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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q



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



For
the quarterly period ended May 31, 2005



Commission file
number 000-25349



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HOOKER FURNITURE CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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)



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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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    YES  x    NO ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock as ofJuly 8, 2005.



|                           |  |                   
|-------------------------- |  | ------------------
|Common stock, no par value |  | 14,425,300        
|(Class of common stock)    |  | (Number of shares)



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PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, including share data)



|                                                                                                                   |  |             |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                   |  | May 31,2005 |         |   | November 30, 2004 |  
|Assets                                                                                                             |  |             |         |   |                   |   |         |  
|Current assets                                                                                                     |  |             |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                          |  | $           | 10,388  |   |                   | $ | 9,230   |  
|Trade accounts receivable, less allowance for doubtful accounts of $1,273 and $1,341 on each date                  |  |             | 38,277  |   |                   |   | 40,960  |  
|Inventories                                                                                                        |  |             | 74,632  |   |                   |   | 69,735  |  
|Prepaid expenses and other current assets                                                                          |  |             | 3,183   |   |                   |   | 3,540   |  
|Assets held for sale                                                                                               |  |             |         |   |                   |   | 5,376   |  
|                                                                                                                   |  |             |         |   |                   |   |         |  
|Total current assets                                                                                               |  |             | 126,480 |   |                   |   | 128,841 |  
|Property, plant and equipment, net                                                                                 |  |             | 43,228  |   |                   |   | 44,142  |  
|Goodwill                                                                                                           |  |             | 2,396   |   |                   |   | 2,396   |  
|Intangible assets                                                                                                  |  |             | 4,677   |   |                   |   | 4,765   |  
|Cash surrender value of life insurance policies                                                                    |  |             | 9,850   |   |                   |   | 8,474   |  
|Other assets                                                                                                       |  |             | 783     |   |                   |   | 300     |  
|                                                                                                                   |  |             |         |   |                   |   |         |  
|Total assets                                                                                                       |  | $           | 187,414 |   |                   | $ | 188,918 |  
|                                                                                                                   |  |             |         |   |                   |   |         |  
|Liabilities and Shareholders Equity                                                                               |  |             |         |   |                   |   |         |  
|Current liabilities                                                                                                |  |             |         |   |                   |   |         |  
|Trade accounts payable                                                                                             |  | $           | 15,577  |   |                   | $ | 14,930  |  
|Accrued salaries, wages and benefits                                                                               |  |             | 6,026   |   |                   |   | 7,090   |  
|Other accrued expenses                                                                                             |  |             | 3,360   |   |                   |   | 3,011   |  
|Current maturities of long-term debt                                                                               |  |             | 2,201   |   |                   |   | 6,671   |  
|                                                                                                                   |  |             |         |   |                   |   |         |  
|Total current liabilities                                                                                          |  |             | 27,164  |   |                   |   | 31,702  |  
|Long-term debt, excluding current maturities                                                                       |  |             | 12,174  |   |                   |   | 16,495  |  
|Deferred compensation                                                                                              |  |             | 2,970   |   |                   |   | 2,775   |  
|Other long-term liabilities                                                                                        |  |             | 1,289   |   |                   |   | 1,361   |  
|                                                                                                                   |  |             |         |   |                   |   |         |  
|Total liabilities                                                                                                  |  |             | 43,597  |   |                   |   | 52,333  |  
|                                                                                                                   |  |            
|Shareholders equity                                                                                               |  |             |         |   |                   |   |         |  
|Common stock, no par value, 20,000 shares authorized, 14,425 and 14,475 shares issued and outstanding on each
date |  |             | 8,565   |   |                   |   | 7,385   |  
|Unearned ESOP shares, 2,627 and 2,708 shares on each date                                                          |  |             | (16,417 | ) |                   |   | (16,927 | )
|Retained earnings                                                                                                  |  |             | 152,149 |   |                   |   | 146,886 |  
|Accumulated other comprehensive loss                                                                               |  |             | (480    | ) |                   |   | (759    | )
|                                                                                                                   |  |             |         |   |                   |   |         |  
|Total shareholders equity                                                                                         |  |             | 143,817 |   |                   |   | 136,585 |  
|                                                                                                                   |  |             |         |   |                   |   |         |  
|Total liabilities and shareholders equity                                                                         |  | $           | 187,414 |   |                   | $ | 188,918 |  
|                                                                                                                   |  |             |         |   |                   |   |         |  



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







2



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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)



|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------- |  | - | -------
|                                                  |  | Three Months Ended May 31, |        | Six Months Ended May 31,
|                                                  |  | 2005                       |        | 2004                     |   | 2005   |  | 2004
|Net sales                                         |  | $                          | 88,698 |                          | $ | 91,490 |  | $    | 169,224 |  | $ | 169,712
|Cost of sales                                     |  |                            | 64,459 |                          |   | 66,004 |  |      | 124,054 |  |   | 123,814
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|Gross profit                                      |  |                            | 24,239 |                          |   | 25,486 |  |      | 45,170  |  |   | 45,898 
|Selling and administrative expenses               |  |                            | 15,934 |                          |   | 16,161 |  |      | 31,420  |  |   | 29,733 
|Restructuring and related asset impairment charge |  |                            |        |                          |   |        |  |      | 366     |  |   |        
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|Operating income                                  |  |                            | 8,305  |                          |   | 9,325  |  |      | 13,384  |  |   | 16,165 
|Other income, net                                 |  |                            | 155    |                          |   | 84     |  |      | 288     |  |   | 252    
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|Income before interest and income taxes           |  |                            | 8,460  |                          |   | 9,409  |  |      | 13,672  |  |   | 16,417 
|Interest expense                                  |  |                            | 434    |                          |   | 517    |  |      | 773     |  |   | 1,010  
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|Income before income taxes                        |  |                            | 8,026  |                          |   | 8,892  |  |      | 12,899  |  |   | 15,407 
|Income taxes                                      |  |                            | 3,167  |                          |   | 3,378  |  |      | 5,090   |  |   | 5,853  
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|Net income                                        |  | $                          | 4,859  |                          | $ | 5,514  |  | $    | 7,809   |  | $ | 9,554  
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|Basic and diluted earnings per share              |  | $                          | .41    |                          | $ | .47    |  | $    | .66     |  | $ | .82    
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        
|Weighted average shares outstanding               |  |                            | 11,772 |                          |   | 11,779 |  |      | 11,770  |  |   | 11,629 
|                                                  |  |                            |        |                          |   |        |  |      |         |  |   |        



