United
States


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549


Form
10-K


Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934


For the
fiscal year ended February 1,
2009





Commission
file number000-25349


HOOKER
FURNITURE CORPORATION


(Exact
name of registrant as specified in its charter)





Virginia
              54-0251350(State or other
      jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification
Number)





440
East Commonwealth Boulevard, Martinsville, VA  24112


(Address
of principal executive offices, Zip Code)





(276)
632-0459


(Registrant’s
telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Act:





Name
      of Each ExchangeTitle of Each Class
                    
                    on Which RegisteredCommon
      Stock, no par value
                    
                    NASDAQ
      Global Select
Market





Securities
registered pursuant to Section 12(g) of the Act:None





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.  Yes ̈Nox





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes  ̈No
x





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 xNo
 ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  ̈





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


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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes (   ) No (X)





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter: $147.1 million.





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock as of April 16, 2009:





Common
      stock, no par value
              10,771,912(Class
      of common stock)
              (Number
      of shares)





Documents
incorporated by reference:  Portions of the registrant’s definitive
Proxy Statement for its Annual Meeting of Shareholders scheduled to be held June
9, 2009 are incorporated by reference into Part III.





Hooker
Furniture Corporation





TABLE
OF CONTENTS





PagePart
      IItem
      1.
                          Business
                          3Item
      1A.
                          Risk
      Factors
                          11Item
      1B.
                          Unresolved
      Staff Comments
                          13Item
      2.
                          Properties
                          14Item
      3.
                          Legal
      Proceedings
                          14Item
      4.
                          Submission
      of Matters to a Vote of Security Holders
                          14Executive
      Officers of Hooker Furniture Corporation
                          15Part
      IIItem
      5.
                          Market
      for Registrant’s Common Equity, Related Shareholder Matters and Issuer
      Purchases of Equity Securities
                          16Item
      6.
                          Selected
      Financial Data
                          18Item
      7.
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          19Item
      7A.
                          Quantitative
      and Qualitative Disclosures about Market Risk
                          32Item
      8.
                          Financial
      Statements and Supplementary Data
                          32Item
      9.
                          Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                          33Item
      9A.
                          Controls
      and Procedures
                          33Item
      9B.
                          Other
      Information
                          33Part
      IIIItem
      10.
                          Directors,
      Executive Officers and Corporate Governance
                          34Item
      11.
                          Executive
      Compensation
                          34Item
      12.
                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters
                          34Item
      13.
                          Certain
      Relationships and Related Transactions, and Director
      Independence
                          34Item
      14.
                          Principal
      Accountant Fees and Services
                          34Part
      IVItem
      15.
                          Exhibits
      and Financial Statement Schedules
                          35Signatures
                          37Index
      to Consolidated Financial Statements
                          F-1




2


Hooker
Furniture Corporation


Part
I








ITEM
      1.
            BUSINESS





General





Incorporated
in Virginia in 1924 and celebrating our 85th
anniversary in 2009, Hooker Furniture Corporation (“Company”, “we”, “our”) is
ranked among the nation’s top 10 largest publicly traded furniture sources,
based on 2007 shipments to U.S. retailers, according to Furniture/Today, a leading
trade publication.  We are a key resource for residential wood, metal
and upholstered furniture.  Our major wood furniture product
categories include home entertainment, home office, accent, dining, bedroom and
bath furniture under the Hooker Furniture brand, and youth furniture sold under
the Opus Designs by Hooker brand.  Our residential upholstered seating
companies include Cherryville, N.C.-based Bradington-Young, LLC, a specialist in
upscale motion and stationary leather furniture, and Bedford, Va.-based Sam
Moore Furniture LLC, a specialist in upscale occasional chairs with an emphasis
on cover-to-frame customization.  An extensive selection of designs
and formats along with finish and cover options in each of these product
categories makes us a comprehensive resource for retailers primarily targeting
the upper-medium price range.  Our principal customers are retailers
of residential home furnishings who are broadly dispersed throughout North
America.  Customers include independent furniture stores, specialty
retailers, department stores, catalog merchants, interior designers and national
and regional chains.





We market
wood and metal furniture under the Hooker Furniture and Opus Designs by Hooker
brand names, and upholstered furniture under the Bradington-Young and Sam Moore
brand names.  Furniture is designed and marketed as stand-alone
products or products within small multi-piece groups or broader collections
offering a unifying style, design theme and finish.  Examples of
Hooker Furniture collections include Beladora, North Hampton and
Kensington.  Products also are marketed by product category, such as
The Great Entertainers, SmartWorks Home Office and Opus Designs Youth Furniture
by Hooker.  Our wood and metal furniture is typically designed for and
marketed in the upper-medium price range.  Under the Bradington-Young
upholstery brand, we offer a broad variety of residential leather and fabric
upholstered furniture and specialize in leather reclining and motion chairs,
sofas, club chairs and executive desk chairs.  Under the Sam Moore
upholstery brand, we offer upscale occasional chairs with an emphasis on
fabric-to-frame customization in the upper-medium to high-end price
niches.  Domestically produced upholstered furniture is targeted at
the upper-medium and upper price ranges, while imported upholstered furniture is
targeted at the medium and upper-medium price ranges.  Hooker is a
full-line resource for retailers, offering furniture collections and products
for virtually every room of the home.





Since
2003, we have transformed our company from a predominantly wood furniture
manufacturer to a product design, global sourcing, logistics and marketing
company for residential wood and upholstered furniture.  Prior to 2003
nearly seventy percent of our net sales were derived from the sale of
domestically produced wood furniture; subsequently, sales of our better valued
imported wood furniture rapidly overtook, and have now replaced sales of our
domestically made furniture.  We systematically closed our domestic
wood furniture plants as our product mix increasingly shifted toward imported
wood and metal furniture.  In March 2007, we closed our Martinsville,
Va. wood furniture production facility, the last of our domestic wood furniture
plants, marking our exit from domestic wood furniture
manufacturing.  This completed our transformation from a wood
furniture manufacturer to a company that both markets high-value wood, metal and
upholstered furniture sourced globally and manufactures upholstered
furniture.





Our goal
to expand our offerings to furniture retailers led to the acquisition of
Bradington-Young in January 2003 and Sam Moore Furniture in April
2007.  These acquisitions provided Hooker’s customers with a broad
array of upholstered seating options to complement our wood and metal furniture
offerings.  Additionally, in December 2007, we acquired certain assets
of Opus Designs Furniture a specialist in moderately-priced youth
furniture.  The Opus Designs acquisition provides us with expanded
product offerings in a previously under-developed niche.





In 2007,
we terminated our Employee Stock Ownership Plan (“ESOP”).  The ESOP
was discontinued primarily because of the fundamental change in our business
model as a rising stock price and our diminishing employee base caused the ESOP
to become too costly in this competitive industry.  As a result of the
ESOP termination, we believe that we have better positioned our company to
compete going forward by bringing future employee benefit costs more in line
with the industry, our new operating model and our current
workforce.





With our
exit from domestic wood furniture manufacturing and the addition of upholstery
and expanded bedroom offerings and the termination of the ESOP, Hooker
Furniture’s transition to a design, marketing, logistics and global sourcing
business model focused on imported wood and metal and domestically produced and
imported upholstered home furnishings is complete.


3


Strategy
and Mission





Our
mission is to “enrich the lives of the people we touch through innovative home
furnishings of exceptional value,” using the following strategy:





·
            To
      offer world-class style, quality and product value as a complete
      residential wood, metal and upholstered furniture resource through
      excellence in product design, manufacturing, global sourcing, marketing,
      logistics, sales, and customer
service.




·
            To
      be an industry leader in sales growth and profitability performance,
      providing an outstanding investment for our shareholders and contributing
      to the well-being of our employees, customers, suppliers and community
      neighbors.




·
            To
      nurture the relationship-focused, team-oriented and honor-driven corporate
      culture that has distinguished our company for 85
  years.




Home
furnishings account for all of Hooker’s net sales.  The percentages of
net sales provided by each of our major product sub-categories for the 52-week
fiscal year that ended February 1, 2009, the 53-week fiscal year that
ended  February 3, 2008,  the 2007 two-month transition
period that ended January 28, 2007, and the 12-month fiscal year ended November
30, 2006 were as follows:




(2
      mos.)2009
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Wood
      and metal furniture products
                      
                      
                      72
                      %
                      
                      
                      75
                      %
                      
                      
                      80
                      %
                      
                      
                      82
                      %Upholstered
      furniture products
                      
                      
                      28
                      %
                      
                      
                      25
                      %
                      
                      
                      20
                      %
                      
                      
                      18
                      %Total
                      
                      
                      100
                      %
                      
                      
                      100
                      %
                      
                      
                      100
                      %
                      
                      
                      100
                      %




Product
Design, Product Collections and Styles





Our
product lines cover most major style categories, including European and American
traditional, transitional, urban, country, casual and cottage
designs.  We offer furniture in a variety of materials, such as
various types of wood, metal, leather and fabric, as well as veneer and rattan,
often accented with marble, stone, slate, ceramic, glass, brass and/or
hand-painted finishes.  Products are designed to be attractive to
consumers both as individual furniture pieces and as pieces within whole-home
collections.  We believe our wide variety of product categories,
styles and finishes enables us to anticipate and respond quickly to changing
consumer preferences.  Hooker offers retailers a comprehensive
furniture resource principally in the upper-medium price range and additional
products within both the upscale and medium price ranges.  Based on
sales and market acceptance, we believe our products represent good value, and
the style and quality of our furniture compares favorably with more
premium-priced products.





The
product life cycle for furniture continues to shorten as consumers demand
innovative new features, functionality, style, finishes and fabrics that will
enhance their lifestyle while providing value and durability.  We
believe our distinctive product design, development and market-launch process
provides us with a competitive advantage.  Hooker designs and develops
new styles in each of our product categories semi-annually to replace
discontinued products and collections, and in some cases, to enter new product
categories.  Our collaborative product design process begins with the
marketing team identifying customer needs and trends and conceptualizing product
ideas and features.  A variety of sketches are produced, usually by
independent designers, from which prototype furniture pieces are
built.  We invite some of our independent sales representatives and a
representative group of dealers to view and critique the
prototypes.  Based on this input, we may modify the designs and then
prepare samples for full-scale production.  We generally introduce new
product styles at the International Home Furnishings Market (“the Market”) held
each fall and spring in High Point, North Carolina, and support new product
launches with promotions, public relations, product brochures, websites and
point-of-purchase consumer materials.





The
flexibility of our global sourcing business model gives us the ability to offer
a wide range of styles, materials and price points to a variety of retailers
serving a range of consumer markets.  The flexibility to target
production of various styles to the most efficient and best suppliers in the
world enabled us to broaden our product line without abandoning our core
strengths in fiscal 2009.  At the fall 2008 Market, we successfully
expanded both upward and downward in price points as we gained strong retail
placements on a comprehensive new product collection at higher than average
price points in European traditional styling and also successfully introduced a
new bedroom collection with more transitional styling at lower than average
price points.  We will draw upon this sourcing flexibility again this
spring when launching our Envision brand, targeting a less affluent, younger
consumer aged 25 to 44, with a smaller-scaled, casual lifestyle
look.  We expect the Envision collection will expand Hooker’s market
beyond our core product line, which is more traditionally styled in upper-medium
price points, with a strong base of purchasers aged 40 and up with household
incomes above $75,000.


4


Hooker
continues to strive for innovation in the Home Office and Entertainment
categories where we believe we are perceived as an industry leader.





Consumers
are replacing large armoires that were a mainstay of our entertainment business
in the 1990s with smaller scale consoles for flat panel televisions (“TV” or
“TVs”).  Our approach to this category is to offer presentation
formats for TV sizes from 32” up to 73” in a variety of sizes and
styles.  One merchandising concept that continues to grow is the
stacking of three consoles that take 32” to 42” TVs, 50” to 55” TVs and 60” and
up TVs.  This gives the consumer selection, and helps the retailer
maximize sales per square foot.  Hooker makes the stacked console
concept available in several styles from contemporary to
traditional.  Other entertainment formats we offer include consoles
with hutches in which a TV can be mounted on the back panel with room for
speakers, and electric lift consoles that hide the TV within the case, with
remote control activation to raise the TV to the surface of the console for
viewing.





In the
Home Theater and Wall Unit category, large units for 10- and 12- foot ceilings
continue to sell well at the upper end of our price spectrum.  They
can accommodate up to 73” TV’s, and we offer several styles that fit into the
large atrium family rooms in suburban homes.  We also offer smaller
wall units that work well in smaller homes and urban
condominiums.  This business is trending to a more
transitional/contemporary styling.





In Home
Office, Hooker continues to develop large scale home office furniture for our
executive office category with two highly successful introductions this past
year.  We are also increasing our focus on smaller office solutions
for younger consumers.  We introduced several new formats in smaller
office this past year that include a desk/hutch with TV storage in the hutch,
and a new “SmartWorks Home Center” that is taller at a 36” working
height.  This unit is designed for entrance halls, family rooms, and
kitchens – areas of the home where the family gathers - and can be used as a
central point to keep in touch.  It is loaded with power bars that
also include USB ports to charge cameras, phones, and
i-Phones.  Modular home office is also an area of growth that allows
consumers to customize their office format for large or small
spaces.





Bradington-Young
continues to expand its distribution channels with global sourcing of leather
seating in more moderate price points than the upper-end niche occupied by its
domestically produced seating.  In fiscal 2009, Bradington-Young
broadened its product line to include more transitional styling and leather
colors along with its core business in traditional
styling.  Bradington-Young will seek to be more fashion-forward in its
future introductions by including a number of leathers, fabrics and silhouettes
in cleaner, more transitional to contemporary styling.  While fiscal
2009 was a difficult year for Bradington-Young’s domestic product offerings, its
sectional Seating by Design Program and Designer Direct Program, both introduced
in recent Markets, were bright spots in an otherwise challenging
year.





Sam
Moore’s product offerings fill several niches in the occasional chair category,
offering exposed wood as well as fully upholstered seating.  Sam
Moore’s occasional seating covers multiple styles that include upholstered
swivel rockers, club chairs, wings, chaises, benches, ottomans, office chairs,
settees, dining chairs and barstools in 18th
Century, French, traditional, transitional, and contemporary
styles.  Most chair styles are available in a choice of either fabric
or leather.





Sam Moore
has a modern finishing facility that offers a choice of 26 different finishes
for any exposed wood chair selection.  Over one-half of the styles
shipped are custom ordered with the customer’s choice of leather, fabric and
finish.  Along with the choice of fabrics, leathers and finishes,
customers can choose from different colors and sizes of nail trim, bullion,
fringe or contrasting pillows.  Since most orders are custom made, Sam
Moore customers may provide their own fabric (customer’s own material “COM”) to
be applied to a chair.  In fact, COM is the most popular fabric
application choice of customers.





Sam Moore
imports thirteen seating styles from the Far East (principally China) in leather
for immediate shipment in a single color selection.  In addition, Sam
Moore has brought its customization expertise to our line of imported decorative
dining and occasional seating.  Presently, Hooker offers over three
dozen decorative seating products, each in a single fabric and
finish.  Sam Moore has customized and expanded this line by offering
the best selling Hooker frames in its wide range of fabrics and leathers, as
well as its multiple finishes.  At the April 2008 High Point Market,
Sam Moore entered a new product category of upholstered
headboards.  The headboards are available in all of the Sam Moore
fabrics, and customers can apply options such as tufting, channeling, shirring
and nail trim.  The company expanded its offering of reclining chairs
at the October 2008 High Point Market by focusing on upscale designs, leveraging
its strengths of multiple finishes, fabric and leather options.  Sam
Moore intends to continue to expand the reclining chair category in the future
as we believe there is a void in the reclining chair marketplace for upscale,
stylish recliners.





It is Sam
Moore’s goal to live up to its reputation as “America’s Premier Chair
Specialist” by offering a quality product from a complete selection of chairs in
fresh leathers and fabrics with exceptional wood finishes.





December
2008 marked the one year anniversary of Hooker’s acquisition of Opus Designs, a
specialist in moderately priced youth furniture.  During the year, the
sales, marketing, merchandising and operations of Opus Designs were successfully
integrated into our company, and the line positioned itself for growth by
gaining floor placements with approximately 600 new retail
customers.  Despite a double-digit sales downturn in the furniture
industry, sales of Opus Designs products increased in the low single digits
during fiscal 2009.  Opus Designs by Hooker is poised to introduce
five new groups at the spring 2009 High Point Market to expand its
appeal.  Focusing on upscale finishes, cleaner lines, superior quality
and more transitional styling, the groups will reflect the changing tastes of
the youth furniture consumer.


5


Sourcing





Hooker
Furniture has the capability, resources, longstanding business relationships and
experience to efficiently and cost effectively source our wood, metal and
upholstered furniture.





Imported
Products





We have
sourced products from foreign manufacturers since 1988.  We have
imported finished furniture in a variety of styles, materials and product
lines.  We believe the best way to leverage our financial strength and
differentiate our import business from the industry is through innovative and
collaborative design, outstanding products, great value, consistent quality,
easy ordering, and world-class global logistics and distribution
systems.  Imported wood, metal and upholstered furniture accounted for
approximately 77% of net sales in fiscal 2009, 76% of net sales in fiscal 2008
and the 2007 two-month transition period and 73% of net sales in fiscal
2006.





Hooker
imports products primarily from China, the Philippines, Indonesia, Vietnam,
Thailand and Honduras through direct relationships with factories and with
agents representing other factories.  Because of the large number and
diverse nature of the foreign factories from which we source our imported
products, we have significant flexibility in the placement of products in any
particular factory or country.  Factories located in China are our
primary resource for imported furniture.  In fiscal 2009, imported
products sourced from China accounted for approximately 90% of import purchases;
and the factory in China from which we directly source the most product
accounted for approximately 46% of our worldwide purchases of imported
product.  A sudden disruption in our supply chain from this factory,
or from China in general, could significantly compromise our ability to fill
customer orders for products manufactured at that factory or in that
country.  If such a disruption were to occur, we believe that we would
have sufficient inventory to adequately meet demand for approximately four
months.  Also, with the broad spectrum of product we offer, we believe
that, in some cases, buyers could be offered similar product available from
alternative sources.  We believe that we could, most likely at higher
cost, source most of the products currently sourced in China from factories in
other countries and could produce certain upholstered products domestically at
our own factories.  However, supply disruptions and delays on selected
items could occur for up to six months.  If we were to be unsuccessful
in obtaining those products from other sources or at a comparable cost, then a
sudden disruption in our supply chain from our largest import furniture
supplier, or from China in general, could have a short-term material adverse
effect on our results of operations.  Given the capacity available in
China and other low-cost producing countries, we believe the risks from these
potential supply disruptions are manageable.





