month period ended October 28,
2007, the Company invested $10.6 million (net of cash acquired) for the
acquisition of the assets of Sam Moore Furniture and invested $1.5 million to
purchase property, plant and equipment, partially offset by $2.1 million of cash
proceeds of sales of machinery and equipment related to the closure of the
Martinsville, Va. manufacturing facility.





The
Company used $19.5 million of cash for financing activities during the first
nine months of fiscal 2009 compared to $32.5 million in the nine-month period
ended October 28, 2007.  During the first nine months of fiscal year
2009, the Company used $14.1 million to purchase and retire common stock, paid
cash dividends of $3.4 million and made scheduled principal repayments of $2.0
million on the Company’s term loan.  During the fiscal year 2008
nine-month period, the Company purchased and retired $26.8 million of common
stock, paid cash dividends of $3.8 million and made scheduled principal
repayments of $1.9 million on the Company’s term loan.





Swap
Agreements





The
Company is party to an interest rate swap agreement that in effect provides for
a fixed interest rate of 4.1% through 2010 on its term loan.  In 2003,
the Company terminated a similar swap agreement, which in effect provided a
fixed interest rate of approximately 7.4% on that term loan.  The
Company’s $3.0 million payment to terminate the former swap agreement is being
amortized over the remaining payment period of the loan, resulting in an
effective fixed interest rate of approximately 7.4% on the term
loan.  The Company is accounting for the interest rate swap agreement
as a cash flow hedge.





The
aggregate fair market value of the Company’s swap agreement decreases when
interest rates decline and increases when interest rates
rise.  Overall, interest rates have declined since the inception of
the Company’s swap agreement.  The aggregate decrease in the fair
market value of the effective portion of the agreement of $123,000 ($198,000
pretax) as of November 2, 2008 and $191,000 ($311,000 pretax) as of February 3,
2008 is reflected under the caption “accumulated other comprehensive loss” in
the consolidated balance sheets.  See “Note 8 – Other Comprehensive
Income” to the consolidated financial statements included in this
report.  Approximately $156,000 of the aggregate pre-tax decrease in
fair market value of the agreement is expected to be reclassified into interest
expense during the next twelve months.




15




Debt Covenant
Compliance





The
credit agreement for the Company’s revolving credit facility and outstanding
term loan includes, among other requirements, financial covenants as to minimum
tangible net worth, debt service coverage, the ratio of funded debt to earnings
before interest, taxes, depreciation and amortization, and maximum capital
expenditures.  The Company was in compliance with these covenants as
of November 2, 2008.  In spite of the current difficult business
environment, the Company believes that it will continue to remain in compliance
with these covenants for the foreseeable future.





Supplier
Commitments





The
Company has made advance payments to one of its finished goods suppliers against
the Company’s purchase orders placed with that supplier.  The purpose
of the advances was to facilitate the supplier’s purchase of raw materials in
order to ensure timely delivery of furniture shipments to the
Company.  The current balance of the advances is approximately
$216,000.  Also, the Company assisted the supplier in obtaining
additional bank financing by issuing a standby letter of credit in the amount of
$600,000, which expires in July 2009, as security for that financing.  In
conjunction with the issuance of the letter of credit, the Company entered into
a security agreement with the supplier, which provides the Company with a
security interest in certain assets of the supplier and its
shareholders.  The Company does not intend to make additional advances
to the supplier.  The Company’s maximum exposure under the advances
and the standby letter of credit as of November 2, 2008 is approximately
$816,000.  The Company believes its financial exposure under this
arrangement is adequately secured.





Liquidity and Capital
Expenditures





As of
November 2, 2008, the Company had an aggregate $13.0 million available under its
revolving credit facility to fund working capital needs.  Standby
letters of credit in the aggregate amount of $2.0 million, used to collateralize
certain insurance arrangements and for imported product purchases, were
outstanding under the Company’s revolving credit facility as of November 2,
2008.  There were no other borrowings outstanding under the revolving
credit line on November 2, 2008.  Any principal outstanding under the
credit line is due March 1, 2011.