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





3



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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                           |  |                  |          |   |             |   |          |  
|-------------------------------------------------------------------------- |  | ---------------- | -------- | - | ----------- | - | -------- | -
|                                                                           |  | Six Months Ended |         
|                                                                           |  | May 31,2005      |          |   | May 31,2004 |  
|Cash flows from operating activities                                       |  |                  |          |   |             |   |          |  
|Cash received from customers.                                              |  | $                | 172,198  |   |             | $ | 169,919  |  
|Cash paid to suppliers and employees                                       |  |                  | (157,662 | ) |             |   | (157,184 | )
|Income taxes paid, net                                                     |  |                  | (4,170   | ) |             |   | (5,877   | )
|Interest paid, net                                                         |  |                  | (648     | ) |             |   | (631     | )
|                                                                           |  |                  |          |   |             |   |          |  
|Net cash provided by operating activities                                  |  |                  | 9,718    |   |             |   | 6,227    |  
|                                                                           |  |                  |          |   |             |   |          |  
|Cash flows from investing activities                                       |  |                  |          |   |             |   |          |  
|Purchase of property, plant and equipment                                  |  |                  | (2,652   | ) |             |   | (1,371   | )
|Proceeds from the sale of property                                         |  |                  | 5,457    |   |             |   | 912      |  
|                                                                           |  |                  |          |   |             |   |          |  
|Net cash provided by (used in) investing activities                        |  |                  | 2,805    |   |             |   | (459     | )
|                                                                           |  |                  |          |   |             |   |          |  
|Cash flows from financing activities                                       |  |                  |          |   |             |   |          |  
|Payments on long-term debt                                                 |  |                  | (8,791   | ) |             |   | (3,417   | )
|Cash dividends paid                                                        |  |                  | (1,644   | ) |             |   | (1,394   | )
|Repurchase of common stock                                                 |  |                  | (930     | ) |             |   |          |  
|                                                                           |  |                  |          |   |             |   |          |  
|Net cash used in financing activities                                      |  |                  | (11,365  | ) |             |   | (4,811   | )
|                                                                           |  |                  |          |   |             |   |          |  
|Net increase in cash and cash equivalents                                  |  |                  | 1,158    |   |             |   | 957      |  
|Cash and cash equivalents at beginning of period                           |  |                  | 9,230    |   |             |   | 14,859   |  
|                                                                           |  |                  |          |   |             |   |          |  
|Cash and cash equivalents at end of period                                 |  | $                | 10,388   |   |             | $ | 15,816   |  
|                                                                           |  |                  |          |   |             |   |          |  
|Reconciliation of net income to net cash provided by operating activities: |  |                  |          |   |             |   |          |  
|Net income                                                                 |  | $                | 7,809    |   |             | $ | 9,554    |  
|Depreciation and amortization                                              |  |                  | 3,670    |   |             |   | 3,838    |  
|Non-cash ESOP cost                                                         |  |                  | 1,718    |   |             |   | 2,030    |  
|Restructuring and related asset impairment charge                          |  |                  | 366      |   |             |   |          |  
|Gain on disposal of property                                               |  |                  | (15      | ) |             |   | (11      | )
|Provision for doubtful accounts                                            |  |                  | 275      |   |             |   | 378      |  
|Deferred tax provision                                                     |  |                  | (52      | ) |             |   |          |  
|Changes in assets and liabilities:                                         |  |                  |          |   |             |   |          |  
|Trade accounts receivable                                                  |  |                  | 2,408    |   |             |   | (365     | )
|Inventories                                                                |  |                  | (5,060   | ) |             |   | (10,423  | )
|Prepaid expenses and other assets                                          |  |                  | (1,584   | ) |             |   | (2,028   | )
|Trade accounts payable                                                     |  |                  | 647      |   |             |   | 784      |  
|Accrued salaries, wages and benefits                                       |  |                  | (1,132   | ) |             |   | 761      |  
|Other accrued expenses                                                     |  |                  | 593      |   |             |   | 1,859    |  
|Other long-term liabilities                                                |  |                  | 75       |   |             |   | (150     | )
|                                                                           |  |                  |          |   |             |   |          |  
|Net cash provided by operating activities                                  |  | $                | 9,718    |   |             | $ | 6,227    |  
|                                                                           |  |                  |          |   |             |   |          |  



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





4



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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in tables in thousands unless otherwise indicated)

For the Quarterly Period Ended May 31, 2005

1.Preparation of Interim Financial Statements



The consolidated financial statements of Hooker Furniture Corporation (referred to as Hooker or the Company) have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein.
All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with 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 consolidated financial statements and accompanying notes included in the Companys Annual Report on Form 10-K for the fiscal year ended November 30, 2004.



2.Inventories



|                        |  |             |        |                  |   |       
|----------------------- |  | ----------- | ------ | ---------------- | - | ------
|                        |  | May 31,2005 |        | November 30,2004
|Finished furniture      |  | $           | 72,826 |                  | $ | 66,922
|Furniture in process    |  |             | 1,965  |                  |   | 2,258 
|Materials and supplies  |  |             | 11,221 |                  |   | 11,879
|                        |  |             |        |                  |   |       
|Inventories at FIFO     |  |             | 86,012 |                  |   | 81,059
|Reduction to LIFO basis |  |             | 11,380 |                  |   | 11,324
|                        |  |             |        |                  |   |       
|Inventories             |  | $           | 74,632 |                  | $ | 69,735
|                        |  |             |        |                  |   |       



3. Property, Plant and Equipment



|                                   |  |             |         |                  |   |        
|---------------------------------- |  | ----------- | ------- | ---------------- | - | -------
|                                   |  | May 31,2005 |         | November 30,2004
|Buildings and land improvements    |  | $           | 45,772  |                  | $ | 44,948 
|Machinery and equipment            |  |             | 42,412  |                  |   | 42,313 
|Furniture and fixtures             |  |             | 26,080  |                  |   | 24,569 
|Other                              |  |             | 3,335   |                  |   | 3,647  
|                                   |  |             |         |                  |   |        
|Total depreciable property at cost |  |             | 117,599 |                  |   | 115,477
|Less accumulated depreciation      |  |             | 78,527  |                  |   | 73,916 
|                                   |  |             |         |                  |   |        
|Total depreciable property, net    |  |             | 39,072  |                  |   | 41,561 
|Land                               |  |             | 1,771   |                  |   | 1,771  
|Construction in progress           |  |             | 2,385   |                  |   | 810    
|                                   |  |             |         |                  |   |        
|Property, plant and equipment, net |  | $           | 43,228  |                  | $ | 44,142 
|                                   |  |             |         |                  |   |        



During the 2005 first quarter, the
Company recorded a one-time charge to depreciation expense of $520,000 ($322,000 after tax, or $0.03 per share) to correct an error in the application of GAAP related to amortizing leasehold improvements (the Company reduced the estimated useful
lives of certain leasehold improvements at its High Point, N.C. showroom to correspond with the remaining term of the related lease). The impact of this charge was immaterial to results in each of the prior periods in which the error arose, and is
expected to be immaterial to 2005 results.