Our
imported furniture business is subject to the usual risks inherent in importing
products manufactured abroad, including, but not limited to, supply disruptions
and delays, currency exchange rate fluctuations, economic and political
developments and instability, as well as the laws, policies, and actions of
foreign governments and the United States affecting trade, including
tariffs.





For
imported products, Hooker generally negotiates firm pricing with its foreign
suppliers in U.S. Dollars, typically for a term of at least one
year.  We accept the exposure to exchange rate movements beyond these
negotiated periods.  We do not use derivative financial instruments to
manage this risk.  Since we transact our imported product purchases in
U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase
the price we pay for imported products beyond the negotiated
periods.  We generally expect to reflect substantially all of the
effects of any price increases from suppliers in the prices we charge for
imported products.  These price changes could adversely impact sales
volume and profit margin during affected periods.  Conversely, a
relative increase in the value of the U.S. Dollar could decrease the cost of
imported products and favorably impact net sales and profit margins during
affected periods.  See also “Item 7A.  Quantitative and
Qualitative Disclosures about Market Risk.”





Manufacturing and Raw
Materials





At
February 1, 2009, Hooker Furniture operated approximately 639,000 square feet of
manufacturing and supply plant capacity in North Carolina and Virginia for its
domestic upholstered furniture production.  We consider the machinery
and equipment at these locations generally to be modern and
well-maintained.





We
believe that there is a viable future for domestically produced upholstery,
which, as an industry, has been less affected by import competition over the
last five years than wood furniture production.  Domestic seating
companies with strong positions in the upper-medium to high-end price point have
been the domestic furniture manufacturers least impacted by lower cost
imports.  In addition, domestic upholstery manufacturers have two key
competitive advantages compared to imported upholstery
manufacturers:


6


·
            offering
      customized cover-to-frame and fabric-to-frame combinations to the upscale
      consumer and interior design trade;
and,


·
            offering
      quick four- to six-week product delivery of custom
    products.





Due to
these competitive advantages, we remain committed to maintaining domestic
production of upholstered furniture.





Bradington-Young’s
strategy for its two upholstered furniture production facilities and two
upholstered furniture supply plants is to be a comprehensive leather resource
for retailers positioned in the upper and upper-medium price
ranges.  Bradington-Young offers a broad selection of approximately
230 leather covers for domestically produced upholstered
furniture.  The motion category comprises approximately 55% of
Bradington-Young’s domestic production.  The upholstery manufacturing
process begins with the cutting of leather or fabric and the cutting and
precision machining of frames.  Precision frames are important for
motion furniture to operate properly and to provide durable service over the
life of the products.  Finally, the cut leather or fabric upholstery,
frames, foam and other materials are assembled to build reclining chairs,
executive seating, stationary seating and multiple-seat reclining
furniture.





Sam
Moore’s strategy for its upholstery production facility is to be a complete
source of fashionable upholstered chairs for all rooms of the home and other
upholstered accent pieces, such as decorative upholstered
headboards.  Sam Moore offers a diverse range of approximately 200
different styles of upholstered products in over 550 fabric choices and over 100
leather choices.  Sam Moore produces 95% of its products domestically
at its single, large manufacturing facility in Bedford, Va.





Significant
materials used in manufacturing upholstered furniture products include leather
or fabric, foam, wooden frames and metal mechanisms.  Most of the
leather is imported from Italy, South America and China.  Leather is
purchased as full hides, which Bradington-Young and Sam Moore then cut and sew,
and as pre-cut and sewn hides processed by the vendor to pattern
specifications.





Costs for
leather and leather products from Asia increased significantly during fiscal
2009 due to higher labor and freight costs, changes in foreign tax incentives
and increased costs for premium leather hides sourced from
Europe.  The costs for these products have also been affected by the
weaker U.S. Dollar.  As a result, Bradington-Young dealer prices were
increased at the fall Market.  This increase could affect demand,
although we believe the impact will be less significant for Bradington-Young,
with its upper-medium price position, compared to the more promotional end of
the leather market.  Late in the year, this upward price pressure
lessened as the U.S. Dollar became stronger and there was an excess supply of
leather due to stress in the auto and furniture industries.





We
believe that our sources for raw materials are adequate and that we are not
dependent on any one supplier.  Hooker’s five largest suppliers
accounted for approximately 31% of our raw materials supply purchases for
domestic upholstered furniture manufacturing operations in fiscal 2009. No
single supplier accounted for more than 10 % of our raw material
purchases.





Distribution





Hooker
utilizes 105,000 square feet of showroom space in High Point, N.C. to introduce
new products and collections and increase sales of existing products during the
industry’s spring and fall Markets.  We also utilize this showroom
throughout the year to host meetings with dealers and sales representatives in
the product design development process.  We also work directly with
several large customers to develop proprietary products exclusively for those
customers.





We sell
our furniture through over 90 independent sales representatives to retailers of
residential home furnishings, who are broadly dispersed throughout North
America, including:





·
            independent
      furniture retailers such as Furnitureland South of Jamestown/High Point,
      N.C., Louis Shanks of Texas, Baer’s Furniture of South Florida, and
      Berkshire Hathaway-owned companies Star Furniture, Jordan’s Furniture,
      Nebraska Furniture Mart and R.C.
Willey;




·
            department
      stores such as Macy’s and
Dillard’s;




·
            regional
      chain stores such as Raymour & Flanigan, Robb & Stucky and
      Haverty’s;




·
            national
      chain stores such as Z Gallerie and Crate & Barrel;
  and




·
            catalog
      merchandisers such as Frontgate and the Horchow Collection, a unit of
      Neiman Marcus.




Hooker
sold to more than 4600 customers during fiscal 2009.  No single
customer accounted for more than 3% of our net sales in 2009.  No
significant part of our business is dependent upon a single customer, the loss
of which would have a material effect on our business. However, the loss of
several of our major customers could have a material impact on our
business.  In addition to our broad domestic customer base,
approximately 4% of our net sales in 2009 were to international
customers.


7


We
believe this broad network of retailers and independent sales representatives
reduces our exposure to regional recessions and allows us to capitalize on
emerging trends in channels of distribution.





Hooker
offers tailored merchandising programs, such as our SmartLiving ShowPlace
in-store galleries, Seven Seas Treasures boutiques and Home Entertainment and
SmartWorks Home Office galleries, to address each channel of
distribution.  These galleries are currently dedicated principally to
furniture groups and whole-home collections under the Hooker and
Bradington-Young brands, with plans to increase the number of galleries that
carry our Sam Moore and Opus Designs by Hooker brands.  These
galleries typically comprise 3,500 to 8,000 square feet of retail
space.  The mission of the SmartLiving program is to develop
progressive partnerships with retailers by providing a merchandising and
marketing plan to drive increased sales and profitability and positively
influence consumers’ purchase decisions, satisfaction and loyalty through an
enhanced shopping experience.





Currently,
we have about 50 SmartLiving Showplace Galleries established throughout the
country.  There are 367 dealers who dedicate space in their stores to
display our Seven Seas Treasuresline of imported upscale
and casual dining room furniture, metal beds, occasional tables and functional
accents, including hand-painted furniture, carved writing desks, tables and
chests.  In the home entertainment and home office categories, in
which we are recognized as an industry leader, we have well-developed product
specialty gallery programs supported by semi-annual national sales promotions, a
special website dealer locator and point-of-purchase collateral
materials.  Over 300 dealers have Home Entertainment by Hooker
galleries and more than  220 dealers have SmartWorks Home Office
galleries in their retail stores  There are more than 130 Opus Designs
by Hooker Furniture youth furniture galleries around the country.  In
addition, over 1,500 retailers offer Bradington-Young leather upholstery
products and over 1,500 retailers offer Sam Moore Furniture occasional seating
products.





In fiscal
2008, we expanded our distribution channels by hiring a senior executive charged
with developing a private label and limited distribution programs targeting
large national retailers.  This program has increased sales to large
national accounts.





Warehousing, Inventory and
Supply Chain Management





During
fiscal year 2009, we continued to refine our supply chain and sourcing
operations via systems enhancements and personnel additions in both the U.S. and
China.  Investments made in a new Global Purchasing System and a
web-based Global Sourcing Management System, coupled with planned upgrades to
current demand and inventory planning platforms, have helped improve order
fulfillment rates.




We
distribute furniture to retailers from our distribution centers and warehouses
in Virginia, North Carolina and California, as well as directly from Asia and
Latin America via our Container Direct Program.  In 2004, we entered
into a warehousing and distribution arrangement in China with our largest
supplier of imported products.  In 2008, we entered into similar
arrangements with two more suppliers.  The warehouse and distribution
facilities are owned by the supplier and operated by that supplier and a third
party utilizing a global warehouse management system that updates daily our
central inventory management and order processing systems.  Under the
Container Direct Program, we offer directly to retailers in the U.S. a focused
mix of over 1,100 of our best selling items sourced from these three
suppliers.  By doing so, we achieved an approximately 80% in-stock
percentage at these facilities during fiscal 2009.  The program
features an internet-based product ordering system and a delivery notification
system that is easy to use and available to our pre-registered
dealers.  In addition, we also ship containers directly from a variety
of other suppliers in Asia and Honduras.  We are committed to
exploring ways to continually improve our distinctive, value-added Container
Direct Program through additional warehouses at key vendors, product
consolidation and routing strategies aimed at shortening delivery times and
providing significant cost savings for retailers.




In
January 2008, we opened a West Coast distribution center in Carson,
California.  The 80,000-square-foot warehouse, which became fully
operational in February 2008, stocks many of our best-selling products for quick
shipment to customers in California, Arizona, New Mexico, Nevada, Oregon,
Colorado, Idaho, Montana, Wyoming, Utah and Washington.  While
delivery times and costs will vary from customer to customer, we expect that, on
average, we can remove approximately ten days of delivery time and reduce inland
freight costs by 6-10% for the products processed through this
facility.




Seven
Seas Seating, Bradington-Young’s line of imported upholstered furniture, has
experienced rapid growth since its introduction in the 2003 fourth
quarter.  However, Seven Seas Seating experienced a decline in net
sales in fiscal 2009, decreasing by $1.3 million, or 9.2% to $12.9 million
compared to $14.2 million in fiscal 2008.  Unlike domestic upholstered
production, Seven Seas Seating products are purchased based on a forecast of
product demand and shipped out of inventory from 109,000 square feet of leased
warehouse space in Cherryville, N.C.  Seven Seas Seating may also be
purchased under the Container Direct Program, and a container order can include
any of the product produced at a given supply plant.


8


Sam Moore
imports and warehouses thirteen styles of leather club and desk chairs for
immediate order fulfillment.  Ten styles come from two factories in
China.  Three styles come from one factory in the Philippines.  For
inventory, Supply Chain personnel order mixed containers from each country based
on rate of sale.  Orders are shipped from Sam Moore's facility in Bedford,
Va.  All styles can be ordered and shipped in container quantities to any
Sam Moore account.  Sam Moore also imports one style chair from a
third factory in China which is direct shipped in container quantity to a single
Sam Moore account.




In 2006, Hooker Furniture’s import
distribution operations were certified as a full participant in the U.S.
Department of Homeland Security, Customs Trade Partnership Against Terrorism
(C-TPAT) program.  C-TPAT is a joint government-business initiative
designed to ensure proper security procedures are in place to protect the flow
of global trade.  Through C-TPAT, U.S. Customs and Border Protection
has joined with importers, carriers, brokers, warehousemen and manufacturers to
provide the highest level of security while facilitating the movement of goods
entering the United States.  To qualify for membership in C-TPAT,
participating companies must conduct a detailed self-assessment of supply chain
security using the C-TPAT security guidelines created by Customs and the trade
community.  Companies must also complete and submit a supply chain
security profile questionnaire to Customs and implement a program to enhance
security throughout the supply chain in accordance with the C-TPAT
guidelines.  Upon C-TPAT certification, members receive expedited
handling and processing of their goods into the United
States.




Hooker
Furniture schedules purchases of imported furniture and production of
domestically manufactured upholstered furniture based upon actual and
anticipated orders and product acceptance at the spring and fall
Markets.  We strive to provide imported and domestically produced
furniture on-demand for our dealers.  During fiscal year 2009, we
shipped 73% of all wood and metal furniture orders and 59% of all upholstery
orders within 30 days of order receipt.  It is our policy and industry
practice to allow order cancellation for wood and metal furniture up to the time
of shipment; therefore, customer orders for wood and metal furniture are not
firm.  However, domestically produced upholstered product orders are
predominantly custom-built and shipped within six weeks after the order is
received and consequently, cannot be cancelled once the leather or fabric is
cut.




Our
backlog of unshipped orders for all of our products amounted to $19 million or
approximately 4 weeks of sales as of February 1, 2009.  For the last
three years, over 95% of all orders booked were ultimately
shipped.  Management considers orders and backlogs to be one helpful
indicator of sales for the upcoming 30-day period, but because of our quick
delivery and our cancellation policy, management does not consider order
backlogs to be a reliable indicator of expected long-term business.




Competition





The
furniture industry is highly competitive and includes a large number of foreign
and domestic manufacturers and importers, none of which dominates the
market.  While the markets in which Hooker competes include a large
number of relatively small and medium-sized manufacturers, certain competitors
have substantially greater sales volumes and financial resources than we
do.  U.S. imports of furniture produced overseas, such as from China,
have stabilized in recent years, and some overseas companies have increased both
their presence through wholesale distributors based in the United States and
their shipments directly to U.S. retailers during that period.





The
primary competitive factors for home furnishings in our price points include
price, style, availability, service, quality and durability.  We
believe that our design capabilities, ability to import and/or manufacture
upholstered furniture, product value, longstanding customer and supplier
relationships, significant distribution and inventory capabilities, ease of
ordering, financial strength, experienced management and customer support are
significant competitive advantages.





In
November 2004 and January 2005, the U.S. Department of Commerce found that
certain Chinese furniture manufacturers were dumping bedroom products into the
U.S. market and imposed tariffs on Chinese companies for wood bedroom products
exported to the U.S.  The tariff rates were approved in a subsequent
action by the International Trade Commission, based on measured damage to the
U.S. furniture manufacturing industry caused by illegal
dumping.  Tariffs on imported bedroom furniture have not and are not
expected to have a material adverse effect on our results of
operations.





Employees





As of
February 1, 2009, Hooker Furniture had approximately 814 permanent
employees.  None of our employees are represented by a labor
union.  We consider our relations with our employees to be
good.


9


Patents
and Trademarks





The
Hooker Furniture, Bradington-Young, Sam Moore and Opus Designs by Hooker
Furniture trade names represent many years of continued business.  We
believe these trade names are well-recognized and associated with quality and
service in the furniture industry.  We also own a number of patents
and trademarks, none of which is considered to be material.





Hooker,
the “H” logo, Bradington-Young, the “B-Y” logo, Sam Moore, Sam Moore Furniture
Industries, Sam Moore Furniture, LLC, America’s Premier Chair Specialist, Opus
Designs by Hooker Furniture, Forever Young, Envision Lifestyle Collections by
Hooker Furniture, Albany Park, Beladora, Belle Vista, Casablanca, North Hampton,
Summerglen, Vineyard, Chatham, Brookhaven, Belle Grove, Villa Grande, Villa
Florence, Fairview, Mirabel,  Danforth, Small Office Solutions,
Preston Ridge, Sectional Sofas by Design, Seven Seas, Seven Seas Seating,
SmartLiving ShowPlace, SmartWorks Home Office, SmartWorks Home Center, The Great
Entertainers,  Wexford Square and Waverly Place are
registered  trademarks of Hooker Furniture Corporation.





Governmental
Regulations





Our
company is subject to federal, state, and local laws and regulations in the
areas of safety, health, environmental pollution controls and
importing.  Compliance with these laws and regulations has not in the
past had any material effect on our earnings, capital expenditures, or
competitive position; however, the effect of compliance in the future cannot be
predicted.  We believe that we are in material compliance with
applicable federal, state and local safety, health, environmental and importing
regulations.





Additional
Information





You may visit us online atwww.hookerfurniture.com,www.bradington-young.com,www.sammoore.comandwww.opusdesigns.net.Hooker makes available,
free of charge through our website, our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and other documents as soon
as practical after filing or furnishing the material to the Securities and
Exchange Commission.  A free copy of our Form 10-K may also be
obtained by contacting Robert W. Sherwood, Vice President - Credit, Secretary
and Treasurer at our corporate offices.





Forward-Looking
Statements





Certain
statements made in this report, including under “Item 1 - Business” and “Item 7
- Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” are not based on historical facts, but are forward-looking
statements.  These statements reflect our reasonable judgment with
respect to future events and typically can be identified by the use of
forward-looking terminology such as “believes,” “expects,” “projects,”
“intends,” “plans,” “may,” “will,” “should,” “would,” “could”  or
“anticipates,” or the negative thereof, or other variations thereon, or
comparable terminology, or by discussions of
strategy.  Forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements.  Those risks and uncertainties include
but are not limited to:





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




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




·
            price
      competition in the furniture
industry;




·
            changes
      in domestic and international monetary policies and fluctuations in
      foreign currency exchange rates affecting the price of our imported
      products and raw materials;




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




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




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




·
            adverse
      political acts or developments in, or affecting, the international markets
      from which we import products, including duties or tariffs imposed on
      those products;




10


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




·
            our
      ability to successfully implement our business plan to increase sales and
      improve financial performance;




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




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




·
            capital
      requirements and costs;




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




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




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




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




ITEM
      1A.
            RISK
      FACTORS




Our
business is subject to a variety of risks.  The risk factors detailed
below should be considered in conjunction with the other information contained
in this annual report on Form 10-K.  If any of these risks actually
materialize, our business, financial condition and future prospects could be
negatively impacted.  These risks are not the only ones we
face.  There may be additional risks that are presently unknown to us
or that we currently believe to be immaterial that could affect our
business.




We
may lose market share due to competition, which would decrease future sales and
earnings.




The
furniture industry is very competitive and fragmented.  Hooker
competes with many domestic and foreign manufacturers.  Some
competitors have greater financial resources than we have and often offer
extensively advertised, well-recognized, branded
products.  Competition from foreign producers has increased
dramatically in the past few years.  We may not be able to meet price
competition or otherwise respond to competitive pressures, including
increases in supplier and production costs.  Also, due to the large
number of competitors and their wide range of product offerings, we may not be
able to continue to differentiate our products (through styling, finish and
other construction techniques) from those of our competitors.  In
addition, large retail furniture dealers have the ability and could at any time
begin to obtain offshore sourcing on their own.  As a result, we are
continually subject to the risk of losing market share, which may lower sales
and earnings.




An
economic downturn could result in a decrease in sales and
earnings.