The
recent disruption and volatility in U. S. and global capital markets have
adversely affected the availability and cost of borrowing for many
businesses.  Lenders in many cases have reduced or even ceased funding
for those businesses.  However, the Company’s lender, has indicated
that it will continue to provide funding and honor the terms of the Company’s
credit agreement including the Company’s $15 million revolving credit
facility.





The
Company believes that it has the financial resources (including available cash
and cash equivalents, expected cash flow from operations, and committed lines of
credit) needed to meet business requirements for the foreseeable future,
including capital expenditures, working capital, dividends on the Company’s
common stock and repayment of debt, despite the lower operating cash flow
resulting from the lower profitability attributable to current economic
conditions.  Cash flow from operations is highly dependent on incoming
order rates and the Company’s operating performance.  The Company
expects to spend $750,000 to $1.5 million in capital expenditures during the
remainder of fiscal year 2009 to maintain and enhance its operating systems and
facilities.





During
the nine months that ended November 2, 2008, the Company reduced long-term debt,
including current maturities by $2.0 million, through scheduled debt
payments.





Common Stock and
Dividends




On
October 16, 2008 the Company announced that on or about October 24, 2008, the
Company would distribute approximately 1.7 million shares of its common stock to
1,066 current and former employees who participated in the Company's Employee
Stock Ownership Plan (ESOP).  The ESOP shares, which had been issued
and outstanding but unavailable to trade, became freely tradable upon
distribution.  Under the terms of the ESOP, participants were given
the option of rolling over or transferring their ESOP account balance to the
Company's 401(k) plan; electing to have all or part of the account balance
distributed to him or her; or rolling over the balance to an individual
retirement account or another employer's retirement plan.  The
distribution had no effect on the Company’s third quarter results or financial
statements, as all transactions resulting from the ESOP termination have been
recorded in previously reported periods.




At its
December 9, 2008 meeting, the board of directors of the Company declared a
quarterly cash dividend of $0.10 per share, payable on February 27, 2008 to
shareholders of record as of February 13, 2008.




Accounting
Pronouncements




In March
2008, the Financial Accounting Standards Boards (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.”  This statement requires enhanced disclosures about an entity’s
derivative and hedging activities and is thereby intended to improve the
transparency of financial reporting.  This statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008.  This statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption.  The
adoption of SFAS 161 is not expected to have a material impact on the Company’s
financial position or results of operations.





16




Forward-Looking
Statements





Certain
statements made in this report, including certain statements under Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations, are not historical facts, but are forward-looking
statements.  These statements reflect the Company’s reasonable
judgment and outlook with respect to future events and typically can be
identified by the use of forward-looking terminology such as “believes,”
“expects,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “would,”
“could,” or “anticipates,” or the negative thereof, or other variations thereon,
or comparable terminology, or by discussions of
strategy.  Forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements, including but not limited to:





·
            current
      economic conditions and instability in the financial and credit markets
      including their potential impact on the Company’s (i) sales and operating
      costs and access to financing, (ii) customers and suppliers and their
      ability to obtain financing or generate the cash necessary to conduct
      their business;




·
            general
      economic or business conditions, both domestically and
      internationally;




·
            price
      competition in the furniture
industry;




·
            changes
      in domestic and international monetary policies and fluctuations in
      foreign currency exchange rates affecting the price of the Company’s
      imported products;




·
            the
      cyclical nature of the furniture industry which is particularly sensitive
      to changes in consumer confidence, the amount of consumers’ income
      available for discretionary purchases and the availability and terms of
      consumer credit;




·
            risks
      associated with the cost of imported goods, including fluctuation in the
      prices of purchased finished goods and transportation and warehousing
      costs;




·
            supply,
      transportation and distribution disruptions, particularly those affecting
      imported products;




·
            adverse
      political acts or developments in, or affecting, the international markets
      from which the Company imports products, including duties or tariffs
      imposed on products imported by the
Company;