5



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4. Goodwill and Intangible Assets



|                                  |  |             |       |                  |   |      
|--------------------------------- |  | ----------- | ----- | ---------------- | - | -----
|                                  |  | May 31,2005 |       | November 30,2004
|Goodwill                          |  | $           | 2,396 |                  | $ | 2,396
|                                  |  |             |       |                  |   |      
|Non-amortizable Intangible Assets |  |             |       |                  |   |      
|Trademarks and trade names        |  | $           | 4,400 |                  | $ | 4,400
|                                  |  |             |       |                  |   |      
|Amortizable Intangible Assets     |  |             |       |                  |   |      
|Non-compete agreements            |  |             | 700   |                  |   | 700  
|Less accumulated amortization     |  |             | 423   |                  |   | 335  
|                                  |  |             |       |                  |   |      
|Net carrying value                |  |             | 277   |                  |   | 365  
|                                  |  |             |       |                  |   |      
|Intangible assets                 |  | $           | 4,677 |                  | $ | 4,765
|                                  |  |             |       |                  |   |      



5. Long-Term Debt



|                                        |  |             |        |                  |   |       
|--------------------------------------- |  | ----------- | ------ | ---------------- | - | ------
|                                        |  | May 31,2005 |        | November 30,2004
|Term Loan A                             |  | $           | 14,375 |                  | $ | 15,416
|Term Loan B                             |  |             |        |                  |   | 2,150 
|Revolving credit facility               |  |             |        |                  |   | 1,000 
|Industrial revenue bonds                |  |             |        |                  |   | 4,600 
|                                        |  |             |        |                  |   |       
|Total long-term debt outstanding        |  |             | 14,375 |                  |   | 23,166
|Less current maturities                 |  |             | 2,201  |                  |   | 6,671 
|                                        |  |             |        |                  |   |       
|Long-term debt, less current maturities |  | $           | 12,174 |                  | $ | 16,495
|                                        |  |             |        |                  |   |       



In May 2005, the Company completed the
early redemption of the industrial revenue bonds for $4.6 million in cash.



6.Restructuring Charges and Assets Held for Sale



|                                                      |  |                               |      |   |                 |   |      |       |  |   |       |   |  |   |      |  
|----------------------------------------------------- |  | ----------------------------- | ---- | - | --------------- | - | ---- | ----- |  | - | ----- | - |  | - | ---- | -
|                                                      |  | Severance andRelated Benefits |      |   | AssetImpairment |   |      | Other |  |   | Total |  
|Balance at November 30, 2004                          |  | $                             | 368  |   |                 |   |      |       |  | $ | 225   |   |  | $ | 593  |  
|Restructuring charges accrued and accrual adjustments |  |                               | 176  |   |                 | $ | 180  |       |  |   | 10    |   |  |   | 366  |  
|Non-cash charges                                      |  |                               |      |   |                 |   | (180 | )     |  |   |       |   |  |   | (180 | )
|Cash payments                                         |  |                               | (199 | ) |                 |   |      |       |  |   | (166  | ) |  |   | (365 | )
|                                                      |  |                               |      |   |                 |   |      |       |  |   |       |   |  |   |      |  
|Balance at May 31, 2005                               |  | $                             | 345  |   |                 | $ |      |       |  | $ | 69    |   |  | $ | 414  |  
|                                                      |  |                               |      |   |                 |   |      |       |  |   |       |   |  |   |      |  



During the 2005 first quarter, the
Company recorded an additional pretax restructuring and asset impairment charge of $366,000 ($227,000 after tax, or $0.02 per share) related to the closing and sale of its Maiden, N.C. manufacturing facility. The charge consisted principally of
factory disassembly costs, additional health care benefits for terminated employees and an additional asset impairment charge based on the final sale and valuation of the Maiden, N.C. real property and equipment.



During the 2005 six-month period, the Company completed the sale of all of its Maiden, N.C.
real property, machinery and equipment for an aggregate consideration of $5.5 million in cash, net of selling expenses.



6



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7. Other Comprehensive Income



|                                                                        |  |                           |       |                         |      |   |       |  |      |       |  |   |      
|----------------------------------------------------------------------- |  | ------------------------- | ----- | ----------------------- | ---- | - | ----- |  | ---- | ----- |  | - | -----
|                                                                        |  | Three Months EndedMay 31, |       | Six Months EndedMay 31,
|                                                                        |  | 2005                      |       |                         | 2004 |   | 2005  |  | 2004
|Net income                                                              |  | $                         | 4,859 |                         |      | $ | 5,514 |  | $    | 7,809 |  | $ | 9,554
|                                                                        |  |                           |       |                         |      |   |       |  |      |       |  |   |      
|Gain (loss) on interest rate swaps                                      |  |                           | (84   | )                       |      |   | 586   |  |      | 41    |  |   | 122  
|Portion of swap agreements fair value reclassified to interest expense |  |                           | 243   |                         |      |   | 157   |  |      | 409   |  |   | 481  
|                                                                        |  |                           |       |                         |      |   |       |  |      |       |  |   |      
|Other comprehensive gain before tax                                     |  |                           | 159   |                         |      |   | 743   |  |      | 450   |  |   | 603  
|Income tax expense                                                      |  |                           | 60    |                         |      |   | 282   |  |      | 171   |  |   | 229  
|                                                                        |  |                           |       |                         |      |   |       |  |      |       |  |   |      
|Other comprehensive income, net of tax                                  |  |                           | 99    |                         |      |   | 461   |  |      | 279   |  |   | 374  
|                                                                        |  |                           |       |                         |      |   |       |  |      |       |  |   |      
|Comprehensive income                                                    |  | $                         | 4,958 |                         |      | $ | 5,975 |  | $    | 8,088 |  | $ | 9,928
|                                                                        |  |                           |       |                         |      |   |       |  |      |       |  |   |      



In connection with the redemption of
the industrial revenue bonds, the Company decided not to terminate the related swap agreement. Consequently, that swap agreement is no longer effective as a cash flow hedge. Accordingly, the Company reclassified the fair market value of that swap
agreement (a pretax loss of $103,000) to interest expense in the second quarter of 2005. As a result, the portion of the swap agreements fair value reclassified to interest expense includes a loss of $103,000 for the 2005 three-month period, a
gain of $14,000 for the 2004 three-month period, a loss of $100,000 for the 2005 six-month period and a gain of $16,000 for the 2004 six-month period related to the ineffective portion of that interest rate swap agreement.



8. Employee Stock Ownership Plan



The Company records non-cash Employee Stock Ownership Plan (ESOP) cost for the
number of shares that it commits to release to eligible employees at the average closing market price of the Companys common stock during each period. The number of shares the Company commits to release is based on annual principal and
interest payments made on the loan between the Company and the ESOP trust. Unearned ESOP shares in shareholders equity is reduced by the Companys aggregate cost basis in the shares committed to be released. Those shares have
a cost basis of $6.25 per share. Common stock is increased by the aggregate difference between the average market price and the cost basis of those shares.