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




Failure
to anticipate or timely respond to changes in fashion and consumer tastes could
adversely impact our business and decrease sales and earnings.




Furniture
is a styled product and is subject to rapidly changing fashion trends and
consumer tastes.  If we fail to anticipate or promptly respond to
these changes we may lose market share or be faced with the decision of whether
to sell excess inventory at reduced prices.  This could result in
lower sales and earnings.


11


A
loss of several large customers through business consolidations, failures or
other reasons could result in a decrease in future sales and
earnings.




The loss
of several of our major customers through business consolidations, failures or
otherwise, could materially adversely affect our sales and
earnings.  Lost sales may be difficult to replace.  Amounts
owed to Hooker by a customer whose business fails may become
uncollectible.




Our
ability to grow sales and earnings depends on the successful execution of our
business strategies.




Since
2003, we have transitioned from manufacturing most of our products to sourcing
most of them from offshore suppliers.  As a result, we are now
primarily a design, sourcing, marketing and logistics company with domestic
upholstery manufacturing capabilities.  Our ability to maintain and
grow sales and earnings depends on the continued correct selection and
successful execution and refinement of our overall business strategies and
business systems for designing, marketing, sourcing, distributing and servicing
our products.  We must also make good decisions about product mix and
inventory availability targets.  Since we have exited domestic
manufacturing of wood furniture and are now completely dependent on offshore
suppliers for wood and metal furniture products, we must continue to enhance
relationships and business systems that allow us to continue to work more
efficiently and effectively with our global sourcing
suppliers.  Hooker also must continue to evaluate the appropriate mix
between domestic manufacturing and foreign sourcing for upholstered
products.  All of these factors affect our ability to grow sales and
earnings.




We
depend on suppliers in China for a very high proportion of our imported
furniture products, and a disruption in supply from China or from our most
significant Chinese supplier could undermine our ability to timely fill customer
orders for these products and our sourcing costs.




In fiscal
2009, imported products sourced from China accounted for approximately 90% of
our import purchases and the factory in China from which we directly source the
largest portion of our import products accounted for approximately 46% of our
worldwide purchases of imported products.  A sudden disruption in our
supply chain from this factory, or from China in general, could significantly
impact our ability to fill customer orders for products manufactured at that
factory or in that country.  If such a disruption were to occur, we
believe that we would have sufficient inventory to adequately meet demand for
approximately four months.  We believe that we could, most likely at
higher cost, source most of the products currently sourced in China from
factories in other countries and could produce certain upholstered products
domestically at our own factories.  However, supply disruptions and
delays on selected items could occur for up to six months before remedial
measures could be implemented.  If we were to be unsuccessful in
obtaining those products from other sources or at comparable cost, then a sudden
disruption in our supply chain from our largest import furniture supplier, or
from China in general, could have a short-term material adverse effect on our
results of operations.




Changes
in the value of the U.S. Dollar compared to the currencies for the countries
from which we obtain our products could adversely affect net sales and profit
margins.




For
imported products, we generally negotiate firm pricing with our foreign
suppliers in U.S. Dollars for periods typically of at least one
year.  We accept the exposure to exchange rate movements beyond these
negotiated periods. We do not use derivative financial instruments to manage
this risk.  Since we transact our imported product purchases in U.S.
Dollars, a relative decline in the value of the U.S. Dollar could increase the
price we must pay for imported products beyond the negotiated
periods.  These price changes could adversely impact net sales and
profit margins during affected periods.




Our
dependence on offshore suppliers could, over time, adversely affect our ability
to service customers, which could lower future sales and earnings.




In March
2007, we exited domestic wood furniture manufacturing.  We now rely
exclusively on offshore suppliers for our wood and metal furniture
products.  Our offshore suppliers may not provide goods that meet our
quality, design or other specifications in a timely manner and at a competitive
price.  If our suppliers do not meet our specifications, we may need
to find alternative vendors, potentially at a higher cost, or may be forced to
discontinue products.  Also, delivery of goods from offshore vendors
may be delayed for reasons not typically encountered for domestically
manufactured wood and metal furniture, such as shipment delays caused by customs
or labor issues.  Our failure to fill customer orders during an
extended business interruption by a major offshore supplier could negatively
impact existing customer relationships resulting in decreased sales and
earnings.


12


We rely
on offshore sourcing for all of our wood and metal products, and for some of our
upholstered products. We are subject to changes in local government
regulations, which could result in a decrease in earnings.




Changes
in political, economic, and social conditions, as well as laws and regulations
in the foreign countries where we source our products could have an adverse
impact on our performance.  These changes could make it more difficult
to provide products and service to customers.  International trade
policies of the United States and the countries from which we source finished
products could adversely affect us.  Imposition of trade sanctions
relating to imports, taxes, import duties and other charges on imports could
increase our costs and decrease our earnings.  For example in 2004,
the U.S. Department of Commerce imposed tariffs on wooden bedroom furniture
coming into the United States from China.  In this case, none of the
rates imposed were of sufficient magnitude to alter our import strategy in any
meaningful way; however, these tariffs are subject to review and could be
increased in the future.




We
may engage in acquisitions and investments in companies, which could disrupt our
business, dilute our earnings per share and decrease the value of our common
stock.




We may
acquire or invest in businesses that offer complementary products and that we
believe offer competitive advantages.  However, we may fail to
identify significant liabilities or risks that negatively affect us or result in
our paying more for the acquired company or assets than they are
worth.  We may also have difficulty assimilating the operations and
personnel of an acquired business into our current
operations.  Acquisitions may disrupt or distract management from our
ongoing business.  We may pay for future acquisitions using cash,
stock, the assumption of debt, or a combination of these.  Future
acquisitions could result in dilution to existing shareholders and to earnings
per share.




If
demand for our domestically manufactured upholstered furniture declines and we
respond by realigning manufacturing, our near-term earnings could
decrease.




Since
March 2007, our domestic manufacturing operations consist solely of upholstered
furniture.  A decline in demand for our domestically produced
upholstered furniture could result in the realignment of domestic manufacturing
operations and capabilities and the implementation of cost savings
programs.  These programs could include the consolidation and
integration of facilities, functions, systems and procedures.  We may
decide to source certain products from offshore suppliers, instead of continuing
to manufacture them domestically.  These realignments and cost savings
programs typically involve initial upfront costs and could result in decreases
in our near-term earnings before the expected cost reductions from realignment
are realized.  We may not always accomplish these actions as quickly
as anticipated and may not fully achieve the expected cost
reductions.




Fluctuations
in the price, availability and quality of raw materials for our domestically
manufactured upholstered furniture could cause manufacturing delays, adversely
affect our ability to provide goods to our customers and increase costs, any of
which could decrease our sales and earnings.




We use
various types of wood, leather, fabric, foam and other filling material, high
carbon spring steel, bar and wire stock and other raw materials in manufacturing
upholstered furniture.  We depend on outside suppliers for raw
materials and must obtain sufficient quantities of quality raw materials from
these suppliers at acceptable prices and in a timely manner.  We do
not have long-term supply contracts with our suppliers.  Unfavorable
fluctuations in the price, quality and availability of required raw materials
could negatively affect our ability to meet the demands of our
customers.  The inability to meet customers’ demands could result in
the loss of future sales.  We may not always be able to pass along
price increases in raw materials to our customers due to competition and market
pressures.




We
may experience impairment of our long-lived assets, which would decrease
earnings and net worth.




Accounting
rules require that long-lived assets be tested for impairment at least
annually.  We have substantial long-lived assets, consisting primarily
of property, plant and equipment, trademarks and trade names, which based upon
the outcome of the annual test, could result in the write-down of all or a
portion of these assets.  A write-down of our assets would, in turn,
reduce our earnings and net worth.




ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS




None.


13




ITEM
      2.
            PROPERTIES




Set forth
below is information with respect to our principal properties.  We
believe all of these properties are well-maintained and in good
condition.  We believe our manufacturing facilities are efficiently
utilized.   During fiscal 2009, we estimate our upholstery plants
operated at approximately 50% of capacity on a one-shift basis.  All
our production facilities are equipped with automatic sprinkler systems, except
for the Woodleaf, N.C. facility.  All facilities maintain modern fire
and spark detection systems, which we believe are adequate.  We have
leased certain warehouse facilities for our distribution and imports operation
on a short and medium-term basis.  We expect that we will be able to
renew or extend these leases or find alternative facilities to meet our
warehousing and distribution needs at a reasonable cost.  All
facilities set forth below are active and operational and represent
approximately 2.2 million square feet of owned or leased space.




Location
                                                                    
                                                                    Primary Use
                                                                    
                                                                    Approximate Size in Square Feet
                                                                    
                                                                    Owned or LeasedMartinsville,
      Va.
                                                                    
                                                                    Corporate
      Headquarters
                                                                    
                                                                    43,000
                                                                    
                                                                    
                                                                    OwnedMartinsville,
      Va.
                                                                    
                                                                    Distribution
      and Imports
                                                                    
                                                                    580,000
                                                                    
                                                                    
                                                                    OwnedMartinsville,
      Va.
                                                                    
                                                                    Distribution
                                                                    
                                                                    189,000
                                                                    
                                                                    
                                                                    OwnedMartinsville,
      Va.
                                                                    
                                                                    Customer
      Support Center
                                                                    
                                                                    146,000
                                                                    
                                                                    
                                                                    OwnedMartinsville,
      Va.
                                                                    
                                                                    Distribution
                                                                    
                                                                    400,000
                                                                    
                                                                    
                                                                    Leased
                                                                    (1)High
      Point, N.C.
                                                                    
                                                                    Showroom
                                                                    
                                                                    105,000
                                                                    
                                                                    
                                                                    Leased
                                                                    (2)Cherryville,
      N.C.
                                                                    
                                                                    Manufacturing
      and Offices
                                                                    
                                                                    144,000
                                                                    
                                                                    
                                                                    Owned
                                                                    (3)Cherryville,
      N.C.
                                                                    
                                                                    Manufacturing
      Supply Plant
                                                                    
                                                                    53,000
                                                                    
                                                                    
                                                                    Owned
                                                                    (3)Cherryville,
      N.C.
                                                                    
                                                                    Distribution
      and Imports
                                                                    
                                                                    74,000
                                                                    
                                                                    
                                                                    Leased
                                                                    (3) (4)Cherryville,
      N.C.
                                                                    
                                                                    Distribution
      and Imports
                                                                    
                                                                    35,000
                                                                    
                                                                    
                                                                    Leased
                                                                    (3) (5)Hickory,
      N.C.
                                                                    
                                                                    Manufacturing
                                                                    
                                                                    91,000
                                                                    
                                                                    
                                                                    Owned
                                                                    (3)Woodleaf,
      N.C.
                                                                    
                                                                    Manufacturing
      Supply Plant
                                                                    
                                                                    34,000
                                                                    
                                                                    
                                                                    Leased
                                                                    (3) (6)Bedford,
      Va.
                                                                    
                                                                    Manufacturing
      and Offices
                                                                    
                                                                    327,000
                                                                    
                                                                    
                                                                    Owned
                                                                    (7)





(1)
            Lease
      expires December 31, 2009


(2)
            Lease
      expires April 30, 2014


(3)
            Comprise
      the principal properties of
Bradington-Young


(4)
            Lease
      expires June 30, 2009


(5)
            Lease
      expires June 30, 2009 and provides for a one year
    extension.


(6)
            Lease
      provides for five consecutive one year extensions through December 31,
      2010


(7)
            Comprise
      the principal properties of Sam Moore Furniture
  LLC





Set forth
below is information regarding principal properties we utilize that are owned
and operated by third parties.





Location
                                  
                                  Primary Use
                                  
                                  Approximate Size in Square FeetCarson,
      Ca.
                                  
                                  Distribution
                                  
                                  
                                  80,000
                                  (1)Guangdong,
      China
                                  
                                  Distribution
                                  
                                  
                                  210,000
                                  (2)Guangdong,
      China
                                  
                                  Distribution
                                  
                                  
                                  35,000
                                  (3)Guangdong,
      China
                                  
                                  Distribution
                                  
                                  
                                  9,000
                                  (4)




(1)
              This
      property is subject to a distribution services agreement that expires on
      January 1, 2010.
 (2)
              This
      property is subject to an operating agreement that expires on July 31,
      2009 and automatically renews for one year on its anniversary date unless
      notification of termination is provided 120 days prior to such
      anniversary.
 (3)
              This
      property is subject to an operating agreement that expires on May 31, 2010
      and automatically renews for one year on its anniversary
    date.
 (4)
              This
      property is subject to an operating agreement that expires on September
      30, 2010 and automatically renews for one year on its anniversary
      date.


ITEM
      3.
            LEGAL
      PROCEEDINGS





None





ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None.


14


EXECUTIVE
OFFICERS OF


HOOKER
FURNITURE CORPORATION





Hooker
Furniture’s executive officers and their ages as of April 17, 2009 and the year
each joined the company are as follows:





Name
                
                Age
                
                Position
                
                Year Joined CompanyPaul
      B. Toms, Jr.
                
                54
                
                Chairman,
      President and Chief Executive Officer
                
                1983E.
      Larry Ryder
                
                61
                
                Executive
      Vice President - Finance and Administration, Assistant Secretary and
      Assistant Treasurer
                
                1977Alan
      D. Cole
                
                59
                
                President
      and Chief Executive Officer - Upholstery
                
                2007Michael
      P. Spece
                
                56
                
                Executive
      Vice President - Merchandising and Design
                
                1997Sekar
      Sundararajan
                
                44
                
                Executive
      Vice President - Operations
                
                2008Raymond
      T. Harm
                
                59
                
                Senior
      Vice President - Sales
                
                1999





Paul B. Toms, Jr.has
been Chairman and Chief Executive Officer since December 2000 and President
since November 2006.  Mr. Toms was President and Chief Operating
Officer from December 1999 to December 2000, Executive Vice President -
Marketing from 1994 to December 1999, Senior Vice President - Sales and
Marketing from 1993 to 1994, and Vice President - Sales from 1987 to
1993.  Mr. Toms joined the Company in 1983 and has been a Director
since 1993.





E. Larry Ryder has been
Executive Vice President - Finance and Administration since December 2000,
Assistant Treasurer since 1998, and Assistant Secretary since
1990.  Mr. Ryder was Senior Vice President - Finance and
Administration from December 1987 to December 2000, Treasurer from 1989 to 1998,
and Vice President - Finance and Administration from 1983 to
1987.  Prior to 1983, Mr. Ryder served in various financial management
positions.  Mr. Ryder joined the Company in 1977 and was a Director
from 1987 until 2003.





Alan D. Cole has been
President and Chief Executive Officer - Upholstery since August
2008.  Mr. Cole joined the Company in April 2007 as Executive Vice
President – Upholstery Operations.  Prior to joining the Company, Mr.
Cole was President and Chief Executive Officer of Schnadig Corporation, a
manufacturer and marketer of a full line of medium-priced home furnishings from
2004 to 2006.  Mr. Cole has been President of Parkwest LLC, a real
estate development firm from 2002 to the present.  Mr. Cole also
served as a member of the Company’s Board of Directors in 2003.





Michael P. Spece has been
Executive Vice President - Merchandising and Design since September
2004.  Mr. Spece was Senior Vice President - Import Division from
December 2001 to September 2004.  Mr. Spece was Vice President -
Import Division from the time he joined the Company in 1997 until December
2001.





Sekar Sundararajanhas been
Executive Vice President - Operations since February 2008.  Prior to
joining the Company, Mr. Sundararajan was President of Libra Consulting, an
operations and supply chain management consulting firm focusing on the home
furnishings and consumer goods industries from 1996 to 2008.  In this
capacity, he provided consulting services to the Company beginning in April
2007.





Raymond T. Harm has been
Senior Vice President - Sales since joining the Company in
1999.  Prior to joining the Company, Mr. Harm served as Vice President
- Sales for The Barcalounger Company, a manufacturer of upholstered motion
furniture from 1992 to 1999.


15


Hooker
Furniture Corporation


Part
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES





Our stock
is traded on the NASDAQ Global Select Market under the symbol
“HOFT”.  The table below sets forth the high and low sales prices per
share for our common stock and the dividends per share paid by Hooker with
respect to our common stock for the periods indicated.





Sales Price Per Share
                      
                      
                      DividendsHigh
                      
                      
                      Low
                      
                      
                      Per ShareFebruary
      4, 2008 – May 4, 2008
                      
                      $
                      24.00
                      
                      
                      $
                      19.20
                      
                      
                      $
                      0.10May
      5, - August 3, 2008
                      
                      
                      21.94
                      
                      
                      
                      15.80
                      
                      
                      
                      0.10August
      4 – November 2, 2008
                      
                      
                      20.59
                      
                      
                      
                      8.35
                      
                      
                      
                      0.10November
      3 – February 1, 2009
                      
                      
                      10.09
                      
                      
                      
                      5.64
                      
                      
                      
                      0.10October
      29, 2007 – February 3, 2008
                      
                      
                      22.37
                      
                      
                      
                      16.55
                      
                      
                      
                      0.10July
      30 – October 28, 2007
                      
                      
                      22.36
                      
                      
                      
                      15.52
                      
                      
                      
                      0.10April
      30 – July 29, 2007
                      
                      
                      25.10
                      
                      
                      
                      19.39
                      
                      
                      
                      0.10January
      29 – April 29, 2007
                      
                      
                      22.29
                      
                      
                      
                      14.70
                      
                      
                      
                      0.10December
      1, 2006 – January 28, 2007
                      
                      
                      15.86
                      
                      
                      
                      14.39





As of
February 28, 2009, our company had approximately 2,450 beneficial
shareholders.  We pay dividends on our common stock on or about the
last day of February, May, August and November, when declared by the Board of
Directors, to shareholders of record approximately two weeks
earlier.  Although we presently intend to continue to declare cash
dividends on a quarterly basis for the foreseeable future, the determination as
to the payment and the amount of any future dividends will be made by the Board
of Directors from time to time and will depend on our then-current financial
condition, capital requirements, results of operations and any other factors
then deemed relevant by the Board of Directors.


16


Performance
Graph





The
following graph compares cumulative total shareholder return for the Company
with a broad performance indicator, the Russell 2000® Index,
and an industry index, the Household Furniture Index, for the period from
November 30, 2003 to February 1, 2009.The Household Furniture
Index combines all home furnishings companies whose securities are registered
with the SEC under the Securities Exchange Act.







(1)
              The
      graph shows the cumulative total return on $100 invested at the beginning
      of the measurement period in the Company’s Common Stock or the specified
      index, including reinvestment of
dividends.