·
            risks
      associated with domestic manufacturing operations, including fluctuations
      in capacity utilization and the prices of key raw materials,
      transportation and warehousing costs, domestic labor costs and
      environmental compliance and remediation
costs;




·
            the
      Company’s ability to successfully implement its business plan to increase
      Sam Moore Furniture’s and Opus Designs’ sales and improve their financial
      performance;




·
            achieving
      and managing growth and change, and the risks associated with
      acquisitions, restructurings, strategic alliances and international
      operations;




·
            risks
      associated with distribution through retailers, such as non-binding
      dealership arrangements;




·
            capital
      requirements and costs;




·
            competition
      from non-traditional outlets, such as catalogs, internet and home
      improvement centers;




·
            changes
      in consumer preferences, including increased demand for lower quality,
      lower priced furniture due to declines in consumer confidence and/or
      discretionary income available for furniture purchases and the
      availability of consumer credit;
and




·
            higher
      than expected costs associated with product quality and safety, including
      regulatory compliance costs related to the sale of consumer products and
      costs related to defective
products.




Any
forward looking statement that the Company makes speaks only as of the date of
that statement, and the Company undertakes no obligation to update any
forward-looking statements whether as a result of new information, future events
or otherwise.




17


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, in some cases,
through the use of interest rate swap agreements with respect to interest
rates.





The
Company’s obligations under its revolving line of credit and term loan bear
interest at variable rates.  The outstanding balance under the
Company’s term loan, including current maturities, amounted to $5.9 million as
of November 2, 2008.  The Company has entered into an interest rate
swap agreement that, in effect, fixes the rate of interest on its term loan at
4.1% through 2010 (7.4% when the effect of a previously terminated swap
agreement is taken into account when determining interest
expense).  The notional principal value of the swap agreement is
substantially equal to the outstanding principal balance of the term
loan.  A fluctuation in market interest rates of one percentage point
(100 basis points) would not have a material impact on the Company’s results of
operations or financial condition.  For additional discussion of the
Company’s swap agreement see “Swap Agreements” in Management’s Discussion and
Analysis in the Company’s annual report on Form 10-K for the year ended February
3, 2008 and in this quarterly report.





For
imported products, the Company generally negotiates firm pricing denominated in
U.S. Dollars with its foreign suppliers,  typically for periods of six
months 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.  The majority of the Company’s
imports are purchased from China.  The Chinese currency floats within
a limited range in relation to the U.S. Dollar, resulting in additional exposure
to foreign currency exchange rate fluctuations.





Since the
Company transacts its imported product purchases in U.S. Dollars, a relative
decline in the value of the U.S. Dollar could increase the price the Company
pays for imported products beyond the negotiated periods.  The Company
generally expects to reflect substantially all of the effect of any price
increases from suppliers in the prices it charges for imported
products.  However, these changes could adversely impact sales volume
and profit margin during affected periods.





Item
4.  Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





The
Company’s management, with the participation of the Company’s principal
executive officer and principal financial officer, evaluated the effectiveness
of the Company’s disclosure controls and procedures as of the end of the
Company’s fiscal quarter ended November 2, 2008.  Based on this
evaluation, the Company’s principal executive officer and principal financial
officer have concluded that the Company’s disclosure controls and procedures
were effective as of the end of the period covered by this quarterly report to
provide reasonable assurance that information required to be disclosed by the
Company in the reports that it files or submits under the Securities Exchange
Act of 1934, as amended, is accumulated and communicated to the Company’s
management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure
and are effective to provide reasonable assurance that such information is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms.





Changes
in Internal Controls





There
have been no changes in the Company’s internal control over financial reporting
during the Company’s quarter ended November 2, 2008, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.


18


PART
II.  OTHER INFORMATION




ITEM
1A.  RISK FACTORS




In
addition to the other information set forth in this report, the factors
discussed below and under the caption “Item 1A. Risk Factors” in the Company’s
Annual Report on Form 10-K for fiscal year 2008 could materially affect the
Company’s business, financial condition and results of operations and should be
carefully considered.  These risks are not the only risks facing the
Company.  Additional risks and uncertainties, including those not
currently known to the Company or that the Company currently deems to be
immaterial also could materially adversely affect the Company’s business,
financial condition and results of operations.  Due to the current
economic climate, the Company has disclosed certain additional risk factors as
set forth below in light of these unprecedented circumstances.