The Company committed to release approximately:



| |  |  | 43,600 shares during the second quarter of fiscal 2005, having an aggregate market value of $821,000, or $18.84 per share;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | 44,860 shares during the 2004 second quarter having an aggregate market value of $1.0 million, or $22.64 per share;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | 81,650 shares during the 2005 first half having an aggregate fair market value of $1.7 million, or $21.04 per share; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | 89,700 shares during the 2004 six-month period having an aggregate market value of $2.0 million, or $22.63 per share.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



The cost of the plan is allocated to cost of goods sold and selling and administrative
expenses based on employee compensation. Substantially all employees participate in the ESOP.



9. Common Stock



In April 2005, the
Company repurchased 50,000 shares of common stock for $930,000 in cash, or $18.60 per share, under a Board-authorized stock repurchase program.



7



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Item 2. Managements Discussion and Analysis



|Overview | 
|-------- | 



The Companys results of operations during the 2005 second quarter were principally impacted by the following factors:



| |  |  | A 23.0% decline in net sales for domestically produced wood furniture compared to the 2004 second quarter, resulting from lower incoming order rates and higher sales discounting.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A 16.4% increase in net sales for upholstered furniture compared to the 2004 second quarter, driven by expanded product lines and an expanded sales force and distribution network.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A 2.2% increase in net sales for imported wood and metal furniture compared to the 2004 second quarter, resulting from higher average selling prices partially offset by slightly
lower unit volume.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A slight decrease in gross profit margin to 27.3% compared to 27.9% in the 2004 second quarter as a decline in gross profit margin for domestically produced wood furniture offset
increases in gross profit margin for imported wood and metal furniture and for upholstery.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A slight decrease in selling and administrative expenses. As a percent of net sales, these expenses increased slightly to 18.0% in the 2005 second quarter versus 17.7% in the 2004
period through the effect of the decline in net sales.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Results of Operations



The following table sets forth the
percentage relationship to net sales of certain items included in the statements of income:



|                                                  |  |                           |   |  |                          |   |  |        |   |  |        |  
|------------------------------------------------- |  | ------------------------- | - |  | ------------------------ | - |  | ------ | - |  | ------ | -
|                                                  |  | Three MonthsEnded May 31, |   |  | Six Months Ended May 31, |  
|                                                  |  | 2005                      |   |  | 2004                     |   |  | 2005   |   |  | 2004   |  
|Net sales                                         |  | 100.00                    | % |  | 100.00                   | % |  | 100.00 | % |  | 100.00 | %
|Cost of sales                                     |  | 72.67                     |   |  | 72.14                    |   |  | 73.31  |   |  | 72.96  |  
|                                                  |  |                           |   |  |                          |   |  |        |   |  |        |  
|Gross profit                                      |  | 27.33                     |   |  | 27.86                    |   |  | 26.69  |   |  | 27.04  |  
|Selling and administrative expenses               |  | 17.97                     |   |  | 17.67                    |   |  | 18.56  |   |  | 17.52  |  
|Restructuring and related asset impairment charge |  |                           |   |  |                          |   |  | 0.22   |   |  |        |  
|                                                  |  |                           |   |  |                          |   |  |        |   |  |        |  
|Operating income                                  |  | 9.36                      |   |  | 10.19                    |   |  | 7.91   |   |  | 9.52   |  
|Other income, net                                 |  | 0.18                      |   |  | 0.09                     |   |  | 0.17   |   |  | 0.15   |  
|                                                  |  |                           |   |  |                          |   |  |        |   |  |        |  
|Income before interest and income taxes           |  | 9.54                      |   |  | 10.28                    |   |  | 8.08   |   |  | 9.67   |  
|Interest expense                                  |  | 0.49                      |   |  | 0.56                     |   |  | 0.46   |   |  | 0.59   |  
|                                                  |  |                           |   |  |                          |   |  |        |   |  |        |  
|Income before income taxes                        |  | 9.05                      |   |  | 9.72                     |   |  | 7.62   |   |  | 9.08   |  
|Income taxes                                      |  | 3.57                      |   |  | 3.69                     |   |  | 3.01   |   |  | 3.45   |  
|                                                  |  |                           |   |  |                          |   |  |        |   |  |        |  
|Net income                                        |  | 5.48                      | % |  | 6.03                     | % |  | 4.61   | % |  | 5.63   | %
|                                                  |  |                           |   |  |                          |   |  |        |   |  |        |  



Net sales for the 2005 second quarter
of $88.7 million declined $2.8 million, or 3.1%, compared to 2004 record second quarter net sales of $91.5 million. During the second quarter, sales of Bradington-Young upholstered leather furniture increased $2.5 million, or 16.4%, to $17.8 million
from $15.3 million during the prior year period due to higher unit volume.



8



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Sales of Hookers imported wood and metal furniture increased $1.1 million, or 2.2%, to $49.6 million in the 2005
second quarter from $48.5 million in the prior year second quarter as a result of higher average selling prices (resulting principally from the mix of products shipped) partially offset by lower unit volume. The unit volume decline during the 2005
second quarter was due to a temporary inventory imbalance, as orders (including new product orders) and backlog for imported products increased during the quarter. While inventory levels increased during the 2005 second quarter, principally to
support the Companys multi-category whole-home collections, the Company is out of stock on certain imported products offered in these collections. These inventory stock-outs have delayed fulfillment of orders for these collections.
This situation should be rectified during the 2005 second half, which should enable the Company to fill orders currently in backlog.



These sales gains in upholstered and imported furniture were more than offset by a decline in net sales of the Companys domestically produced wood furniture of $6.4
million or 23.0%, to $21.3 million in the 2005 second quarter from $27.7 million in the prior year period due to lower unit volume.



For the 2005 six-month period, the Company reported net sales of $169.2 million, a decrease of $488,000 or 0.3%, compared to $169.7 million in the 2004 six-month period.
Shipments of Bradington-Young upholstered furniture increased $6.2 million or 22.1%, to $33.7 million during the first six months of 2005 compared to $27.5 million during the prior year period due to higher unit volume. Imported wood furniture
shipments increased $5.9 million, or 6.8%, to $93.0 million in the 2005 six-month period compared to $87.1 million in the 2004 six-month period. The increase in net sales of imported wood furniture for the 2005 six-month period compared to the same
2004 period is due to higher unit volume and higher average selling prices. Shipments of the Companys domestically produced wood furniture declined $12.5 million, or 22.7%, to $42.6 million during the 2005 six-month period from $55.1 million
in the same 2004 period, principally due to lower unit volume.