(2)
            On
      August 29, 2006, the Company approved a change in its fiscal year. After
      the fiscal year ended November 30, 2006, the Company’s fiscal year ends on
      the Sunday nearest to January 31. Information regarding the change in the
      Company’s fiscal year is available in the Company’s Form 8-K filed
      September 1, 2006. In making the transition to a new fiscal
      year, the Company completed a two-month transition period that began
      December 1, 2006 and ended January 28, 2007. The Company’s fiscal
      years ended February 1, 2009, February 3, 2008 and the transition period
      are reflected in the Performance
Graph.





(3)
            The
      Russell 2000®
      Index, prepared by Frank Russell Company, measures the performance of the
      2,000 smallest companies out of the 3,000 largest U.S. companies based on
      total market capitalization.





(4)
            The
      Household Furniture Index (SIC Codes 2510 and 2511) as prepared by Zack’s
      Investment Research. On March 6, 2009, Zacks Investment Research reported
      that the Household Furniture Index consisted of: Bassett Furniture
      Industries, Inc., Chromcraft Revington, Inc., Ethan Allen Interiors Inc.,
      Flexsteel Industries, Inc., Furniture Brands International, Inc., Hooker
      Furniture Corporation, La-Z-Boy Incorporated, Natuzzi S.p.A, Tempur
      Pedic International, Inc., Leggett and Platt, Inc., Sealy Corp., Select
      Comfort Corp. and Stanley Furniture Company,
  Inc.


17


ITEM
      6.
            SELECTED
      FINANCIAL DATA





On August
29, 2006, Hooker Furniture approved a change in our fiscal
year.  After the fiscal year that ended November 30, 2006, our fiscal
years will end on the Sunday closest to January 31.  The following
selected financial data for each of our last five fiscal years and for the
two-month transition period ended January 28, 2007 has been derived from our
audited, consolidated financial statements.  The selected financial
data should be read in conjunction with the Consolidated Financial Statements,
including the related Notes, and Management’s Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this
report.





For The
                    
                    
                    For The
                    
                    
                    For The Two52 Weeks Ended
                    
                    
                    53 Weeks Ended
                    
                    
                    Months Ended
                    
                    
                    For The Twelve Months EndedFebruary 1,
                    
                    
                    February 3,
                    
                    
                    January 28,
                    
                    
                    Nov. 30,
                    
                    
                    Nov. 30,
                    
                    
                    Nov. 30,2009(1)(2)
                    
                    
                    2008 (1)(2)
                    
                    
                    2007
                    
                    
                    2006
                    
                    
                    2005
                    
                    
                    2004(In
      thousands, except per share data)Income
      Statement Data (3):Net
      sales
                    
                    $
                    261,162
                    
                    
                    $
                    316,801
                    
                    
                    $
                    49,061
                    
                    
                    $
                    350,026
                    
                    
                    $
                    341,775
                    
                    
                    $
                    345,944Cost
      of sales
                    
                    
                    200,878
                    
                    
                    
                    235,057
                    
                    
                    
                    37,876
                    
                    
                    
                    269,681
                    
                    
                    
                    265,051
                    
                    
                    
                    262,889Gross
      profit
                    
                    
                    60,284
                    
                    
                    
                    81,744
                    
                    
                    
                    11,185
                    
                    
                    
                    80,345
                    
                    
                    
                    76,724
                    
                    
                    
                    83,055Selling
      and administrative expenses
                    
                    
                    45,980
                    
                    
                    
                    51,738
                    
                    
                    
                    7,028
                    
                    
                    
                    50,680
                    
                    
                    
                    50,319
                    
                    
                    
                    50,285ESOP
      termination compensation charge (4)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    18,428Restructuring
      (credits) charges (5)
                    
                    
                    (951
                    )
                    
                    
                    309
                    
                    
                    
                    2,973
                    
                    
                    
                    6,881
                    
                    
                    
                    5,250
                    
                    
                    
                    1,604Goodwill
      and intangible asset impairment charges (6)
                    
                    
                    4,914Operating
      income (loss)
                    
                    
                    10,341
                    
                    
                    
                    29,697
                    
                    
                    
                    (17,244
                    )
                    
                    
                    22,784
                    
                    
                    
                    21,155
                    
                    
                    
                    31,166Other
      income (expense), net
                    
                    
                    323
                    
                    
                    
                    1,472
                    
                    
                    
                    129
                    
                    
                    
                    (77
                    )
                    
                    
                    (646
                    )
                    
                    
                    (1,242
                    )Income
      (loss) before income taxes
                    
                    
                    10,664
                    
                    
                    
                    31,169
                    
                    
                    
                    (17,115
                    )
                    
                    
                    22,707
                    
                    
                    
                    20,509
                    
                    
                    
                    29,924Income
      taxes
                    
                    
                    3,754
                    
                    
                    
                    11,514
                    
                    
                    
                    1,300
                    
                    
                    
                    8,569
                    
                    
                    
                    8,024
                    
                    
                    
                    11,720Net
      income (loss)
                    
                    
                    6,910
                    
                    
                    
                    19,655
                    
                    
                    
                    (18,415
                    )
                    
                    
                    14,138
                    
                    
                    
                    12,485
                    
                    
                    
                    18,204Per
      Share Data:Basic
      and diluted earnings per share (7)
                    
                    $
                    0.62
                    
                    
                    $
                    1.58
                    
                    
                    $
                    (1.52
                    )
                    
                    $
                    1.18
                    
                    
                    $
                    1.06
                    
                    
                    $
                    1.56Cash
      dividends per share
                    
                    
                    0.40
                    
                    
                    
                    0.40
                    
                    
                    
                    
                    
                    
                    
                    0.31
                    
                    
                    
                    0.28
                    
                    
                    
                    0.24Net
      book value per share (6)
                    
                    
                    12.06
                    
                    
                    
                    12.18
                    
                    
                    
                    12.23
                    
                    
                    
                    13.49
                    
                    
                    
                    12.50
                    
                    
                    
                    11.60Weighted
      average shares outstanding
                    
                    
                    11,060
                    
                    
                    
                    12,442
                    
                    
                    
                    12,113
                    
                    
                    
                    11,951
                    
                    
                    
                    11,795
                    
                    
                    
                    11,669Balance
      Sheet Data:Cash
      and cash equivalents
                    
                    $
                    11,804
                    
                    
                    $
                    33,076
                    
                    
                    $
                    47,085
                    
                    
                    $
                    31,864
                    
                    
                    $
                    16,365
                    
                    
                    $
                    9,230Trade
      accounts receivable
                    
                    
                    30,261
                    
                    
                    
                    38,229
                    
                    
                    
                    37,744
                    
                    
                    
                    45,444
                    
                    
                    
                    43,993
                    
                    
                    
                    40,960Inventories
                    
                    
                    60,248
                    
                    
                    
                    50,560
                    
                    
                    
                    62,803
                    
                    
                    
                    68,139
                    
                    
                    
                    68,718
                    
                    
                    
                    69,735Assets
      held for sale (8)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    3,475
                    
                    
                    
                    
                    
                    
                    
                    1,656
                    
                    
                    
                    5,376Working
      capital
                    
                    
                    91,261
                    
                    
                    
                    102,307
                    
                    
                    
                    127,193
                    
                    
                    
                    124,028
                    
                    
                    
                    110,421
                    
                    
                    
                    97,661Total
      assets
                    
                    
                    153,467
                    
                    
                    
                    175,232
                    
                    
                    
                    202,463
                    
                    
                    
                    201,299
                    
                    
                    
                    189,576
                    
                    
                    
                    188,918Long-term
      debt (including current maturities)
                    
                    
                    5,218
                    
                    
                    
                    7,912
                    
                    
                    
                    10,415
                    
                    
                    
                    11,012
                    
                    
                    
                    13,295
                    
                    
                    
                    23,166Shareholders’
      equity
                    
                    
                    129,710
                    
                    
                    
                    140,826
                    
                    
                    
                    162,310
                    
                    
                    
                    162,536
                    
                    
                    
                    148,612
                    
                    
                    
                    136,585





(1)
            On
      April 28, 2007, Hooker acquired substantially all of the assets of
      Bedford, Va.-based fabric upholstered seating specialist Sam Moore
      Furniture.  Shipments of Sam Moore upholstered furniture
      products accounted for $25.4 million in net sales for fiscal 2009 and for
      $20.8 million in net sales for fiscal 2008 following the
      acquisition.


(2)
            On
      December 14, 2007, we acquired the assets of Opus Designs Furniture, LLC,
      a specialist in imported moderately-priced youth bedroom
      furniture.  Shipments of Opus youth bedroom furniture products
      accounted for $5.6 million in net sales for fiscal 2009 and for $636,000
      in net sales for fiscal 2008 following the
  acquisition.


(3)
            Warehousing,
      distribution and certain supply chain and operations management expenses
      for periods prior to 2009 have been reclassified from selling and
      administrative expense to cost of sales to conform to the 2009 method of
      presentation.  Amounts reclassified in each period presented
      were $16.8 million for fiscal 2009, $15.5 million for the fiscal 2008,
      $2.4 million for the two month period ended January 28, 2007, $20.9
      million for fiscal 2006, $15.2 million for fiscal 2005 and $12.4 million
      for fiscal 2004.


(4)
            On
      January 26, 2007, we terminated our ESOP.  The termination
      resulted in an $18.4 million non-cash, non-tax deductible charge to
      earnings in January 2007.


(5)
            We
      have closed facilities in order to reduce and ultimately eliminate our
      domestic wood furniture manufacturing capacity.  As a result, we
      recorded restructuring charges, principally for severance and asset
      impairment, as follows:


a)
            in
      fiscal 2009 we recorded after tax credits of $592,000 ($951,000 pretax),
      or $0.05 per share related to previously accrued employee benefits and
      environmental costs not expected to be
paid;


b)
            in
      fiscal 2008, we recorded after tax charges of $190,000 ($309,000 pretax),
      or $0.02 per share, principally related to the March 2007 closing and sale
      of our Martinsville, Va. manufacturing
facility;


c)
            in
      the 2007 two-month transition period, we recorded after tax charges of
      $1.8 million ($3.0 million pretax), or $0.15 per share, principally for
      severance and related benefits for salaried and hourly employees related
      to the planned closing of our Martinsville, Va. manufacturing
      facility;


d)
            in
      fiscal 2006, we recorded after tax charges of $4.3 million ($6.9 million
      pretax), or $0.36 per share, principally related to the planned closing of
      our Martinsville, Va. manufacturing facility and the closing of our
      Roanoke, Va. facility;


e)
            in
      fiscal 2005, we recorded after tax charges of $3.3 million ($5.3 million
      pretax), or $0.28 per share, principally related to the closing of our
      Pleasant Garden, N.C. facility;


18





f)
            in
      fiscal 2004, we recorded after tax charges of $994,000 ($1.6 million
      pretax), or $0.09 per share, principally related to the closing of our
      Maiden, N.C. facility.


(6)
            In
      the fiscal 2009 fourth quarter we completed our annual impairment
      assessment of goodwill and other intangible assets.  As a
      consequence of the assessment, we recorded asset impairment charges of
      $2.5 million ($3.8 million, pretax), or $0.22 per share, primarily related
      to the write-off of goodwill resulting from the acquisition of Opus
      Designs in 2007 and of Bradington-Young in 2003, and $685,000 ($1.1
      million pretax) or $0.06 per share to write down the Bradington-Young
      trade name.


(7)
            Net
      book value per share is derived by dividing (a)  “shareholders’
      equity” by (b) the number of common shares issued and outstanding,
      excluding unearned ESOP and restricted shares, all determined as of the
      end of each fiscal period.


(8)
            In
      connection with the closings of the Martinsville, Va. plant in March 2007,
      the Roanoke, Va. plant in August 2006, the Pleasant Garden, N.C. plant in
      October 2005 and the Maiden, N.C. plant in October 2004, we reclassified
      substantially all of the related property, plant and equipment to “assets
      held for sale.”  The carrying value of these assets approximated
      fair value less anticipated selling expenses.  We completed the
      sale of the assets located in Martinsville, Va. in December 2007, the
      assets located in Roanoke, Va. in October 2006, the assets located in
      Pleasant Garden, N.C. in May 2006 and the assets located in Maiden, N.C.
      in January 2005.





ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS





The
following discussion should be read in conjunction with the Selected Financial
Data and the Consolidated Financial Statements, including the related Notes,
contained elsewhere in this annual report.





On August
29, 2006, Hooker approved a change in our fiscal year.  After the
fiscal year that ended November 30, 2006, our fiscal year ends on the Sunday
nearest to January 31.  In addition, starting with the fiscal year
that began January 29, 2007, we adopted quarterly periods based on thirteen-week
“reporting periods” (which will end on a Sunday) rather than quarterly periods
consisting of three calendar months.  As a result, each quarterly
period generally will be thirteen weeks, or 91 days, long.  However,
since our fiscal year will end on the Sunday closest to January 31, in some
years (generally once every seven years) the fourth quarter will be fourteen
weeks long and the fiscal year will consist of 53 weeks (e.g., the fiscal year
that ended February 3, 2008 was 53 weeks).  For more information about
the changes in our fiscal year and quarterly periods, please refer to our Form
8-K filed with the Securities and Exchange Commission on September 1,
2006.





In
connection with the change in our fiscal year, we completed a two-month
transition period that began December 1, 2006 and ended January 28, 2007 and
filed a transition report on Form 10-Q for that period on March 16,
2007.  The financial statements filed as part of this annual report on
Form 10-K include the:


·
            fifty-two
      week period that began February 4, 2008 and ended on February 1,
      2009;


·
            fifty-three
      week period that began January 29, 2007 and ended on February 3,
      2008;


·
            two-month
      transition period that began December 1, 2006 and ended January 28, 2007;
      and


·
            twelve-month
      period that ended November 30, 2006.  We did not recast the
      financial statements for the twelve-month period ended November 30, 2006,
      principally because the financial reporting processes in place for that
      period included certain procedures that were completed only on a quarterly
      basis.  Consequently, to recast that period would have been
      impractical and would not have been
  cost-justified.





For
fiscal year 2009 we reclassified warehousing and distribution and operations
management expenses from selling and administrative expenses to cost of sales in
our consolidated financial statements and accompanying
notes.  Accordingly, these costs have also been reclassified for prior
periods to conform to the current year’s method of presentation.  We
reclassified $16.8 million for fiscal 2009 and $15.5 million for fiscal
2008.





Overview





We have
seen a growing consumer preference for lower-priced, high-quality imported
furniture products since 2001.  Led by the change in consumer demand,
from 2003 to 2008 we systematically increased our reliance on high-quality
imported home furnishings with a coordinated exit from domestic wood furniture
manufacturing.  We closed our last domestic wood manufacturing plant
during the 2008 first quarter.  Following the sale of all
manufacturing assets no longer needed in the business and the reduction in the
workforce of approximately 2,000 wood manufacturing employees, we have replaced
a domestic operating model for wood furniture, which had high overhead and high
fixed costs, with a low overhead, variable cost import model.





Since
2006, our business has been impacted by low levels of consumer confidence and a
weak housing market.  By late 2008, the economic malaise, exacerbated
by weak credit markets, had spread to the broader U.S. economy.  As a
result, the residential home furnishings industry has seen an unprecedented
decline in demand for its products.


19


Results
of operations for the 52 weeks ended February 1, 2009 and the fifty-three weeks
ended February 3, 2008 reflect our transformation into a home furnishings
design, marketing and logistics company with world-wide sourcing
capabilities.  We are now focused on imported wood and metal
furniture, as well as both domestically produced and imported upholstered home
furnishings.





In early
2007, we completed the acquisition of substantially all of the assets of Sam
Moore Furniture Industries, Inc., a Bedford, Virginia manufacturer of upscale
occasional chairs with an emphasis on fabric-to-frame customization in the
upper-medium to high-end price niches.  We began operating the
business as Sam Moore Furniture LLC during the fiscal 2008 second
quarter.  On December 14, 2007, we completed our acquisition of
certain assets of Opus Designs Furniture, LLC, a specialist in moderately-priced
imported youth furniture.  We have integrated this business with our
existing imported wood and metal furniture business and now offer this brand to
customers as Opus Designs by Hooker.





Because
fiscal 2009 included four fewer shipping days than fiscal 2008, management’s
discussion of results of operations includes information regarding profitability
performance as a percentage of net sales and daily average sales
rates.





Following
are the principal factors that impacted our results of operations during the
52-week period ended February 1, 2009:





·
            Based
      on operating days in each period and excluding discontinued, domestically
      produced wood furniture, average daily net sales declined 15.1% during the
      251-day 2009 fiscal year compared to the 255-day 2008 fiscal
      year.  The decline in average daily net sales mirrors the
      year-over-year decline in incoming order rates we have experienced since
      the fiscal 2006 third quarter resulting from an industry-wide slow down in
      business at retail.





·
            Operating
      margin during the 2009 fiscal year compared with the 2008 fiscal year was
      negatively impacted by a decrease in gross profit margin, an increase in
      selling and administrative expenses as a percentage of sales, and
      impairment charges incurred in fiscal
2009.




We
experienced an erosion of gross profit margin to 23.1% of net sales compared
with 25.8% in the prior fiscal year, largely due to an increase in direct costs
as a percentage of net sales, resulting from:




·
            higher
      prices from virtually all suppliers of imported
  products,




·
            higher
      ocean freight costs, including fuel surcharges, higher upholstery material
      costs, and




·
            increased
      warehousing expense from the addition of two facilities in Asia, and the
      West Coast Service Center in
California.




Selling
and administrative expenses increased as a percentage of net sales, due to lower
net sales.  However, these expenses actually declined by $5.8 million,
or 11.1%, driven primarily by:




·
            lower
      selling and compensation expenses,
and




·
            lower
      professional fees and lower contributions expense, due to the donation of
      the High Point showrooms in fiscal
2008.




These
cost reductions were partially offset by higher allowance for bad debts and
costs incurred to introduce the Opus Designs by Hooker product line to our
customer base.




Finally,
we recorded $4.9 million in asset impairment charges during the 2009 fourth
quarter, including


·
            the
      elimination of all goodwill related to Bradington-Young and Opus Designs
      by Hooker Youth Furniture lines and


·
            a
      partial write down the carrying value of the Bradington-Young trade
      name.