The
current negative worldwide economic conditions could adverselyaffect the Company’s
business, market share and/or operating results by:





·
            reducing
      sales,


·
            increasing operating
      costs,


·
            preventing the Company from
      accuratelyforecasting demand for its
      products, and


·
            increasing the risk of
      unrecoverable losses on customers’ accounts
    receivable.





The
furniture industry is subject to cyclical variations in the general economy and
to uncertainty regarding future economic prospects.  Home furnishings
are generally considered a postponeable purchase by most
consumers.  Economic downturns could affect consumer spending habits
and as a result decrease the overall demand for home
furnishings.  These events could impact furniture retailers, which are
the Company’s primary customers, possibly resulting in a decrease in the
Company’s sales and earnings.  Changes in interest rates, consumer
confidence, new housing starts and existing home sales are particularly
significant economic indicators for the Company.




If the
current worldwide economic downturn continues, many of the Company’s direct and
indirect customers may delay or reduce their purchases of
furniture.  In addition, consumers and many of the Company’s customers
rely on credit financing in order to purchase its products.  If the
negative conditions in the global credit markets reduce consumers’ and the
Company’s customers’ access to credit, product orders may decrease, which could
result in lower revenue.  Likewise, if the Company’s suppliers face
challenges in obtaining credit required to finance their businesses, they may
become unable to continue to manufacture, or supply the materials used to
manufacture, the Company’s products.  These supply disruptions could
reduce the Company’s revenue and increase operating costs, which could adversely
affect the Company’s business, results of operations and financial
condition.




The
current negative worldwide economic conditions and market instability make it
increasingly difficult for the Company, and its customers and its suppliers, to
accurately forecast future product demand trends, which could cause the Company
to obtain or manufacture excess merchandise, which, in turn, would increase our
inventory carrying costs and could result in obsolete
inventory.  Alternatively, this forecasting difficulty could cause a
shortage of products, or materials used in the Company’s products, which could
result in an inability to satisfy demand for the Company’s products and a loss
of market share.




The
Company could suffer significant losses if a number of high volume customers
were to fail or become unable to pay for merchandise shipped to
them.  A significant increase in uncollectible accounts receivable
would have a negative impact on the Company’s financial results.




Failure
to accurately forecast market and customer demand for the Company’s products
could adversely affect its business and financial results or operating
efficiencies.




The
furniture industry faces difficulties in accurately forecasting market and
customer demand for furniture.  The variety and volume of products the
Company sources or manufactures is based significantly on these
forecasts.  If the Company’s forecasts exceed actual market demand, or
if market demand decreases significantly from the Company’s forecasts, then the
Company could experience periods of product oversupply, price decreases and
product obsolescence, which could impact the Company’s financial
performance.  If the Company’s forecasts do not meet actual market
demand, or if market demand increases significantly beyond those forecasts, and
the Company is unable to source additional products or add manufacturing
capacity in a timely fashion, then the Company may not be able to satisfy
customer product needs, which could result in a loss of market share if the
Company’s competitors are able to meet customer demands.




Demand
for the Company’s furniture depends substantially on the health of the housing
market, disposable income, and consumer confidence.  The demand for
furniture over time has been volatile and changes in demand have often had a
disproportionate effect on inventory levels.  As a result, the
furniture industry has experienced periods of excess capacity, which can lead to
liquidation of excess inventories and intense price competition.  If
intense price competition occurs, the Company may be forced to lower its prices
sooner and more than expected, which could result in reduced sales and lower
gross margins.