For the 2005
second quarter and six months compared with the same 2004 periods, average selling prices increased for imported wood and metal products due to the mix of products shipped. For domestically manufactured wood products, average selling prices
increased for the 2005 second quarter due to the mix of products shipped. Average selling prices for domestic products declined for the 2005 six-month period principally due to higher sales discounts. Average selling prices declined for upholstered
products for the 2005 second quarter and six months due to the mix of products shipped. Overall, average selling prices increased during both the 2005 second quarter and six-month period compared to the same 2004 periods.



Gross profit margin decreased to 27.3% of net sales in the 2005 second quarter compared to
27.9% in the 2004 second quarterly period, as a result of a decline in gross profit margin for domestically produced wood furniture and upholstered furniture, partially offset by an increase in gross profit margin for imported wood and metal
furniture. For the 2005 fiscal year-to-date period, gross profit margin decreased to 26.7% of net sales compared to 27.0% in the comparative 2004 period, as a result of a decline in gross profit margin for domestically produced wood furniture,
partially offset by gross profit margin improvements for upholstered and imported wood and metal furniture.



The 2005 second quarter and six month gross profit margin improvement for imported wood and metal furniture versus the comparable prior year period was principally a result of a decline in the delivered cost of those
products as a percentage of net sales. During the 2005 three and six-month periods, domestic wood furniture gross margin has been impacted by higher discounting, principally for the sale of discontinued and slow moving products.
Bradington-Youngs gross profit margin improvement for the



9



---

2005 six-month period versus the same period a year ago was driven primarily by lower labor and overhead costs as a
percentage of net sales resulting from efficiencies gained by operating at higher production levels, partially offset by higher material costs. Higher material costs, resulting from the mix of products shipped, led to a decline in the 2005 second
quarter gross margin for upholstered products.



Selling and administrative
expenses decreased $227,000 to $15.93 million in the second quarter of 2005 from $16.16 million in the 2004 period. The decline in the 2005 second quarter is principally due to lower selling costs resulting from lower net sales (principally
commissions and warehousing and distribution expenses). As a percentage of net sales, selling and administrative expenses in the 2005 second quarter increased slightly to 18.0% versus 17.7% in the 2004 period through the effect of lower net sales in
the 2005 period.



For the 2005 six-month period, selling and administrative
expenses increased $1.7 million to $31.4 million compared with $29.7 million for the same 2004 period. As a percentage of net sales, these expenses increase to 18.6% from 17.5% in the same prior year period. The year-to-date 2005 increase is
principally due to the following factors:



| |  | Increased trade advertising costs principally related to the Companys introduction of multi-category whole home collections.
|- |  | -------------------------------------------------------------------------------------------------------------------------------



| |  | Higher information technology costs principally to support operations such as the warehouse located in China (owned and operated by vendors) and the new initiatives in supply chain
management.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | A one-time charge to depreciation expense of $520,000 ($322,000 after tax, or $0.03 per share) to correct an error in the application of GAAP related to amortizing leasehold
improvements (the Company reduced the estimated useful lives of certain leasehold improvements at its High Point, N.C. showroom to correspond with the remaining term of the related lease). The impact of this charge was immaterial to results in each
of the prior periods in which the error arose, and is expected to be immaterial to 2005 results.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | An increase in the cost of complying with Sarbanes-Oxley regulations during the first six months of 2005 compared with the prior year period. These costs declined in the 2005 second
quarter versus the same 2004 period. The Company expects these compliance costs to continue declining during the 2005 second half compared to the same 2004 second half.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The non-cash cost of the Companys ESOP for the 2005 second quarter decreased $195,000 to $821,000 compared to $1.0 million in the
second quarter of 2004. For the 2005 six-month period non-cash ESOP cost decreased $312,000 to $1.7 million compared to $2.0 million in the same 2004 period. Non-cash ESOP cost decreased in the 2005 periods compared to the 2004 periods principally
due to declines in the market price of the Companys common stock. The Company records non-cash ESOP cost for the number of shares that it commits to release to eligible employees at the average closing market price of the Companys common
stock during each respective period.



The Company committed to release
approximately:



| |  |  | 43,600 shares during the second quarter of fiscal 2005, having an aggregate market value of $821,000, or $18.84 per share;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | 44,860 shares during the 2004 second quarter having an aggregate market value of $1.0 million, or $22.64 per share;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | 81,650 shares during the 2005 first half having an aggregate fair market value of $1.7 million, or $21.04 per share; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



10



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| |  |  | 89,700 shares during the 2004 six-month period having an aggregate market value of $2.0 million, or $22.63 per share.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



The cost of the plan is allocated to cost of goods sold and selling and administrative
expenses based on employee compensation.



During the 2005 first quarter, the
Company recorded an additional pretax restructuring and asset impairment charge of $366,000 ($227,000 after tax, or $0.02 per share) related to the closing and sale of its Maiden, N.C. manufacturing facility. The charge consisted principally of
factory disassembly costs, additional health care benefits for terminated employees and an additional asset impairment charge based on the final sale and valuation of the Maiden, N.C. real property and equipment.



Principally as a result of lower gross margin, operating income as a percentage of net sales
declined to 9.4% in the 2005 quarterly period, compared to 10.2% for the 2004 second quarter. For the year-to-date period, operating income margin declined to 7.9% from 9.5% in the comparable 2004 period principally as a result of higher selling and
administrative expenses as a percentage of sales, lower gross margin and the additional restructuring charge.



Other income, net increased $71,000, or 84.5%, to $155,000 in the 2005 three-month period from $84,000 in the same 2004 period and increased $36,000, or 14.3%, to $288,000 in the 2005 six-month period from $252,000 in
the 2004 six-month period. These increases are due to increased interest income.



Interest expense decreased $83,000 to $434,000 during the second quarter of 2005 from $517,000 in the 2004 period. For the 2005 six-month period, interest expense decreased $237,000 to $773,000 from $1.0 million in the same 2004 period. The
decreases in the 2005 periods are principally due to lower debt levels resulting from principal repayments, partially offset by higher weighted average interest rates on outstanding borrowings.



The Companys effective tax rate increased to 39.5% for both 2005 periods compared to
38.0% in the 2004 periods. The increase is principally attributed to the estimated impact of non-cash ESOP cost for 2005, which is expected to constitute a higher proportion of income before income taxes than in 2004.



Second quarter 2005 net income declined to $4.9 million, or $0.41 per share, compared to $5.5
million, or $0.47 per share, in the comparable 2004 period. As a percent of net sales, net income declined to 5.5% in the 2005 quarterly period, compared to 6.0% for the 2004 second quarter. During the 2005 six months, net income fell $1.8 million,
or $0.16 per share, to $7.8 million, or $0.66 per share, from $9.6 million, or $0.82 per share, in the same prior year period. As a percent of net sales, net income declined to 4.6% in the 2005 six months, compared to 5.6% for the 2004 six months.