20


Results
of Operations





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





Fifty-Two
                                            
                                            Fifty-Three
                                            
                                            TwelveWeeks Ended
                                            
                                            Weeks Ended
                                            
                                            Months EndedFebruary 1,
                                            
                                            February 3,
                                            
                                            November 30,2009
                                            
                                            2008
                                            
                                            2006Net
      sales
                                            
                                            
                                            100.0
                                            %
                                            
                                            
                                            100.0
                                            %
                                            
                                            
                                            100.0
                                            %Cost
      of sales
                                            
                                            
                                            76.9
                                            
                                            
                                            
                                            74.2
                                            
                                            
                                            
                                            77.0Gross
      profit
                                            
                                            
                                            23.1
                                            
                                            
                                            
                                            25.8
                                            
                                            
                                            
                                            23.0Selling
      and administrative expenses
                                            
                                            
                                            17.6
                                            
                                            
                                            
                                            16.3
                                            
                                            
                                            
                                            14.5Restructuring
      (credits) charges
                                            
                                            
                                            (0.4
                                            )
                                            
                                            
                                            0.1
                                            
                                            
                                            
                                            2.0Goodwill
      and intangible asset impairment charges
                                            
                                            
                                            1.9Operating
      income
                                            
                                            
                                            4.0
                                            
                                            
                                            
                                            9.4
                                            
                                            
                                            
                                            6.5Other
      income (expense), net
                                            
                                            
                                            0.1
                                            
                                            
                                            
                                            0.5Income
      before income taxes
                                            
                                            
                                            4.1
                                            
                                            
                                            
                                            9.8
                                            
                                            
                                            
                                            6.5Income
      taxes
                                            
                                            
                                            1.5
                                            
                                            
                                            
                                            3.6
                                            
                                            
                                            
                                            2.5Net
      income
                                            
                                            
                                            2.6
                                            
                                            
                                            
                                            6.2
                                            
                                            
                                            
                                            4.0





Fiscal
2009 Compared to Fiscal 2008





For
fiscal 2009, Hooker Furniture reported net sales of $261.2 million, a decrease
of $55.6 million, or 17.6%, compared to $316.8 million in fiscal
2008.  Net sales of our wood and metal furniture decreased $48.7
million, or 20.6%, to $188.2 million during fiscal 2009 compared to net sales of
$236.9 million in fiscal 2008, principally due to lower unit
volume.  The decline in wood and metal furniture unit volume was
attributed to a sharp decline in sales as a result of the industry-wide slow
down in business at retail and lower shipments of discontinued domestically
produced wood furniture.





Based on
operating days in each period, and excluding the impact of discontinued,
domestically produced wood furniture, average daily net sales declined 15.1% to
$1.0 million per day during the 251-day 2009 fiscal year, compared to $1.2
million per day during the 255-day 2008 fiscal year.  We experienced
lower average daily unit volume shipments overall and in every product category,
except youth bedroom and upholstered seating, which increased due to the
acquisition of Opus Designs in December 2007 and the inclusion of a full year of
sales for Sam Moore, which was acquired in April 2007.





Overall,
average selling prices declined significantly.  The primary
contributors to the overall decline were;


·
            the
      sharp drop in the average selling price of upholstered
      furniture.  This drop was due to the increased proportion of
      upholstery sales of  less expensive, predominantly
      fabric-covered products manufactured by Sam Moore, which was in its first
      full year as a Hooker subsidiary,
and


·
            the
      impact of our exit from the domestic wood and metal furniture
      business.





The unit
volume of higher priced domestically produced wood products was partially
replaced by lower priced imports.  The remaining domestic wood
products were heavily discounted during fiscal 2009.  The average
selling price for imported wood and metal furniture decreased due to heavier
discounting in a challenging market and the mix of products
shipped.  Bradington-Young’s imported and domestically produced
leather upholstered furniture showed higher average selling prices while Sam
Moore’s average prices declined in both categories.





Gross
profit margin for fiscal 2009 decreased to 23.1% of net sales compared to 25.8%
in fiscal 2008, primarily due to:


·
            increased
      product and shipping and warehousing
costs,


·
            lower
      fixed cost absorption due to lower sales of domestically produced
      upholstered furniture, and


·
            higher
      warehousing and distribution expenses due to the addition of two
      facilities in China and one in
California.





These
costs were partially offset by lower salary and benefit expenses resulting from
staff reductions at our Bradington-Young and domestic wood and metal furniture
operations.


21


For
fiscal 2009, selling and administrative expenses decreased $5.8 million, or
11.1%, to $46.0 million, compared with $51.7 million in 2008, due
to:


·
            last
      year’s donation of two former Bradington-Young’s showrooms to a local
      university, and


·
            lower
      selling expenses, professional fees and administrative payroll
      costs.





These
costs were partially offset by higher bad debt expenses.





As a
percentage of net sales, selling and administrative expenses increased to 17.6%
in fiscal 2009 from 16.3% in fiscal 2008, due to lower net sales in the current
year.





During
fiscal 2009, we recorded $4.9 million ($3.1million after tax, or $0.28 per
share) in goodwill and intangible asset impairment charges, principally related
to:





·
            a
      write-off of $1.4 million in goodwill resulting from the 2007 acquisition
      of Opus Designs


·
            a
      write-off of $2.4 million in goodwill remaining from the Company’s
      purchase of Bradington-Young in
2003;


·
            an
      impairment charge of $1.1 million in the value of the Bradington-Young
      trade name.





We also
recorded restructuring credits of $951,000 ($592,000 after tax or $0.05 per
share) in fiscal 2009 for previously accrued employee benefits and environmental
costs not expected to be paid.





During
fiscal 2008, we recorded $309,000 ($190,000 after tax, or $0.02 per share) in
restructuring and asset impairment charges (net of restructuring
credits).





Our
operating income margin for fiscal 2009 decreased to 4.0% of net sales, compared
to operating income margin of 9.4% of net sales for fiscal 2008, principally due
to:





·
            the
      $3.7 million increase in restructuring and goodwill and intangible asset
      impairment costs;


·
            the
      decrease in gross profit margin to 23.1% from 25.8%;
  and


·
            the
      increase in selling and administrative expenses as a percentage of net
      sales to 17.6% in 2009 compared to 16.3% in fiscal 2008, due to the
      decline in sales (although these costs decreased $5.8 million or
      11.1%).




Excluding
the effect of restructuring and goodwill and intangible asset impairment
charges, operating profitability in fiscal 2009 still declined year over year
compared to fiscal 2008, primarily as a result of lower gross profit margins on
our imported wood and metal furniture and domestic and imported upholstered
furniture.  The following table reconciles operating income as a
percentage of net sales ("operating margin") to operating margin excluding these
charges (“restructuring and special charges”) as a percentage of net sales for
each period:




Fifty-Two
                                    
                                    Fifty-ThreeWeeks Ended
                                    
                                    WeeksEndedFebruary 1,
                                    
                                    February 3,2009
                                    
                                    2008Operating
      margin, including restructuring and special charges
                                    
                                    
                                    4.0
                                    %
                                    
                                    
                                    9.4
                                    %Goodwill
      and intangible asset impairment charges
                                    
                                    
                                    1.9Donation
      of two showrooms
                                    
                                    
                                    
                                    
                                    
                                    
                                    0.3Restructuring
      (credits) charges
                                    
                                    
                                    (0.4
                                    )
                                    
                                    
                                    0.1Operating
      margin, excluding restructuring and special charges
                                    
                                    
                                    5.5
                                    %
                                    
                                    
                                    9.8
                                    %





The
operating margin excluding the impact of restructuring charges and special
charges is a “non-GAAP” financial measure.  We provide this
information because we believe it is useful to investors in evaluating our
ongoing operations. Non-GAAP financial measures are intended to provide insight
into selected financial information and should be evaluated in the context in
which they are presented. These measures are not intended to reflect our overall
financial results.





Other
income, net was $323,000, or 0.1% of net sales, for fiscal 2009, compared to
other income, net of $1.5 million for fiscal 2008, primarily the consequence of
a decrease in interest income from lower interest rates and lower cash
balances.




Our
effective tax rate decreased to 35.2% for fiscal 2009, compared to 36.9% for
fiscal 2008.  The decrease was principally a result of an increase in
non-cash charitable contributions of finished furniture as a percentage of
pretax income and lower net cost related to our captive insurance
program.


22





Net
income for fiscal 2009 declined by 64.8%, or $12.8 million, to $6.9 million, or
$0.62 per share, from $19.7 million, or $1.58 per share, for fiscal
2008.  As a percent of net sales, net income decreased to 2.6% in
fiscal 2009 compared to 6.2% for fiscal 2008.





Fiscal
2008 Compared to Fiscal 2006





For
fiscal 2008, we reported net sales of $316.8 million, a decrease of $33.2
million, or 9.5%, compared to $350.0 million in fiscal 2006.  Net
sales of our wood and metal furniture decreased $50.2 million, or 17.5%, to
$236.9 million during fiscal 2008 compared to net sales of $287.1 million in
fiscal 2006, principally due to lower unit volume.  The decline in
wood and metal furniture unit volume was attributed to a sharp decline in
discontinued domestically produced wood furniture sales and an industry-wide
slow down in business at retail.  We experienced lower average daily
unit volume on shipments overall and in every product category except
Bradington-Young imported leather upholstery, which experienced a slight
increase in fiscal 2008, compared to fiscal 2006.  Sam Moore fabric
upholstery sales amounted to $20.8 million for the three quarters since it was
acquired at the beginning of the fiscal 2008 second quarter.





Based on
actual shipping days in each period, average daily net sales declined 10.6% to
$1.2 million per day during the 255-day 2008 fiscal year compared to $1.4
million per day during the 252-day 2006 fiscal year.





Overall,
average selling prices declined slightly.  The primary contributor to
the overall decline was the sharp decline in domestically produced wood
furniture average selling prices, principally due to sharp discounting offered
on these discontinued products.  We experienced slight increases in
average selling prices for imported wood and metal and Bradington-Young imported
and domestically produced leather upholstered furniture.  Average
selling prices for imported wood and metal furniture during fiscal year 2008
increased in part due to the mix of products shipped and lower discounting,
compared to fiscal year 2006.  While average selling prices per unit
for both Bradington-Young domestically produced and imported leather upholstered
furniture increased, Bradington Young’s overall per unit average selling price
declined slightly, due to the higher proportion of imported products
shipped.





Gross
profit margin for fiscal 2008 increased to 25.8% of net sales compared to 23.0%
in fiscal 2006, principally due to the larger proportion of sales of higher
margin imported products and the lower delivered cost of those products as a
percentage of net sales, as well as to reductions in temporary warehousing and
storage costs for imported wood furniture products.





For
fiscal 2008, selling and administrative expenses increased $1.1 million, or
2.1%, to $51.7 million compared with $50.7 million in 2006.  The
increase is principally due to the selling and administrative expenses incurred
by Sam Moore and a $1.1 million charitable contribution for the donation of two
former Bradington-Young showrooms to a local university. These cost increases
were offset by lower early retirement and non-cash ESOP costs, lower selling
expenses and a gain on the settlement of a corporate-owned life insurance policy
in connection with the death of a former Hooker executive.  As a
percentage of net sales, selling and administrative expenses increased to 16.3%
in fiscal 2008 from 14.5% in fiscal 2006, due to lower net sales in the current
year.





During
fiscal 2008, we recorded $309,000 ($190,000 after tax, or $0.02 per share) in
restructuring and asset impairment charges (net of restructuring credits),
including:





·
            $553,000
      for additional asset impairment, disassembly and exit costs associated
      with the closing of the Martinsville, Va. domestic wood manufacturing
      facility in March 2007; net of


·
            a
      restructuring credit of $244,000, principally for previously accrued
      health care benefits for terminated employees at the former Pleasant
      Garden, N.C.,  Martinsville, Va. and Roanoke, Va. facilities
      that are not expected to be paid.





During
fiscal 2006, we recorded $6.9 million ($4.3 million after tax, or $0.36 per
share) in restructuring and asset impairment charges (net of restructuring
credits).





Our
operating income margin for fiscal 2008 increased to 9.4% of net sales, compared
to operating income margin of 6.5% of net sales for fiscal 2006, principally due
to:





·
            the
      $6.6 million, or 95.5%, decrease in restructuring and asset impairment
      costs;


·
            the
      increase in gross profit margin to 25.8% from 23.0%; partially offset
      by


·
            the
      increase in selling and administrative expenses as a percentage of net
      sales to 16.3% in 2008 compared to 14.5% in fiscal 2006, due to the
      decline in sales, but also to the addition of Sam Moore and the large
      donation of property to a local
university.




23




Excluding
the effect of restructuring and asset impairment charges and the December 2007
donation of the two former Bradington-Young showrooms, operating profitability
in fiscal 2008 improved year over year compared to fiscal 2006, principally as a
result of higher gross profit margins on our imported wood and metal
furniture.  The following table reconciles operating income as a
percentage of net sales ("operating margin") to operating margin excluding these
charges (“restructuring and special charges”) as a percentage of net sales for
each period:




Fifty-Three
                                    
                                    Twelve MonthsWeeks Ended
                                    
                                    EndedFebruary 3,
                                    
                                    November 30,2008
                                    
                                    2006Operating
      margin, including restructuring and special charges
                                    
                                    
                                    9.4
                                    %
                                    
                                    
                                    6.5
                                    %Donation
      of two showrooms
                                    
                                    
                                    0.3Restructuring
      charges
                                    
                                    
                                    0.1
                                    
                                    
                                    
                                    2.0Operating
      margin, excluding restructuring and
    special  charges
                                    
                                    
                                    9.8
                                    %
                                    
                                    
                                    8.5
                                    %





The
operating margin excluding the impact of restructuring charges and the showrooms
donation is a “non-GAAP” financial measure.  We provide this
information because we believe it is useful to investors in evaluating our
ongoing operations.  Non-GAAP financial measures are intended to
provide insight into selected financial information and should be evaluated in
the context in which they are presented. These measures are not intended to
reflect our overall financial results





Other
income, net was $1.5 million, or 0.5% of net sales, for fiscal 2008 compared to
other expense, net of $77,000 for fiscal 2006.  This improvement was
the result of an increase in interest income earned on higher cash and cash
equivalent balances and a decrease in interest expense on lower debt
levels.





Our
effective tax rate decreased to 36.9% for fiscal 2008 compared to 37.7% for
fiscal 2006.  The effective rate declined in fiscal 2008 principally
due to the tax effect of the ESOP.  In fiscal 2008, we reversed
previously recorded income tax expense related to our ESOP in connection with
the settlement of an IRS audit.  In addition, we recorded no ESOP
compensation cost during the current year period after the termination of that
plan in January 2007.  The effective rate also declined during the
current year period due to the non-taxable gain recorded on the settlement of a
corporate owned life insurance policy discussed previously, and lower
assessments under our captive insurance arrangement compared to fiscal
2006.  These declines were partially offset by an increase in our
effective state income tax rate, principally attributed to California state
income taxes incurred as a result of opening the new West Coast distribution
center.





Net
income for fiscal 2008 rose by 39.0%, or $5.5 million, to $19.7 million, or
$1.58 per share, from $14.1 million, or $1.18 per share, for fiscal
2006.  As a percent of net sales, net income increased to 6.2% in
fiscal 2008 compared to 4.0% for fiscal 2006.


24


Fiscal
2007 Two-Month Transition Period Compared to Fiscal 2006 First
Quarter





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





Two
      Months
                                    
                                    Three MonthsEnded
                                    
                                    EndedJanuary
      28,
                                    
                                    February 28,2007
                                    
                                    2006Net
      sales
                                    
                                    
                                    100.0
                                    %
                                    
                                    
                                    100.0
                                    %Cost
      of sales
                                    
                                    
                                    77.2
                                    
                                    
                                    
                                    78.8Gross
      profit
                                    
                                    
                                    22.8
                                    
                                    
                                    
                                    21.2Selling
      and administrative expenses
                                    
                                    
                                    14.2
                                    
                                    
                                    
                                    14.2ESOP
      termination compensation charge
                                    
                                    
                                    37.6Restructuring
      and related asset impairment charges
                                    
                                    
                                    6.1
                                    
                                    
                                    
                                    0.2Operating
      (loss) income
                                    
                                    
                                    (35.1
                                    )
                                    
                                    
                                    6.8Other
      income, net
                                    
                                    
                                    0.3(Loss)
      income before income taxes
                                    
                                    
                                    (34.9
                                    )
                                    
                                    
                                    6.8Income
      taxes
                                    
                                    
                                    2.7
                                    
                                    
                                    
                                    2.6Net
      (loss) income
                                    
                                    
                                    (37.5
                                    )
                                    
                                    
                                    4.2





Net sales
for the 2007 two-month transition period ended January 28, 2007 were $49.1
million and were $85.3 million for the fiscal 2006 three-month
period.  Based on actual shipping days in each period, average daily
net sales declined 5.8% to $1,258,000 per day during the 39-day fiscal 2007
transition period compared to $1,335,400 per day during the 42-day operating
period from December 1, 2005 through January 31, 2006 and 8.6% from $1,376,400
per day during the 62-day fiscal 2006 first quarter.





Average
daily net sales increased for imported wood, metal and upholstered furniture for
the 2007 transition period compared to the fiscal 2006 first quarter,
principally due to slightly higher unit volume.  This increase was
offset by a continued decline in average daily net sales rates for domestically
manufactured wood furniture and a moderate decline in average daily net sales
rates for domestically produced upholstered furniture.





Overall
average selling prices decreased slightly for wood, metal and upholstered
furniture during the 2007 two-month transition period compared with the fiscal
2006 first quarter, principally due to higher sales discounting offered on
overstocked and discontinued domestically produced wood furniture products, as
well as a small decline in domestic upholstered furniture selling prices,
partially offset by increases in imported wood and upholstered furniture average
selling prices.  Average number of units sold per day declined during
the 2007 two-month transition period compared to the fiscal 2006 first
quarter.  Average per-day unit sales for imported wood and metal and
upholstered furniture increased slightly, while average daily per unit sales for
domestic upholstered furniture declined moderately and domestic wood and metal
furniture average per-day unit sales declined sharply.





Gross
profit margin increased to 22.8% of net sales in the 2007 two-month transition
period compared to 21.2% in the fiscal 2006 first quarter.  This
improvement was the result of an increase in the gross profit margin for wood
and metal furniture, partially offset by a decline in the gross profit margin
for upholstered furniture.  The increase in gross profit margin on
wood and metal furniture was principally due to an increased proportion of sales
of imported wood, metal and upholstered furniture and was partially offset by a
significantly lower gross profit margin on domestically produced wood
furniture.  Gross profit margin on domestically produced wood
furniture declined as production costs as a percentage of net sales increased in
the 2007 two-month transition period compared, to the fiscal 2006 first quarter,
principally due to lower production levels.





Bradington-Young’s
gross profit margin decline for the 2007 two-month transition period versus the
fiscal 2006 first quarter was principally due to lower production
levels.





Selling
and administrative expenses, as a percentage of net sales, were 14.2% in the
2007 two-month transition period and the fiscal 2006 first quarter.