19





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds





Purchases of Equity
Securities by the Issuer and Affiliated Purchasers





The
following table provides information about common stock purchases by or on
behalf of the Company during the quarter ended November 2, 2008:





Total Number of
                          
                          
                          Maximum DollarTotal
                          
                          
                          Average
                          
                          
                          Shares Purchased
                          
                          
                          Value of SharesNumber
                          
                          
                          Price
                          
                          
                          As Part of Publicly
                          
                          
                          That May Yet BeOf Shares
                          
                          
                          Paid Per
                          
                          
                          Announced
                          
                          
                          Purchased UnderPurchased
                          
                          
                          Share
                          
                          
                          Program
                          
                          
                          The ProgramAugust
      4, 2008 – September 7, 2008
                          
                          
                          1,403
                          
                          
                          $
                          16.67
                          
                          
                          
                          1,403
                          
                          
                          $
                          0September
      8, 2008 – October 5, 2008October
      6, 2008 – November 2, 2008Total
                          
                          
                          1,403
                          
                          
                          $
                          16.67
                          
                          
                          
                          1,403
                          
                          
                          $
                          0





In
December 2007, the Company announced that its board of directors had authorized
the repurchase up to $10 million of the Company’s common stock.  In
April 2008, the Company announced that the board had increased that
authorization by an additional $10 million, to $20 million.  The
Company completed these repurchases in August 2008.  During the 2009
fiscal year the Company spent a total of $14.1 million, excluding commissions,
to repurchase 800,000 shares of Company common stock under these authorizations
at an average price of $17.62 per share.





Item
4.  Submission of Matters to a Vote of Security Holders





None




Item
6.  Exhibits





3.1
              
              Amended
      and Restated Articles of Incorporation of the Company, as amended March
      28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form
      10-Q (SEC File No. 000-25349) for the quarter ended February 28,
      2003)3.2
              
              Amended
      and Restated Bylaws of the Company (incorporated by reference to Exhibit
      3.2 to the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter
      ended August 31, 2006)4.1
              
              Amended
      and Restated Articles of Incorporation of the Company (See Exhibit
      3.1)4.2
              
              Amended
      and Restated Bylaws of the Company (See Exhibit 3.2)10.1
              
              Amendment
      to Employment Agreement, dated June 3, 2008, between Alan D. Cole and the
      Company (incorporated by reference to Exhibit 10.1 of the Company’s Form
      8-K filed with the Securities and Exchange Commission on June 5,
      2008)31.1*
              
              Rule
      13a-14(a) Certification of the Company’s principal executive
      officer31.2*
              
              Rule
      13a-14(a) Certification of the Company’s principal financial
      officer32.1*
              
              Rule
      13a-14(b) Certification of the Company’s principal executive officer and
      principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002




*Filed
herewith
 20





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 CORPORATIONDate:
      December 9, 2008
              By:
              /s/ R. Gary ArmbristerR. Gary ArmbristerChief Accounting Officer(Principal Accounting
Officer)


21


Exhibit
Index





Exhibit No.
              
              Description3.1
              
              Amended
      and Restated Articles of Incorporation of the Company, as amended March
      28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form
      10-Q (SEC File No. 000-25349) for the quarter ended February 28,
      2003)3.2
              
              Amended
      and Restated Bylaws of the Company (incorporated by reference to Exhibit
      3.2 to the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter
      ended August 31, 2006)4.1
              
              Amended
      and Restated Articles of Incorporation of the Company (See Exhibit
      3.1)4.2
              
              Amended
      and Restated Bylaws of the Company (See Exhibit 3.2)10.1
              
              Amendment
      to Employment Agreement, dated June 3, 2008, between Alan D. Cole and the
      Company (incorporated by reference to Exhibit 10.1 of the Company’s Form
      8-K filed with the Securities and Exchange Commission on June 5,
      2008)31.1*
              
              Rule
      13a-14(a) Certification of the Company’s principal executive
      officer31.2*
              
              Rule
      13a-14(a) Certification of the Company’s principal financial
      officer32.1*
              
              Rule
      13a-14(b) Certification of the Company’s principal executive officer and
      principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002











*Filed
herewith
  22