Outlook



Industry-wide, lethargic retail business conditions persisted throughout the second quarter. As a result, the Company posted its first
quarterly sales decline following thirteen consecutive quarters of year over year sales growth. The Company expects continuing strength in demand for its imported products, a slowdown in upholstery orders in a stagnating retail environment, and
continuing challenges for domestic wood furniture orders. The Company continues to manage work and production schedules for its factories and to evaluate its domestic wood furniture manufacturing capacity in order to match demand.



11



---

In order to drive additional new business for wood, metal and upholstered furniture, the Company has implemented the
following:



| |  |  | The addition of new product categories, such as game tables, as well as multi-category and blended whole home collections that leverage the Companys product
development expertise by combining its domestic manufacturing strength and skill with the additional value and variety offered by imported products;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The continued introduction of new technology-taming innovations in the home entertainment and home office categories, produced both domestically and offshore;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The upgrade of wood finishes and incorporation of additional metals, glass and fixtures, that provide a more sophisticated look and feel to enhance value and appeal to consumers;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanded trade advertising and the addition of special promotional events;
| | - |  | --------------------------------------------------------------------------



| |  |  | More product display space with its existing dealers through store within a store display galleries dedicated exclusively to multi-category and whole-home collections
under the Hooker and Bradington-Young brands; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The utilization of new channels of distribution, such as electronics retailers.
| | - |  | -------------------------------------------------------------------------------



Earlier this year, Hooker Furniture announced the creation of a new department of supply chain planning and management, and is continuing to
make key investments to refine its business in the areas of logistics, personnel and systems. The Company expects that these initiatives will improve inventory turnover and logistics efficiency, and will position it to provide significant
enhancements in inventory availability and customer service at lower cost.



The
improved supply chain management initiative also will help Hooker Furniture execute its long term growth strategy by expanding from its historical niche strengths in home entertainment, home office and occasional furniture to expanded offerings in
multi-category and whole-home collections. These collections are requiring the Company to better coordinate availability of inventory.



New product introductions at the April 2005 International Home Furnishings Market were very well accepted, and as a result the Companys backlog of orders has grown.
However, the Companys outlook entering the third quarter is mixed due to the uncertainties of inconsistent business at retail. The Company expects net sales for the 2005 third quarter to decline 3-7% versus the prior year quarter.



Financial Condition, Liquidity and Capital Resources



Balance Sheet and Working Capital



As of May 31, 2005, assets totaled $187.4 million, decreasing from $188.9 million at
November 30, 2004, principally as a result of the sale of the Maiden, N.C. manufacturing facility and lower accounts receivable. Shareholders equity at May 31, 2005 was $143.8 million, compared to $136.6 million at November 30, 2004. The
Companys long-term debt, including current maturities, was $14.4 million at May 31, 2005, decreasing from $23.2 million at November 30, 2004 as a result of the early redemption of the industrial revenue bonds ($4.6 million) and scheduled debt
repayments.



Working capital increased $2.2 million, or 2.2%, to $99.3 million
as of May 31, 2005, from $97.1 million at the end of fiscal 2004, reflecting a $4.5 million decrease in current liabilities partially offset by a $2.3 million decrease in current assets. The decline in current liabilities is due to decreases of $4.5
million in current maturities of long-term debt and $1.1 million in accrued salaries, wages and benefits, partially offset by increases in trade accounts payable and accrued expenses. The decline in current assets is



12



---

principally attributed to decreases of $5.4 million in assets held for sale and $2.7 million in trade accounts
receivable, partially offset by a $4.9 million increase in inventories and a $1.2 million increase in cash and cash equivalents. Inventories increased 7.0%, to $74.6 million as of May 31, 2005 from $69.7 million at November 30, 2004, principally to
support expanded product offerings in multi-category collections.



Cash Flows  Operating, Investing and Financing Activities



During the six months ended May 31, 2005, cash generated from operations ($9.7 million) and proceeds from the sale of property and equipment ($5.5 million), funded the repayment of long-term debt ($8.8 million),
capital expenditures ($2.7 million), dividend payments ($1.6 million), an increase in available cash and cash equivalents ($1.2 million) and the repurchase of common stock ($930,000).



During the six months ended May 31, 2004, cash generated from operations ($6.2 million) and the proceeds from the sale of property and
equipment ($912,000), funded the repayment of long-term debt ($3.4 million), dividend payments ($1.4 million), capital expenditures ($1.4 million) and an increase in available cash and cash equivalents ($957,000).



Cash generated from operations of $9.7 million during the 2005 six-month period increased
$3.5 million from $6.2 million in the 2004 period. The increase was principally due to higher payments received from customers and lower income tax payments. Cash received from customers increased $2.3 million in 2005 compared to 2004. Trade
accounts receivable (excluding the allowance for doubtful accounts) declined $2.4 million, principally as a result of increased collections from customers. Payments to suppliers and employees increased $478,000, principally to fund higher selling
and administrative expenses compared to the prior year. Tax payments declined $1.7 million in the 2005 period due to lower levels of taxable income than in the 2004 period.



The Company generated cash of $2.8 million from investing activities during the 2005 six months as a result of the sale of the Maiden, N.C.
property for an aggregate consideration of $5.5 million. Purchases of plant, equipment and other assets to maintain and enhance the Companys facilities and business operating systems increased $1.3 million to $2.7 million in the 2005 period
compared with $1.4 million in the same 2004 period.



The Company used cash of
$11.4 million for financing activities during the 2005 six months compared to using cash of $4.8 million for financing activities in the 2004 period. During 2005, the Company repaid long-term debt in the amount of $8.8 million (including the early
redemption of the industrial revenue bonds for $4.6 million in cash), paid cash dividends of $1.6 million and repurchased 50,000 shares of common stock for $930,000, or $18.60 per share. During 2004, the Company repaid long-term debt in the amount
of $3.4 million and paid dividends of $1.4 million.



Swap Agreements



The aggregate fair market value of the
Companys swap agreements decreases when interest rates decline and increases when interest rates rise. Overall, interest rates have declined since the inception of the Companys swap agreements but have increased since May 2003 through
the 2005 second quarter. The decrease in the aggregate fair market value of the effective portion of these agreements of $480,000 after tax ($774,000 pretax) as of May 31, 2005, and $759,000 after tax ($1.2 million pretax) as of November 30, 2004,
is reflected under the caption accumulated other comprehensive loss in the consolidated balance sheets. Approximately $359,000 of the aggregate pretax decrease in fair market value of the agreements is expected to be reclassified into
interest expense during the next twelve months. In connection with the



13



---

redemption of the industrial revenue bonds, the Company decided not to terminate the related swap agreement.
Consequently, that swap agreement is no longer effective as a cash flow hedge. Accordingly, the Company reclassified the fair market value of that swap agreement (a pretax loss of $103,000) to interest expense in the 2005 three-month period. As a
result, the portion of the swap agreements fair value reclassified to interest expense includes a loss of $103,000 for the 2005 three-month period, a gain of $14,000 for the 2004 three-month period, a loss of $100,000 for the 2005 six-month
period and a gain of $16,000 for the 2004 six-month period related to the ineffective portion of that interest rate swap agreement.