On
January 29, 2007, we announced that we had terminated our ESOP, effective
January 26, 2007.  The termination resulted in an $18.4 million,
non-cash, non-tax deductible charge to earnings in January 2007 with an
offsetting increase in shareholders’ equity.  As a result of the ESOP
termination, approximately 1.2 million shares of previously unallocated shares
of Company common stock held by the ESOP were allocated to eligible employees,
resulting in the $18.4 million charge to operating income.  To effect
the termination of the ESOP, we redeemed and retired approximately 1.2 million
of the shares of Company common stock held by the ESOP, with proceeds to the
ESOP of $17.2 million (or $15.01 per share).  The ESOP used the
proceeds to repay the outstanding balance on the ESOP loan.


25


Through
November 30, 2006, we recorded non-cash ESOP cost for the number of shares that
we committed to release to eligible employees at the average closing market
price of our common stock during the period.  During the 2007
two-month transition period, except for the effect of the ESOP termination
discussed above, no shares were committed to be released.  As a
result, no non-cash ESOP cost was recorded during the 2007 two-month transition
period.  We recorded $636,000 in non-cash ESOP cost during the 2006
first quarter.  The cost of the plan was allocated to cost of sales
and selling and administrative expenses based on employee
compensation.





During
the 2007 two-month transition period, we recorded aggregate restructuring and
asset impairment charges of $3.0 million ($1.8 million after tax, or $0.15 per
share), principally for severance and related benefits for approximately 280
hourly and salaried employees that were terminated ($2.3 million) and additional
asset impairment charges for the expected costs to sell the real and personal
property of the Martinsville, Va. manufacturing facility
($655,000).





In the
2006 first quarter, we recorded restructuring charges of $188,000 ($117,000
after tax, or $0.01 per share) to prepare the Pleasant Garden, N.C.
manufacturing facility for sale and for additional asset impairment related to
the closing of this facility.





Principally
due to the ESOP termination and restructuring and asset impairment charges, we
incurred an operating loss for the 2007 two-month transition period of $17.2
million, or 35.1% of net sales, compared to operating income of $5.8 million, or
6.8% of net sales in the 2006 first quarter.





Excluding
the effect of the ESOP termination and restructuring and asset impairment
charges, operating profitability as a percentage of net sales during the
transition period improved when compared to the three month first quarter of
fiscal 2006.  The following table reconciles operating results as a
percentage of net sales (“operating margin”) to operating margin excluding ESOP
termination charges and restructuring and asset impairment charges
(“restructuring charges”) as a percentage of net sales for each
period:





Two Months
                              
                              Three MonthsEnded January 28,
                              
                              Ended February 28,2007
                              
                              2006Operating
      (loss) income margin, including ESOP termination and restructuring
      charges
                              
                              
                              (35.1
                              )%
                              
                              
                              6.8
                              %ESOP
      termination charges
                              
                              
                              37.5Restructuring
      charges
                              
                              
                              6.1
                              
                              
                              
                              0.2Operating
      margin, excluding ESOP termination and restructuring
    charges
                              
                              
                              8.5
                              %
                              
                              
                              7.0
                              %





Operating
margin excluding the impact of the ESOP termination and restructuring charges is
a “non-GAAP” financial measure.  We provide this information because
we believe it is useful to investors in evaluating our
operations.  Non-GAAP financial measures are intended to provide
insight into selected financial information and should be evaluated in the
context in which they are presented. These measures are not intended to reflect
our overall financial results





Other
income, net increased to $129,000 in the 2007 two-month transition period from
$13,000 in the 2006 first quarter.  This improvement was the result of
an increase in interest income earned on higher cash and cash equivalent
balances and a decrease in interest expense, due to one less month of interest
expense in the 2007 two-month transition period compared, to the three-month
2006 first quarter.





We
recorded income tax expense of $1.3 million for the 2007 two-month transition
period and $2.2 million for the 2006 first quarter.  Despite the net
loss for the 2007 transition period, we incurred income tax expense in the
transition period because the $18.4 million non-cash ESOP termination charge was
not tax deductible.  In connection with the ESOP termination, we
wrote-off the related deferred tax asset in the amount of $855,000.





We incurred a net loss of $18.4
million, or $1.52 per share, for the 2007 two-month transition period and net
income of $3.6 million, or $0.30 per share, in the 2006 first
quarter.





Financial
Condition, Liquidity and Capital Resources





Balance Sheet and Working
Capital





Total
assets decreased $21.8 million to $153.5 million at February 1, 2009 from $175.2
million at February 3, 2008, principally as a result of a $21.3 million decrease
in cash and cash equivalents.  A $9.7 million increase in inventories,
a $1.3 million increase in the cash surrender value of life insurance policies,
and a $1.2 million increase in prepaid expenses and other current assets were
offset by an $8.0 million decrease in net receivables and the write- off of $4.9
million of goodwill and intangible assets from prior
acquisitions.


26


Working
capital decreased by $11.0 million to $91.3 million as of February 1, 2009, from
$102.3 million at February 3, 2008, principally as a result of decreases in cash
and cash equivalents and  receivables, offset by an increase in
inventories, and prepaid expenses and other current assets, and a decrease in
current liabilities.  Current liabilities decreased to $15.8 million
at February 1, 2009, from $23.1 million at February 3, 2008 as a result of lower
accounts payable, accrued salaries and accrued taxes.  Our long-term
debt, including current maturities, decreased $2.7 million to $5.2 million on
February 1, 2009, compared to $7.9 million on February 3, 2008 as a result of
scheduled debt payments.  Shareholders’ equity at February 1, 2009
decreased $11.1 million to $129.7 million compared to $140.8 million on February
3, 2008, principally as a result of share repurchases during fiscal
2009.





Summary Cash Flow
Information – Operating, Investing and Financing Activities





Fifty-Two
                                                
                                                Fifty-Three
                                                
                                                Two
      months
                                                
                                                TwelveWeeks
      Ended
                                                
                                                Weeks
      Ended
                                                
                                                Months
      Ended
                                                
                                                Months
      EndedFebruary
      1,
                                                
                                                February
      3,
                                                
                                                January
      28
                                                
                                                November
      30,2009
                                                
                                                2008
                                                
                                                2007
                                                
                                                2006Net
      cash provided by operating activities
                                                
                                                $
                                                3,730
                                                
                                                
                                                $
                                                43,825
                                                
                                                
                                                $
                                                16,261
                                                
                                                
                                                $
                                                23,805Net
      cash used in investing activities
                                                
                                                
                                                (3,752
                                                )
                                                
                                                
                                                (14,267
                                                )
                                                
                                                
                                                (443
                                                )
                                                
                                                
                                                (2,336
                                                )Net
      cash used in financing activities
                                                
                                                
                                                (21,250
                                                )
                                                
                                                
                                                (43,567
                                                )
                                                
                                                
                                                (597
                                                )
                                                
                                                
                                                (5,970
                                                )Net
      (decrease) increase in cash and cash equivalents
                                                
                                                $
                                                (21,272
                                                )
                                                
                                                $
                                                (14,009
                                                )
                                                
                                                $
                                                15,221
                                                
                                                
                                                $
                                                15,499





We
determined that in the Consolidated Statements of Cash Flows the cash payments
related to our life insurance policies should be reported as investing
activities rather than operating activities, therefore we increased “net cash
provided by operating activities” by $167,000 in fiscal 2008, $46,000 in the
2007 two-month transition period, and $1.5 million in fiscal 2006, with a
corresponding increase in “net cash used in investing activities” in each
respective period.  We reviewed the impact of this error on the prior
periods in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,”
and determined that the error was not material to the prior
periods.





During
fiscal year 2009, cash generated from operations ($3.7 million) and a decrease
in cash and cash equivalents ($21.3 million) funded purchases of our common
stock ($14.1 million), cash dividends ($4.5 million), payments on long-term debt
($2.7 million),  capital expenditures ($2.3 million) and life
insurance premium payments ($1.3 million).





During
fiscal year 2008, cash generated from operations ($43.8 million), a decrease in
cash and cash equivalents ($14.0 million), proceeds from the sale of property,
plant and equipment ($3.7 million, principally from the sale of the
Martinsville, Va. facility) and proceeds received from certain life insurance
policies ($1.2 million) funded purchases of our common stock ($36.0 million),
acquisitions ($15.8 million), cash dividends ($5.0 million), payments on
long-term debt ($2.5 million), capital expenditures ($1.9 million) and life
insurance premium payments ($1.4 million).





During
the 2007 two-month transition period ended January 28, 2007, cash generated from
operations ($16.3 million) funded a net increase in cash and cash equivalents
($15.2 million), payments on long-term debt ($597,000) and investing activities
($443,000 principally for the purchase of property, plant and equipment,
net).





During
fiscal year 2006, cash generated from operations ($23.8 million) and proceeds
from the sale of property, plant and equipment ($3.4 million principally from
the sale of the Roanoke, Va. and Pleasant Garden, N.C. facilities) funded an
increase in cash and cash equivalents ($15.5 million), capital expenditures
($4.3 million), cash dividends ($3.7 million), payments on long-term debt ($2.3
million) and life insurance premium payments ($1.5 million).





In fiscal
year 2009, cash generated from operations of $3.7 million decreased $40.1
million compared to $43.8 million in fiscal 2008.  The decrease was
due to a $51.7 million decline in cash received from customers due to the
decline in sales, partially offset by a $7.1 million decrease in cash payments
to suppliers and employees (principally due to a lower purchases of imported
products) and a $5.5 million decline in tax payments principally due to lower
profitability.  Despite lower inventory purchases in fiscal 2009,
inventories increased by $9.7 million in fiscal 2009 due to the natural lag
between the decline in customer order rates and our reduction of orders with our
suppliers.  We continue to modify our inventory plan in reaction to
the steepening decline in demand, and expect to bring inventory levels down over
the next two to three months.





In fiscal
year 2008, cash generated from operations of $43.8 million increased $20.0
million from $23.8 million in fiscal 2006.  The increase was due to a
$50.6 million decline in payments to suppliers and employees (principally due to
a decline in the purchase of imported products) and a $1.3 million decrease in
interest paid, net due to an increase interest income and a decline in interest
expense.  The increase was partially offset by a $27.9 million
decrease in cash received from customers and a $4.0 million increase in income
taxes paid, principally due to increased taxable income.


27


Investing
activities consumed $3.8 million in fiscal year 2009 compared to consuming $14.3
million in fiscal 2008, $443,000 in the 2007 two-month transition period and
$2.3 million in fiscal 2006.  In fiscal 2009, we invested $2.3 million
in property, plant and equipment, $1.3 million for life insurance premium
payments and $181,000 to complete the acquisition of Opus Designs.  In
fiscal year 2008, the investments of $10.6 million to acquire Sam Moore, $5.3
million to acquire Opus Designs and the $1.9 million investments in property,
plant and equipment exceeded the $3.7 million in proceeds from the sale of
property, plant and equipment (principally from the sale of the Martinsville,
Va. facility).  We invested $443,000 in the 2007 transition period for
capital expenditures, net and premiums paid on life insurance
policies.  In fiscal 2006, the investment of $4.3 million in property,
plant and equipment and $1.5 million for life insurance premium payments
exceeded the $3.4 million in proceeds from the sale of property, plant and
equipment (principally from the sale of the Roanoke, Va. and Pleasant Garden,
N.C. facilities).   Capital expenditures in each period are to
maintain and enhance our business operating systems and facilities and for the
purchase of equipment and other assets.





Financing
activities consumed cash of $21.3 million in fiscal year 2009 compared to $43.6
million in fiscal 2008, $597,000 in the 2007 two-month transition period and
$6.0 million in fiscal 2006.  During fiscal year 2009, we expended
cash of $14.1 million to repurchase approximately 800,000 shares of Hooker
common stock, which completes the share repurchase program originally authorized
in fiscal 2007.  We also paid dividends of $4.5 million and made
scheduled debt payments of $2.7 million.  During fiscal year 2008, we
expended cash of $36.0 million for the repurchase of 1.7 million shares of
Hooker common stock, cash dividends of $5.0 million and $2.5 million for
scheduled debt payments.  During the 2007 transition period, we made a
scheduled principal repayment of $597,000 on our term loan.  During
fiscal 2006, we expended $2.3 million in cash for scheduled debt payments and
cash dividends of $3.7 million.





Swap
Agreements





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





The
aggregate fair market value of our swap agreement decreases when interest rates
decline and increases when interest rates rise.  Overall, interest
rates have declined since the inception of our swap agreement.  The
aggregate decrease in the fair market value of the effective portion of the
agreement of $142,000 ($229,000 pretax) as of February 1, 2009, $191,000
($311,000 pretax) as of February 3, 2008 and $69,000 ($111,000 pretax) as of
January 28, 2007 is reflected under the caption “accumulated other comprehensive
loss” in the consolidated balance sheets.  See “Note 12 – Other
Comprehensive Income (Loss)” to the Consolidated Financial Statements included
in this report.  Substantially all of the aggregate pre-tax decrease
in fair market value of the agreement is expected to be reclassified into
interest expense during the next twelve months.





Debt Covenant
Compliance





The
credit agreement for our revolving credit facility and outstanding term loan
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, amortization, non-cash charges and maximum
capital expenditures.  On February 19, 2009, we amended our credit
facility with Bank of America, N.A.  The amendment, effective as of
January 1, 2009 modified the definition of “Cash Flow” to exclude all non-cash
charges, including intangible asset impairment from the calculation of Cash Flow
for purposes of the Company’s Debt Service Coverage Ratio under the credit
agreement; and increased the Commitment Fee and the fee for LIBOR Loans and
Letters of Credit under the credit agreement.  All other terms were
unchanged.  We are in compliance with these covenants as of February
1, 2009.





Liquidity, Financial
Resources and Capital Expenditures





As of
February 1, 2009, we had an aggregate $12.6 million available under our
revolving credit facility to fund working capital needs.  Standby
letters of credit in the aggregate amount of $2.4 million, used to collateralize
certain insurance arrangements and for imported product purchases, were
outstanding under our revolving credit facility as of February 1,
2009.  There were no additional borrowings outstanding under the
revolving credit line on February 1, 2009.  Any principal outstanding
under the credit line is due March 1, 2011.





We
believe that we have  the financial resources (including available
cash and cash equivalents, expected cash flow from operations, and lines of
credit) needed to meet business requirements for the foreseeable future,
including capital expenditures, working capital, dividends on our common stock,
repurchases of common stock and repayments of outstanding debt.  Cash
flow from operations is highly dependent on incoming order rates and our
operating performance.  We expect to spend $4 to $6 million in capital
expenditures during fiscal year 2009 to maintain and enhance our operating
systems and facilities.


28


Supplier
Commitments





During
fiscal 2009 we made advance payments to one of our finished goods suppliers
against our purchase orders placed with that supplier.  The purpose of
the advances was to facilitate the supplier’s purchase of raw materials in order
to ensure timely delivery of furniture shipments to us.  The current
balance of the advances is approximately $107,000.  We also assisted
the supplier in obtaining additional bank financing by issuing a standby letter
of credit in the amount of $600,000, which expires in July 2009, as security for
that financing.  In conjunction with the issuance of the letter of credit,
we entered into a security agreement with the supplier, which provides us with a
security interest in certain assets of the supplier and its
shareholders.  Our maximum exposure under the advances and the standby
letter of credit as of February 1, 2009 was approximately $707,000, which we
believe to be adequately secured under this arrangement.





Common Stock and
Dividends





Since
February 7, 2007, our Board of Directors has authorized the repurchase of $50
million of our common stock in a series of repurchase authorizations, subject to
the limitations of a trading plan under Rule 10b-5-1 of the Securities Exchange
Act of 1934 and certain board imposed guidelines.  We completed these
share repurchases in August 2008.





On
January 15, 2009, awards totaling 10,474 shares of restricted common stock were
granted to the five non-employee members of the Board of Directors.  Each
award is subject to vesting requirements and other limitations in
accordance with the Hooker Furniture 2005 Stock Incentive Plan.





On April
14, 2009, our Board of Directors declared a quarterly cash dividend of $0.10 per
share, payable on May 29, 2009, to shareholders of record May 15,
2009.





Commitments
and Contractual Obligations





As of
February 1, 2009, our commitments and contractual obligations were as
follows:





Payments Due by Period (In thousands)Less than
                                            
                                            
                                            
                                            
                                            
                                            More than1 Year
                                            
                                            1-3 Years
                                            
                                            3-5 Years
                                            
                                            5 Years
                                            
                                            TotalLong-term
      debt (a)
                                            
                                            $
                                            3,026
                                            
                                            
                                            $
                                            2,341
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            $
                                            5,367Deferred
      compensation payments
                                            
                                            
                                            393
                                            
                                            
                                            
                                            880
                                            
                                            
                                            $
                                            1,338
                                            
                                            
                                            $
                                            13,662
                                            
                                            
                                            
                                            16,273Operating
      leases
                                            
                                            
                                            1,432
                                            
                                            
                                            
                                            1,750
                                            
                                            
                                            
                                            1,440
                                            
                                            
                                            
                                            179
                                            
                                            
                                            
                                            4,801Other
      long-term liabilities
                                            
                                            
                                            2,179
                                            
                                            
                                            
                                            570
                                            
                                            
                                            
                                            6
                                            
                                            
                                            
                                            6
                                            
                                            
                                            
                                            2,761Total
      contractual cash obligations
                                            
                                            $
                                            7,030
                                            
                                            
                                            $
                                            5,541
                                            
                                            
                                            $
                                            2,784
                                            
                                            
                                            $
                                            13,847
                                            
                                            
                                            $
                                            29,202




(a)
            Represents
      principal and estimated interest payments under our term
    loan.





Standby
letters of credit in the aggregate amount of $2.4 million, used to collateralize
certain insurance arrangements and for imported product purchases, were
outstanding under our revolving credit facility as of February 1,
2009.  There were no additional borrowings outstanding under the
revolving credit line on February 1, 2009.





Strategy
and Outlook





Our
strategy is to offer world-class style, quality and product value as a complete
residential wood, metal and upholstered furniture resource through excellence in
product design, global sourcing, manufacturing, logistics, sales, marketing and
customer service.  We strive to be an industry leader in sales growth
and profitability performance, thereby providing an outstanding investment for
our shareholders and contributing to the well-being of our employees, customers,
suppliers and community neighbors.  Additionally, we strive to nurture
the relationship-focused, team-oriented and honor-driven corporate culture that
has distinguished our company for 85 years.