Debt Covenant Compliance



The credit facility for the Companys revolving credit line and Term Loan A contains, among other things, 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 May 31, 2005.



Liquidity and Capital Expenditures



As of May 31, 2005, the Company had $13.6 million available under its revolving credit line
to fund working capital needs and $18.9 million available under additional committed lines of credit to support the issuance of letters of credit. The Company believes it has the financial resources (including available cash, expected cash flow from
operations, and lines of credit) needed to meet business requirements for the foreseeable future, including capital expenditures, working capital, purchases under the stock repurchase program, and dividends on the Companys common stock. Cash
flow from operations is highly dependent on order rates and the Companys operating performance. The Company expects to spend an aggregate of $1.8 to $2.3 million in capital expenditures during the remainder of fiscal 2005 to maintain and
enhance its facilities and operating systems, principally supporting growth in imported products and logistics.



In May 2005, the Company completed the early redemption of the industrial revenue bonds for $4.6 million in cash. Prior to this redemption, scheduled principal payments
on these bonds were $2.4 million on November 1, 2005, and $2.2 million on November 1, 2006.



Dividends and Purchases of Common Stock



At its June 29th, 2005 meeting, the Board of Directors of the Company declared a cash dividend of $0.07 per share, payable on August 31, 2005 to shareholders of record
August 16, 2005. In April 2005, the Company repurchased 50,000 shares of its common stock under a Board-authorized stock repurchase program for an aggregate consideration of $930,000, or $18.60 per share.



Forward-Looking Statements



Certain statements made in this report are not based on historical facts, but are
forward-looking statements. These statements can be identified by the use of forward-looking terminology such as believes, expects, projects, may, will, should,
would, or anticipates, or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy. These statements reflect the Companys reasonable judgment with respect to future
events and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to:



| |  |  | Domestic and international competition in the furniture industry, including price competition from lower-priced imports;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



14



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| |  |  | General economic or business conditions, both domestically and internationally;
| | - |  | -------------------------------------------------------------------------------



| |  |  | The cyclical nature of the furniture industry;
| | - |  | ----------------------------------------------



| |  |  | Achieving and managing growth and change, and the risks associated with acquisitions, restructurings, strategic alliances and international operations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Risks associated with manufacturing operations, such as fluctuations in the price of key raw materials, including lumber and leather, and environmental matters;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Supply, transportation and distribution disruptions or delays affecting imported and domestic 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of the Companys imported products;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Risks associated with distribution through retailers, such as non-binding dealership arrangements; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | Capital requirements and costs.
| | - |  | -------------------------------



Item 3. Quantitative and Qualitative Disclosures About Market Risk



The Company is exposed to market risk from changes in interest rates and foreign currency exchange rates, which could impact its results of operations and financial
condition. The Company manages its exposure to these risks through its normal operating and financing activities and through the use of interest rate swap agreements with respect to interest rates.



The Companys obligations under its lines of credit and term loans all bear interest at
variable rates. The Companys outstanding debt (including current maturities) as of May 31, 2005, amounted to $14.4 million under Term Loan A. As of May 31, 2005, no balance was outstanding under the Companys revolving credit line. The
Company has entered into an interest rate swap agreement that, in effect, fixes the rate of interest on Term Loan A at 4.1% through 2010 (7.4% when the effect of a previously terminated swap agreement is taken into account).



In connection with the redemption of the industrial revenue bonds, the Company decided not to
terminate the related swap agreement. Consequently, the future cash flows related to this swap agreement will continue to fluctuate with changes in the benchmark interest rate without an offsetting fluctuation in the interest that would have been
paid on the underlying variable interest rate debt. The Company will continue to consider the early termination of this swap agreement, which is scheduled to terminate November 1, 2006, in light of changes in the benchmark interest rate.



15



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A fluctuation in market interest rates of one percentage point (or 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 agreements see Swap Agreements in Managements Discussion and Analysis in the Companys Annual Report on Form
10-K and this Quarterly Report.



For imported products, the Company generally
negotiates firm pricing with its foreign suppliers, for periods typically of up to one year. The Company accepts the exposure to exchange rate movements beyond these negotiated periods without using derivative financial instruments to manage this
risk. The majority of the Companys imports are purchased from countries such as China, whose currencies have been pegged to the U.S. Dollar, negating much of the Companys exposure to foreign currency fluctuation. There is continued
market speculation that China may take steps to adopt a market-oriented currency and allow the Yuan to fluctuate in value relative to the U.S. Dollar.



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 cost of the
Companys imported products and adversely impact sales volume and profit margin during affected periods. However, the Company generally expects to reflect substantially all of the effect of any price changes from suppliers in the price it
charges for its imported products.



Item 4. Controls and Procedures



Evaluation of Disclosure Controls and Procedures



Based on their most recent review, which was made as of the end of the Companys fiscal
quarter ended May 31, 2005, the Companys principal executive officer and principal financial officer have concluded that the Companys disclosure controls and procedures are effective 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 for the Companys quarter ended May 31, 2005, that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial
reporting.





16



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PART II. OTHER INFORMATION



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



Purchases of Equity Securities by the Issuer or Affiliated Purchasers



The following table provides information about common stock repurchases by or on behalf of the Company during the quarter ended May 31,
2005:



|                         |  |                               |  |                           |       |                                                                    |        |                                                                        |   |            
|------------------------ |  | ----------------------------- |  | ------------------------- | ----- | ------------------------------------------------------------------ | ------ | ---------------------------------------------------------------------- | - | -----------
|                         |  | TotalNumber ofSharesPurchased |  | AveragePricePaid perShare |       | Total Number ofShares Purchasedas Part of PubliclyAnnouncedProgram |        | Maximum DollarValue of Shares thatMay Yet BePurchased Under theProgram
|March 1  March 31, 2005 |  |                               |  |                           |       |                                                                    |        |                                                                        |   |            
|April 1  April 30, 2005 |  | 50,000                        |  | $                         | 18.60 |                                                                    | 50,000 |                                                                        | $ | 1.7 million
|May 1  May 31, 2005     |  |                               |  |                           |       |                                                                    |        |                                                                        |   |            
|Total                    |  | 50,000                        |  | $                         | 18.60 |                                                                    | 50,000 |                                                                        | $ | 1.7 million



In June 2001, the Company announced
that its board of directors had authorized the repurchase of up to $3.0 million of the Companys common stock and announced an increase in that authorization of $2.2 million in October 2001, for an aggregate authorization of $5.2 million. There
is no expiration date for this authorization. Repurchases may be made from time to time in the open market, or in privately negotiated transactions, at prevailing market prices that the Company deems appropriate. Through May 31, 2005, the Company
had repurchased approximately 634,000 shares at a total cost of $3.4 million or an average of $5.42 per share. Based on the market value of the common stock as of May 31, 2005, the remaining $1.7 million of the authorization would allow the Company
to repurchase approximately 117,000 shares, or 0.8%, of the 14.4 million shares outstanding, or 1.1% of the Companys outstanding shares excluding the 3.9 million shares held by the ESOP.



17



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



On March 30, 2005 the Company held its Annual Meeting of Shareholders. At the meeting, the
following business was transacted:



The following directors of the Company
were elected for a term of one year. The votes cast for the election of each director were:



|                           |  |            |  |          
|-------------------------- |  | ---------- |  | ---------
|Director                   |  | For        |  | Withheld 
|Paul B. Toms, Jr.          |  | 13,321,476 |  | 121,467  
|Douglas C. Williams        |  | 13,321,034 |  | 121,909  
|W. Christopher Beeler, Jr. |  | 12,947,556 |  | 495,387  
|John L. Gregory, III       |  | 10,374,166 |  | 3,068,777
|Mark F. Schreiber          |  | 13,328,378 |  | 114,565  
|Robert A. Taylor           |  | 13,301,027 |  | 141,916  
|L. Dudley Walker           |  | 13,303,400 |  | 139,543  
|Henry G. Williamson, Jr.   |  | 13,406,058 |  | 36,885   



The shareholders approved the Hooker
Furniture Corporation 2005 Stock Incentive Plan. The votes cast were:



|                 |  |                   |  |                 
|---------------- |  | ----------------- |  | ----------------
|For  11,266,223 |  | Against  548,446 |  | Abstain  10,349





18



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Item 5. Other Information



EBIT and EBITDA



Set forth below is the Companys earnings before interest and income taxes, or EBIT, and earnings before interest, income taxes,
depreciation and amortization, or EBITDA, for the three and six-month periods ended May 31, 2005 and May 31, 2004. This information has been derived from the Companys unaudited consolidated financial statements. For each period presented, EBIT
and EBITDA have been reconciled to the Companys net cash provided by operating activities. The Company provides these non-GAAP measures because it believes they are widely accepted financial indicators of the Companys liquidity. This
information should be read in conjunction with the consolidated financial statements, including the related Notes, and Managements Discussion and Analysis included elsewhere in this quarterly report on Form 10-Q and in the Companys
annual report on Form 10-K for the year ended November 30, 2004.



|                                                                                |  |                                    |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                |  | For the Three Months Ended May 31, |        |   | For the Six MonthsEnded May 31, |  
|                                                                                |  | 2005                               |        |   | 2004                            |   |        | 2005 |  |   | 2004   |  
|Net cash provided by operating activities                                       |  | $                                  | 226    |   |                                 | $ | 1,681  |      |  | $ | 9,718  |   |  | $ | 6,227  |  
|Net increase in assets and liabilities                                          |  |                                    | 7,069  |   |                                 |   | 6,951  |      |  |   | 4,053  |   |  |   | 9,562  |  
|Gain on disposal of property                                                    |  |                                    | 14     |   |                                 |   |        |      |  |   | 15     |   |  |   | 11     |  
|Restructuring and related asset impairment charge                               |  |                                    |        |   |                                 |   |        |      |  |   | (366   | ) |  |   |        |  
|Provision for doubtful accounts                                                 |  |                                    | (61    | ) |                                 |   | (158   | )    |  |   | (275   | ) |  |   | (378   | )
|Deferred taxes                                                                  |  |                                    | (74    | ) |                                 |   |        |      |  |   | 52     |   |  |   |        |  
|Non-cash ESOP cost                                                              |  |                                    | (821   | ) |                                 |   | (1,015 | )    |  |   | (1,718 | ) |  |   | (2,030 | )
|Depreciation and amortization                                                   |  |                                    | (1,494 | ) |                                 |   | (1,945 | )    |  |   | (3,670 | ) |  |   | (3,838 | )
|                                                                                |  |                                    |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                      |  |                                    | 4,859  |   |                                 |   | 5,514  |      |  |   | 7,809  |   |  |   | 9,554  |  
|Income taxes                                                                    |  |                                    | 3,167  |   |                                 |   | 3,378  |      |  |   | 5,090  |   |  |   | 5,853  |  
|Interest expense                                                                |  |                                    | 434    |   |                                 |   | 517    |      |  |   | 773    |   |  |   | 1,010  |  
|                                                                                |  |                                    |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Earnings before interest and income taxes (EBIT)                                |  |                                    | 8,460  |   |                                 |   | 9,409  |      |  |   | 13,672 |   |  |   | 16,417 |  
|Depreciation and amortization                                                   |  |                                    | 1,494  |   |                                 |   | 1,945  |      |  |   | 3,670  |   |  |   | 3,838  |  
|                                                                                |  |                                    |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Earnings before interest, income taxes, depreciation, and amortization (EBITDA) |  | $                                  | 9,954  |   |                                 | $ | 11,354 |      |  | $ | 17,342 |   |  | $ | 20,255 |  
|                                                                                |  |                                    |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  



19



---

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 3.3 to the Companys Registration Statement on Form 10 (SEC File No. 000-25349))                                                              
|      | 
|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)                                                                                                                                                                   
|      | 
|31.1* |  | Rule 13a-14(a) Certification of the Companys principal executive officer                                                                                                                                                      
|      | 
|31.2* |  | Rule 13a-14(a) Certification of the Companys principal financial officer                                                                                                                                                      
|      | 
|32.1* |  | Rule 13a-14(b) Certification of the Companys principal executive officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                              
|      | 
|32.2* |  | Rule 13a-14(b) Certification of the Companys 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 CORPORATION
|                    |  |                             
|Date: July 11, 2005 |  | By:                          |  | /s/ R. Gary Armbrister        
|                    |  |                              |  | R. Gary Armbrister            
|                    |  |                              |  | Chief Accounting Officer      
|                    |  |                              |  | (Principal Accounting Officer)



21



---

Exhibit Index



|            |  |                                                                                                                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                    
|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 3.3 to the Companys Registration Statement on Form 10 (SEC File No. 000-25349))                                                              
|            | 
|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)                                                                                                                                                                   
|            | 
|31.1*       |  | Rule 13a-14(a) Certification of the Companys principal executive officer                                                                                                                                                      
|            | 
|31.2*       |  | Rule 13a-14(a) Certification of the Companys principal financial officer                                                                                                                                                      
|            | 
|32.1*       |  | Rule 13a-14(b) Certification of the Companys principal executive officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                              
|            | 
|32.2*       |  | Rule 13a-14(b) Certification of the Companys 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
|- | --------------