We have
been executing this strategy since 2003 in part through:





·
            exiting
      domestic wood furniture manufacturing to concentrate on imported wood and
      metal and domestically produced and imported upholstered home
      furnishings;


·
            expanding
      product offerings to become a more complete and important resource to our
      furniture retailers through the acquisitions of upholstery manufacturers
      Bradington-Young LLC (2003) and Sam Moore LLC (2007), and in youth
      furniture lines through the purchase of Opus Designs LLC (2007) and by
      organically expanding the styles and price points offered in existing
      product lines;


29


·
            continuing
      to improve and expand our supply chain capabilities, with improvements in
      forecasting and demand-planning software and stock keeping unit (“SKU”)
      optimization;


·
            filling
      key leadership positions with people who have the skill sets and
      experience needed under our new business model;
  and


·
            expanding
      regional distribution and service capabilities to our retailers on the
      U.S. West Coast through a leased facility located in the port area of
      Southern California and all our container direct customers by adding
      warehousing at two important suppliers’ plants in
  China.




As the
general economy has deteriorated, we have experienced a steepening decline in
year over year incoming order rates and expect challenging conditions at least
through our second fiscal quarter.  We believe however, that the
economy may have bottomed.  We are encouraged by recent small
improvements in retail sales and housing and modest gains in the equity
markets.  We expect to see a slight increase in consumer confidence by
the third or fourth quarter if home values stabilize and the stock market
continues to rebound from its low point earlier this year.




Additionally,
we are optimistic that our new product introductions and merchandising programs
which we will be introducing at the April 2009 Market will be seen by our
retailers as opportunities to stimulate business and engage
consumers.  As a result, our forecasting and inventory planning
includes expectations for a marginal improvement in business this
fall.  We believe our financial strength has become a key
differentiator that is increasingly important to our customers and suppliers,
who want to be aligned with partners who can survive the current downturn,
continue to invest for the future and help them emerge
successfully.  Our balance sheet is strong, with good liquidity,
little debt and no unutilized assets.




Environmental
Matters





Hooker
Furniture is committed to protecting the environment.  As a part of
our business operations, our manufacturing sites generate non-hazardous and
hazardous wastes; the treatment, storage, transportation and disposal of which
are subject to various local, state and national laws relating to protecting the
environment.  We are in various stages of investigation, remediation
or monitoring of alleged or acknowledged contamination at current or former
manufacturing sites for soil and groundwater contamination and visible air
emissions, none of which we believe is material to our results of operations or
financial position.  Our policy is to record monitoring commitments
and environmental liabilities when expenses are probable and can be reasonably
estimated.  The costs associated with our environmental
responsibilities, compliance with federal, state and local laws regulating the
discharge of materials into the environment, or costs otherwise relating to the
protection of the environment, have not had and are not expected to have a
material effect on our financial position, results of operations, capital
expenditures or competitive position.





Critical
Accounting Policies and Estimates





Hooker
Furniture’s significant accounting policies are described in “Note 1 – Summary
of Significant Accounting Policies” to the consolidated financial statements
beginning at page F-1 in this report.  The preparation of financial
statements in conformity with  U.S. generally accepted accounting
principles requires us to make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying financial
statements and related notes.  In preparing these financial
statements, we have made our best estimates and judgments of certain amounts
included in the financial statements, giving due consideration to
materiality.  We do not believe that actual results will deviate
materially from our estimates related to our accounting policies described
below.  However, because application of these accounting policies
involves the exercise of judgment and the use of assumptions as to future
uncertainties, actual results could differ materially from these
estimates.





Allowance for Doubtful
Accounts.  We evaluate the adequacy of our allowance for
doubtful accounts at the end of each quarter.  In performing this
evaluation, we analyze the payment history of our significant past due accounts,
subsequent cash collections on these accounts and comparative accounts
receivable aging statistics.  Based on this information, along with
consideration of the general condition of the economy, we develop what we
consider to be a reasonable estimate of the uncollectible amounts included in
accounts receivable.  This estimate involves significant judgment and
actual uncollectible amounts may differ materially from our
estimate.





Valuation of
Inventories.We value all of our inventories at the lower of
cost (using the last-in, first-out (“LIFO”) method) or market.  LIFO
cost for all of our inventories is determined using the dollar-value, link-chain
method.  This method allows for the more current cost of inventories
to be reported in cost of sales, while the inventories reported on the balance
sheet consist of the costs of inventories acquired earlier, subject to
adjustment to the lower of cost or market.  Hence, if prices are
rising, the LIFO method will generally lead to higher cost of sales and lower
profitability as compared to the first-in, first-out (“FIFO”)
method.  We evaluate our inventory for excess or slow moving items
based on recent and projected sales and order patterns.  We establish
an allowance for those items when the estimated market or net sales value is
lower than their recorded cost.  This estimate involves significant
judgment and actual values may differ materially from our
estimate.


30


Restructuring and Impairment of
Long-Lived Assets





Tangible
Assets





Long-lived
assets, such as property, plant and equipment, are evaluated for impairment when
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through the estimated undiscounted future cash
flows from the use of those assets.  When any such impairment exists,
the related assets are written down to fair value.  Long-lived assets
to be disposed of by sale are measured at the lower of their carrying amount or
fair value less cost to sell, are no longer depreciated, and are reported
separately as “assets held for sale” in the consolidated balance
sheets.





The costs
to dispose of these assets are recognized when we commit to a plan of
disposal.  Severance and related benefits paid to terminated employees
affected by the closings are recorded in the period when management commits to a
plan of termination.  We recognize liabilities for these exit and
disposal activities at fair value in the period in which the liability is
incurred.  Asset impairment charges related to the closure of
facilities are based on our best estimate of expected sales prices, less related
selling expenses for assets to be sold.  The recognition of asset
impairment and restructuring charges for exit and disposal activities requires
significant judgment and estimates by management. We reassess our accrual of
restructuring and asset impairment charges each reporting period.  Any
change in estimated restructuring and related asset impairment charges is
recognized in the period during which the change occurs.





Goodwill
and Other Intangible Assets





Goodwill
represents the excess of the cost of an acquired business over the fair value of
the identifiable tangible and intangible assets acquired and liabilities
assumed.  We have also recorded the fair value of trade names and
furniture designs assumed in business combinations as assets on our balance
sheet.  Intangible assets with an estimable useful life, such as
furniture designs are amortized over their useful lives, while indefinite lived
assets such as trade names are reported at the lower of cost or fair
value.  We test these assets for impairment annually during our fiscal
fourth quarter and at other times as dictated by business conditions or other
facts and circumstances.  Adverse business developments, specific
either to our company or industry or general economic conditions, could create
conditions under which we would evaluate the fair value of these business units
compared to their carrying values, and if impairment is indicated, write them
down to a fair value based on their expected future cash flows or market
value.  To test goodwill we apply the two step approach to identify
potential impairment and, if impairment exists, to determine the appropriate
carrying values.  We use a combination of the income and market
approaches in valuing these assets and weight the results as appropriate to each
asset, and select discount rates, royalty rates and other factors which reflect
current market conditions, business risk attributable to each asset or business
unit and recent transactions at comparable companies.  To test trade
names or trademarks we use the relief from royalty method, which values the
trade name based on comparable trade names in this and similar
industries.





Accounting
Pronouncements




In March
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No.
133.”   The objective of this statement is to require enhanced
disclosures about an entity’s derivative and hedging activities and to improve
the transparency of financial reporting.  This statement changes the
disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.  This statement is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. This statement encourages, but does not require,
comparative disclosures for earlier periods at initial
adoption. We expect to adopt this standard effective with our fiscal
year 2010 first quarter, which began February 2, 2009.




In
December 2007, the FASB issued a revision to SFAS No. 141R, “Business
Combinations”.  The objective of this Statement is to improve the
relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial reports about a business
combination and its effects. To accomplish that, this statement establishes
principles and requirements for how the acquirer:  a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the
acquiree;  b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  This
statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.  Early adoption of
this standard is not permitted.  Consequently, we adopted the standard
in our fiscal year 2010 first quarter, which began February 2,
2009.  The adoption of SFAS 141R is not expected to have a material
impact on our financial position or results of operations.


31


In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115”.   This statement permits entities to choose
to measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. This statement is expected to expand the use of fair
value measurement, which is consistent with FASB’s long-term measurement
objectives for accounting for financial instruments.  This statement
is effective as of the beginning of an entity’s first fiscal year that begins
after November 15, 2007. Early adoption is permitted as of the beginning of a
fiscal year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements.  Consequently, Hooker adopted the standard in our fiscal
year 2009 first quarter, which began February 4, 2008.  The adoption
of SFAS 159 did not have a material impact on our financial position or results
of operations.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements”.  This statement defines fair value, establishes a
framework for measuring fair value under U.S. generally accepted accounting
principles, and expands disclosures about fair value measurements. This
statement applies under other accounting pronouncements that require or permit
fair value measurements, the FASB having previously concluded in those
accounting pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice.  This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years.  Consequently, Hooker
adopted the standard in our fiscal year 2009 first quarter, which began February
4, 2008.  The adoption of SFAS 157 did not have a material impact on
our financial position or results of operations.





ITEM
7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





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





Our
obligations under our lines of credit and term loan bear interest at variable
rates.  The outstanding balance under our term loan amounted to $5.2
million as of February 1, 2009.  We have entered into an interest rate
swap agreement that, in effect, fixes the rate of interest on our term loan at
4.1% through 2010.  The notional principal value of the swap agreement
is substantially equal to the outstanding principal balance of the term
loan.  A fluctuation in market interest rates of one percentage point
(or 100 basis points) would not have a material impact on our results of
operations or financial condition.





For
imported products, we generally negotiate firm pricing denominated in U.S.
Dollars with our foreign suppliers, for periods typically of at least one
year.  We accept the exposure to exchange rate movements beyond these
negotiated periods. We do not use derivative financial instruments to manage
this risk.  Most of our imports are purchased from
China.  The Chinese currency now floats within a limited range in
relation to the U.S. Dollar, resulting in additional exposure to foreign
currency exchange rate fluctuations.





Since we
transact our imported product purchases in U.S. Dollars, a relative decline in
the value of the U.S. Dollar could increase the price we pay for imported
products beyond the negotiated periods.  We generally expect to
reflect substantially all of the effect of any price increases from suppliers in
the prices we charge for imported products.  However, these changes
could adversely impact sales volume and profit margin during affected
periods.





ITEM
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The
financial statements listed in Item 15(a), and which begin on page F-1, of this
report are incorporated herein by reference and are filed as a part of this
report.





Certain
Non-GAAP Financial Measures





In our
Annual Report to Shareholders (of which this annual report on Form 10-K is a
part), under the heading “Financial Highlights,” we reported net income and
earnings per share both including and excluding the impact of restructuring and
asset impairment charges, the January 2007 ESOP termination charge and the
December 2007 charge related to the donation of two former Bradington-Young
showrooms.  In this Form 10-K in Management’s Discussion and Analysis
of Financial Condition and Results of Operations, under the headings “Results of
Operations Fiscal 2009 Compared to Fiscal 2008”, “Results of
Operations  Fiscal 2008 Compared to Fiscal 2006” and “Results of
Operations Fiscal 2007 Two-Month Transition Period Compared to Fiscal 2006 First
Quarter” we have reported operating income margin both including and excluding
the impact of restructuring and asset impairment charges, the January 2007 ESOP
termination charge and the December 2007 charge related to the donation of two
former Bradington-Young showrooms.


32


The net
income, earnings per share and operating income margins figures excluding the
impact of the items specified above are “non-GAAP” financial
measures.  We provide this information because we believe it is useful
to investors in evaluating our ongoing operations.  Non-GAAP financial
measures provide insight into selected financial information and should be
evaluated in the context in which they are presented.  These measures are
of limited usefulness in evaluating  our overall financial results
presented in accordance with GAAP and should be considered in conjunction with
the consolidated financial statements, including the related notes, and
Management’s Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this report.





ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.





ITEM
9A.    CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures




Based on
their most recent review, which was made as of the end of our fourth quarter
ended February 1, 2009, our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures are effective
to provide reasonable assurance that information required to be disclosed in the
reports that we file or submit 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 (“SEC”) rules and forms.





Management’s
Annual Report on Internal Control over Financial Reporting




In
accordance with Section 404 of the Sarbanes-Oxley Act and SEC rules thereunder,
management has conducted an assessment of our internal control over financial
reporting as of February 1, 2009.  Our report regarding that
assessment is included with the financial statements on page F-2 of this report
and is incorporated herein by reference.





Report
of Registered Public Accounting Firm





Our
independent registered public accounting firm, KPMG LLP, audited the
consolidated financial statements included in this annual report on Form 10-K
and have issued an audit report on the effectiveness of our internal control
over financial reporting.  Their report is included with the financial
statements on page F-4 of this report and is incorporated herein by
reference.





Changes
in Internal Control over Financial Reporting





There
have been no changes in our internal control over financial reporting for our
fourth quarter ended February 1, 2009, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.




ITEM
9B.    OTHER INFORMATION





None


33


Hooker
Furniture Corporation


Part
III





In
accordance with General Instruction G (3) of Form 10-K, the information called
for by Items 10, 11, 12, 13 and 14 of Part III is incorporated by reference to
the Company’s definitive Proxy Statement for its Annual Meeting of Shareholders
scheduled to be held June 9, 2009 (the “2009 Proxy Statement”), as set forth
below:





ITEM
10.     DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





Information
related to Hooker Furniture’s directors will be set forth under the caption
“Election of Directors” in the 2009 Proxy Statement and is incorporated herein
by reference.





Information
relating to compliance with Section 16(a) of the Exchange Act will be set forth
under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in
the 2009 Proxy Statement and is incorporated herein by reference.





Information
regarding material changes, if any, in the procedures by which shareholders may
recommend nominees to the Hooker  Board of Directors will be set forth
under the caption “Procedures for Shareholder Recommendations of Director
Nominees” in the 2009 Proxy Statement and is incorporated herein by
reference.





Information
relating to the Audit Committee of the Company’s Board of Directors, including
the composition of the Audit Committee and the Board’s determinations concerning
whether certain members of the Audit Committee are “financial experts” as that
term is defined under Item 407(d)(5) of Regulation S-K will be set forth under
the captions “Board and Board Committee Information” and “Audit Committee” in
the 2009 Proxy Statement and is incorporated herein by reference.





Information
concerning the executive officers of the Company is included in Part I of this
report under the caption “Executive Officers of Hooker Furniture
Corporation.”





We have
adopted a Code of Business Conduct and Ethics, which applies to all of our
employees and directors, including the principal executive officer, principal
financial officer and principal accounting officer.  A copy of our
Code of Business Conduct and Ethics is available on our website at www.hookerfurniture.com.  Amendments
of and waivers from our Code of Business Conduct and Ethics will be posted to
our website when permitted by applicable SEC and NASDAQ rules and
regulations.





ITEM
11.     EXECUTIVE COMPENSATION





Information
relating to this item will be set forth under the captions “Report of the
Compensation Committee,” “Executive Compensation” and “Director Compensation” in
the 2009 Proxy Statement and is incorporated herein by reference.





ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      SHAREHOLDER MATTERS





Information
relating to this item will be set forth under the captions “Equity Compensation
Plan Information” and “Security Ownership of Certain Beneficial Owners and
Management” in the 2009 Proxy Statement and is incorporated herein by
reference.





ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





Information
relating to this item will be set forth under the captions “Certain
Relationships and Related Transactions” and “Board and Board Committee
Information” in the 2009 Proxy Statement and is incorporated herein by
reference.





ITEM
14.     PRINCIPAL ACCOUNTANT FEES AND
SERVICES





Information
relating to this item will be set forth under the caption “Independent
Registered Public Accounting Firm” in the 2009 Proxy Statement and is
incorporated herein by reference.


34


Hooker
Furniture Corporation


Part
IV





ITEM
15.     EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES




(a)
            Documents
      filed as part of this report on Form
10-K:




(1)
            The
      following financial statements are included in this report on Form
      10-K:





Report of
Independent Registered Public Accounting Firm





Consolidated
Balance Sheets as of February 1, 2009 and February 3, 2008





Consolidated
Statements of Operations for the fifty-two weeks ended February 1, 2009, the
fifty-three weeks ended February 3, 2008, the two-month transition period ended
January 28, 2007 and the twelve months ended November 30,
2006





Consolidated
Statements of Cash Flows for the fifty-two weeks ended February 1, 2009, the
fifty-three weeks ended February 3, 2008, the two-month transition period ended
January 28, 2007 and the twelve months ended November 30,
2006





Consolidated
Statements of Shareholders’ Equity for the twelve months ended November 30,
2006, the two-month transition period ended January 28, 2007, the fifty-three
weeks ended February 3, 2008 and the fifty-two weeks ended February 1,
2009





Notes to
Consolidated Financial Statements





(2)
              Financial
      Statement Schedules:





Financial
Statement Schedules have been omitted because the information required has been
separately disclosed in the consolidated financial statements or related
notes.





(b)
              Exhibits:





3.1
                
                Amended
      and Restated Articles of Incorporation of the Company, as amended March
      28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form
      10-Q (SEC File No. 000-25349) for the quarter ended February 28,
      2003)3.2
                
                Amended
      and Restated Bylaws of the Company (incorporated by reference to Exhibit
      3.2 to the Company’s Form 10-Q ((SEC File No. 000-25349) for the quarter
      ended August 31, 2006)4.1
                
                Amended
      and Restated Articles of Incorporation of the Company (See Exhibit
      3.1)4.2
                
                Amended
      and Restated Bylaws of the Company (See Exhibit 3.2)4.3(a)
                
                Credit
      Agreement, dated April 30, 2003, between Bank of America, N.A., and the
      Company (incorporated by reference to Exhibit 4.1 of the Company’s Form
      10-Q (SEC File No. 000-25349) for the quarter ending May 31,
      2003)4.3(b)
                
                First
      Amendment to Credit Agreement, dated as of February 18, 2005, among the
      Company, the Lenders party thereto, and Bank of America, N.A., as agent
      (incorporated by reference to Exhibit 10.2 of the Company’s Form 10-Q (SEC
      File No. 000-25349) for the quarter ending February 28,
    2005)4.3(c)
                
                Second
      Amendment to Credit Agreement dated as of February 27, 2008, among the
      Company and Bank of America, N.A. as lender and agent (incorporated by
      reference to Exhibit 4.3(c) of the Company’s Annual Report on Form 10-K
      (SEC File No. 000-25349) filed April 16, 2008)4.3(d)
                
                Third
      Amendment to Credit Agreement dated as of February 19, 2009, between the
      Company and Bank of America, N.A.  (incorporated by reference to
      Exhibit 4.3(d) of the Company’s Annual Report on Form 10-K (SEC File No.
      000-25349) filed on February 20, 2009)Pursuant
      to Regulation S-K, Item 601(b)(4)(iii), instruments evidencing long-term
      debt not exceeding 10% of the Company’s total assets have been omitted and
      will be furnished to the Securities and Exchange Commission upon
      request.10.1(a)
                
                Form
      of Executive Life Insurance Agreement dated December 31, 2003, between the
      Company and certain of its executive officers (incorporated by reference
      to Exhibit 10.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for
      the quarter ended February 29,
2004)*


35





10.1(b)(i)
                    
                    Supplemental
      Retirement Income Plan effective as of December 1, 2003 (incorporated by
      reference to Exhibit 10.3 of the Company’s Form 10-Q (SEC File No.
      000-25349) for the quarter ended February 29, 2004)*10.1(b)(ii)
                    
                    First
      Amendment to the Supplemental Retirement Income Plan, dated as of May 24,
      2007 incorporated by reference to Exhibit 10.1(b)(ii) of Form 10-K (SEC
      File No. 000-25349) filed on April 16, 200810.1(b)(iii)
                    
                    2008Amendment
      and Restatement of the Hooker Furniture Corporation Supplemental
      Retirement Income Plan, effective as of December 31, 2008 incorporated by
      reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC
      File No. 000-25349) filed on November 19, 2008*10.1(c)
                    
                    Summary
      of Compensation for Named Executive Officers (filed
    herewith)*10.1(d)
                    
                    Summary
      of Director Compensation (filed herewith)*10.1(e)
                    
                    Hooker
      Furniture Corporation 2005 Stock Incentive Plan (incorporated by reference
      to Appendix B of the Company’s Definitive Proxy Statement dated March 1,
      2005 (SEC File No. 000-25349))*10.1(f)
                    
                    Form
      of Outside Director Restricted Stock Agreement (incorporated by reference
      to Exhibit 99.1 of the Company’s Current Report on Form 8-K (SEC File No.
      000-25349) filed January 17, 2006)*10.1(g)
                    
                    Retirement
      Agreement, dated October 26, 2006, between Douglas C. Williams and the
      Company (incorporated by reference to Exhibit 10.1(g) of the Company’s
      Annual Report on Form 10-K (SEC File No. 000-25349) filed February 28,
      2007)*10.1(h)
                    
                    Employment
      Agreement, dated June 15, 2007, between Alan D. Cole and the Company
      incorporated by reference to Exhibit 10.1(h) of the Company’s Annual
      Report on Form 10-K (SEC File No. 000-25349) filed on April 16,
      200810.1(i)
                    
                    Employment
      Agreement, dated June 3, 2008, between Alan D. Cole and the Company
      incorporated by reference to Exhibit 10.1(i) of the Company’s Annual
      Report on Form 10-K (SEC File No. 000-25349) filed on June 5,
      200810.2(a)
                    
                    Credit
      Agreement, dated April 30, 2003, between Bank of America, N.A., and the
      Company (See Exhibit 4.3(a))10.2(b)
                    
                    First
      Amendment to Credit Agreement, dated as of February 18, 2005, among the
      Company, the Lenders party thereto, and Bank of America, N.A., as agent
      (See Exhibit 4.3(b))10.2(c)
                    
                    Second
      Amendment to Credit Agreement, dated as of February 27, 2008, among the
      Company and Bank of America, N.A., as lender and agent (See Exhibit
      4.3(c))10.2(d)
                    
                    Third
      Amendment to Credit Agreement dated as of February 19, 2009, between
      Company and Bank of America, N.A. (See Exhibit 4.3(d))18
                    
                    Preferability
      letter for a change in accounting principle related to the classification
      of shipping and warehousing costs as cost of sales (filed
      herewith)21
                    
                    List
      of Subsidiaries:Bradington-Young
      LLC, a Virginia limited liability companySam
      Moore Furniture LLC, a Virginia limited liability
  company23
                    
                    Consent
      of Independent Registered Public Accounting Firm (filed
      herewith)31.1
                    
                    Rule
      13a-14(a) Certification of the Company’s principal executive officer
      (filed herewith)31.2
                    
                    Rule
      13a-14(a) Certification of the Company’s principal financial officer
      (filed herewith)32.1
                    
                    Rule
      13a-14(b) Certification of the Company’s principal executive officer and
      principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
      herewith)





*Management
contract or compensatory plan


36


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





HOOKER
      FURNITURE CORPORATIONApril
      17, 2009
              /s/ Paul B. Toms, Jr.Paul B. Toms, Jr.Chairman, President and Chief Executive
Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





Signature
              
              Title
              
              Date/s/  Paul B. Toms, Jr.
              
              Chairman,
      President, Chief Executive Officer and
              
              April
      17, 2009Paul B. Toms, Jr.
              
              Director
      (Principal Executive Officer)/s/  E. Larry Ryder
              
              Executive
      Vice President - Finance and
              
              April
      17, 2009E. Larry Ryder
              
              Administration
      (Principal Financial Officer)/s/  R. Gary
Armbrister
              
              Chief
      Accounting Officer
              
              April
      17, 2009R. Gary Armbrister
              
              (Principal
      Accounting Officer)/s/  W. Christopher Beeler,
      Jr.
              
              Director
              
              April
      17, 2009W. Christopher Beeler, Jr./s/  John L. Gregory,
    III
              
              Director
              
              April
      17, 2009John L. Gregory, III/s/  Mark F. Schreiber
              
              Director
              
              April
      17, 2009Mark F. Schreiber/s/  David G. Sweet
              
              Director
              
              April
      17, 2009David G. Sweet/s/  Henry G. Williamson,
      Jr.
              
              Director
              
              April
      17, 2009Henry G. Williamson, Jr.


37




HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS





PageManagement’s
      Report on Internal Control Over Financial Reporting
                          F-2Reports
      of Independent Registered Public Accounting Firm
                          F-3Consolidated
      Balance Sheets as of February 1, 2009 and February 3, 2008
                          F-5Consolidated
      Statements of Operations for the fifty-two weeks ended February 1, 2009,
      thefifty-three
      weeks ended February 3, 2008, the two-month transition period
      endedJanuary
      28, 2007 and the twelve months ended November 30, 2006
                          F-6Consolidated
      Statements of Cash Flows for the fifty-two weeks ended February 1, 2009,
      thefifty-three
      weeks ended February 3, 2008, the two-month transition period ended
      January 28, 2007and
      the twelve months ended November 30, 2006
                          F-7Consolidated
      Statements of Shareholders’ Equity for the twelve months ended November
      30, 2006,the
      two-month transition period ended January 28, 2007, the fifty-three weeks
      endedFebruary
      3, 2008 and the fifty-two weeks ended February 1, 2009
                          F-8Notes
      to Consolidated Financial Statements
                          F-9


F-1


MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING





To the
Shareholders of


Hooker
Furniture Corporation


Martinsville,
Virginia





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Exchange Act Rule 13a-15(f).  Under
the supervision and with the participation of management, including the
principal executive officer and principal financial officer, the Company
conducted an evaluation of the effectiveness of its internal control over
financial reporting based on the framework in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).  Based on the Company’s evaluation under that
framework, management concluded that the Company’s internal control over
financial reporting was effective as of February 1, 2009.  The
effectiveness of the Company’s internal control over financial reporting as of
February 1, 2009 has been audited by KPMG LLP, the Company’s independent
registered public accounting firm, as stated in their report which is included
herein.








Paul B.
Toms, Jr.


Chairman,
President and Chief Executive Officer


(Principal
Executive Officer)


April 16,
2009








E. Larry
Ryder


Executive
Vice President – Finance and Administration


and Chief
Financial Officer


(Principal
Financial Officer)


April 16,
2009


F-2


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The Board
of Directors and Shareholders


Hooker
Furniture Corporation:




We have
audited the accompanying consolidated balance sheets of Hooker Furniture
Corporation and subsidiaries as of February 1, 2009 and February 3, 2008,
and the related consolidated statements of operations, cash flows and
shareholders’ equity for each of the years in the two-year period ended February
1, 2009, for the two-month transition period ended January 28, 2007 and the year
ended November 30, 2006.  These consolidated financial statements are
the responsibility of the Company’s management.  Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Hooker Furniture Corporation
and subsidiaries as of February 1, 2009 and February 3, 2008, and the results of
their operations and their cash flows for each of the years in the two-year
period ended February 1, 2009, for the two-month transition period ended January
28, 2007 and the year ended November 30, 2006, in conformity with
U.S. generally accepted accounting principles.




As
discussed in note 1 and note 8 to the consolidated financial statements, the
Company changed its method of reporting shipping and warehousing costs on the
consolidated statements of operations during the year ended February 1,
2009.




As
discussed in note 16 to the consolidated financial statements, effective January
29, 2007, the Company adopted the provisions of Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income
Taxes.




We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Hooker Furniture Corporation’s internal control
over financial reporting as of February 1, 2009, based on criteria established
in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO), and our report dated April 16, 2009 expressed
an unqualified opinion on the effectiveness of the Company’s internal control
over financial reporting.










Charlotte,
North Carolina


April 16,
2009


F-3




Report
of Independent Registered Public Accounting Firm




The Board
of Directors and Shareholders


Hooker
Furniture Corporation:




We have
audited Hooker Furniture Corporation’s internal control over financial reporting
as of February 1, 2009, based on criteria established inInternal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).  Hooker Furniture Corporation’s management
is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management’s Report on
Internal Control Over Financial Reporting.  Our responsibility is to
express an opinion on the Company’s internal control over financial reporting
based on our audit.




We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects.  Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our
audit also included performing such other procedures as we considered necessary
in the circumstances.  We believe that our audit provides a reasonable
basis for our opinion.




A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.




In our
opinion, Hooker Furniture Corporation maintained, in all material respects,
effective internal control over financial reporting as of February 1, 2009,
based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.




We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Hooker
Furniture Corporation and subsidiaries as of February 1, 2009 and February 3,
2008, and the related consolidated statements of operations, cash flows and
shareholders’ equity for each of the years in the two-year period ended February
1, 2009, for the two-month transition period ended January 28, 2007 and the year
ended November 30, 2006, and our report dated April 16, 2009 expressed an
unqualified opinion on those consolidated financial statements.









Charlotte,
North Carolina


April 16,
2009


F-4


HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(In
thousands)





February1,
                                                  
                                                  
                                                  February3,As of
                                                  
                                                  2009
                                                  
                                                  
                                                  2008AssetsCurrent
      assetsCash
      and cash equivalents
                                                  
                                                  $
                                                  11,804
                                                  
                                                  
                                                  $
                                                  33,076Trade
      accounts receivable, less allowance for doubtful accounts of $2,207 and $1,750 on
      each date
                                                  
                                                  
                                                  30,261
                                                  
                                                  
                                                  
                                                  38,229Inventories
                                                  
                                                  
                                                  60,248
                                                  
                                                  
                                                  
                                                  50,560Prepaid
      expenses and other current assets
                                                  
                                                  
                                                  4,736
                                                  
                                                  
                                                  
                                                  3,552Total
      current assets
                                                  
                                                  
                                                  107,049
                                                  
                                                  
                                                  
                                                  125,417Property,
      plant and equipment, net
                                                  
                                                  
                                                  24,596
                                                  
                                                  
                                                  
                                                  25,353Goodwill
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  3,774Intangible
      assets
                                                  
                                                  
                                                  4,805
                                                  
                                                  
                                                  
                                                  5,892Cash
      surrender value of life insurance policies
                                                  
                                                  
                                                  13,513
                                                  
                                                  
                                                  
                                                  12,173Other
      assets
                                                  
                                                  
                                                  3,504
                                                  
                                                  
                                                  
                                                  2,623Total
      assets
                                                  
                                                  $
                                                  153,467
                                                  
                                                  
                                                  $
                                                  175,232Liabilities
      and Shareholders’ EquityCurrent
      liabilitiesTrade
      accounts payable
                                                  
                                                  $
                                                  8,392
                                                  
                                                  
                                                  $
                                                  13,025Accrued
      salaries, wages and benefits
                                                  
                                                  
                                                  2,218
                                                  
                                                  
                                                  
                                                  3,838Other
      accrued expenses
                                                  
                                                  
                                                  2,279
                                                  
                                                  
                                                  
                                                  3,553Current
      maturities of long-term debt
                                                  
                                                  
                                                  2,899
                                                  
                                                  
                                                  
                                                  2,694Total
      current liabilities
                                                  
                                                  
                                                  15,788
                                                  
                                                  
                                                  
                                                  23,110Long-term
      debt, excluding current maturities
                                                  
                                                  
                                                  2,319
                                                  
                                                  
                                                  
                                                  5,218Deferred
      compensation
                                                  
                                                  
                                                  5,606
                                                  
                                                  
                                                  
                                                  5,369Other
      long-term liabilities
                                                  
                                                  
                                                  44
                                                  
                                                  
                                                  
                                                  709Total
      liabilities
                                                  
                                                  
                                                  23,757
                                                  
                                                  
                                                  
                                                  34,406Shareholders’
      equityCommon
      stock, no par value, 20,000 shares
      authorized, 10,772and11,561 shares issued and outstanding on each
date
                                                  
                                                  
                                                  16,995
                                                  
                                                  
                                                  
                                                  18,182Retained
      earnings
                                                  
                                                  
                                                  112,450
                                                  
                                                  
                                                  
                                                  122,835Accumulated
      other comprehensive income (loss)
                                                  
                                                  
                                                  265
                                                  
                                                  
                                                  
                                                  (191
                                                  )Total
      shareholders’ equity
                                                  
                                                  
                                                  129,710
                                                  
                                                  
                                                  
                                                  140,826Total
      liabilities and shareholders’ equity
                                                  
                                                  $
                                                  153,467
                                                  
                                                  
                                                  $
                                                  175,232





See
accompanying Notes to Consolidated Financial Statements.


F-5


HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(In
thousands, except per share data)


Fifty-Two
                                                            
                                                            
                                                            Fifty-Three
                                                            
                                                            
                                                            Two
      Months
                                                            
                                                            
                                                            TwelveWeeks
      Ended
                                                            
                                                            
                                                            Weeks
      Ended
                                                            
                                                            
                                                            Ended
                                                            
                                                            
                                                            Months
      EndedFebruary
      1,
                                                            
                                                            
                                                            February
      3,
                                                            
                                                            
                                                            January
      28,
                                                            
                                                            
                                                            November
      30,For
      The
                                                            
                                                            2009
                                                            
                                                            
                                                            2008
                                                            
                                                            
                                                            2007
                                                            
                                                            
                                                            2006Net
      sales
                                                            
                                                            $
                                                            261,162
                                                            
                                                            
                                                            $
                                                            316,801
                                                            
                                                            
                                                            $
                                                            49,061
                                                            
                                                            
                                                            $
                                                            350,026Cost
      of sales
                                                            
                                                            
                                                            200,878
                                                            
                                                            
                                                            
                                                            235,057
                                                            
                                                            
                                                            
                                                            37,876
                                                            
                                                            
                                                            
                                                            269,681Gross
      profit
                                                            
                                                            
                                                            60,284
                                                            
                                                            
                                                            
                                                            81,744
                                                            
                                                            
                                                            
                                                            11,185
                                                            
                                                            
                                                            
                                                            80,345Selling
      and administrative expenses
                                                            
                                                            
                                                            45,980
                                                            
                                                            
                                                            
                                                            51,738
                                                            
                                                            
                                                            
                                                            7,028
                                                            
                                                            
                                                            
                                                            50,680ESOP
      termination compensation charge
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            18,428Restructuring
      (credits) charges
                                                            
                                                            
                                                            (951
                                                            )
                                                            
                                                            
                                                            309
                                                            
                                                            
                                                            
                                                            2,973
                                                            
                                                            
                                                            
                                                            6,881Goodwill
      and intangible asset impairment charges
                                                            
                                                            
                                                            4,914Operating
      income (loss)
                                                            
                                                            
                                                            10,341
                                                            
                                                            
                                                            
                                                            29,697
                                                            
                                                            
                                                            
                                                            (17,244
                                                            )
                                                            
                                                            
                                                            22,784Other
      income (expense), net
                                                            
                                                            
                                                            323
                                                            
                                                            
                                                            
                                                            1,472
                                                            
                                                            
                                                            
                                                            129
                                                            
                                                            
                                                            
                                                            (77
                                                            )Income
      (loss) before income taxes
                                                            
                                                            
                                                            10,664
                                                            
                                                            
                                                            
                                                            31,169
                                                            
                                                            
                                                            
                                                            (17,115
                                                            )
                                                            
                                                            
                                                            22,707Income
      taxes
                                                            
                                                            
                                                            3,754
                                                            
                                                            
                                                            
                                                            11,514
                                                            
                                                            
                                                            
                                                            1,300
                                                            
                                                            
                                                            
                                                            8,569Net
      income (loss)
                                                            
                                                            $
                                                            6,910
                                                            
                                                            
                                                            $
                                                            19,655
                                                            
                                                            
                                                            $
                                                            (18,415
                                                            )
                                                            
                                                            $
                                                            14,138Earnings
      (loss) per share:Basic
      and diluted
                                                            
                                                            $
                                                            0.62
                                                            
                                                            
                                                            $
                                                            1.58
                                                            
                                                            
                                                            $
                                                            (1.52
                                                            )
                                                            
                                                            $
                                                            1.18Weighted
      average shares outstanding:Basic
                                                            
                                                            
                                                            11,060
                                                            
                                                            
                                                            
                                                            12,442
                                                            
                                                            
                                                            
                                                            12,113
                                                            
                                                            
                                                            
                                                            11,951Diluted
                                                            
                                                            
                                                            11,066
                                                            
                                                            
                                                            
                                                            12,446
                                                            
                                                            
                                                            
                                                            12,113
                                                            
                                                            
                                                            
                                                            11,953Cash
      dividends declared per share
                                                            
                                                            $
                                                            0.40
                                                            
                                                            
                                                            $
                                                            0.40
                                                            
                                                            
                                                            $
                                                            
                                                            
                                                            
                                                            $
                                                            0.31





See
accompanying Notes to Consolidated Financial Statements.


F-6


HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(In thousands)


Fifty-Two
                                                    
                                                    
                                                    Fifty-Three
                                                    
                                                    
                                                    Two
      Months
                                                    
                                                    
                                                    TwelveWeeks
      Ended
                                                    
                                                    
                                                    Weeks
      Ended
                                                    
                                                    
                                                    Ended
                                                    
                                                    
                                                    Months
      EndedFebruary
      1,
                                                    
                                                    
                                                    February
      3,
                                                    
                                                    
                                                    January
      28,
                                                    
                                                    
                                                    November
      30,For
      The
                                                    
                                                    2009
                                                    
                                                    
                                                    2008
                                                    
                                                    
                                                    2007
                                                    
                                                    
                                                    2006Cash
      flows from operating activitiesCash
      received from customers
                                                    
                                                    $
                                                    269,483
                                                    
                                                    
                                                    $
                                                    321,189
                                                    
                                                    
                                                    $
                                                    56,869
                                                    
                                                    
                                                    $
                                                    349,075Cash
      paid to suppliers and employees
                                                    
                                                    
                                                    (258,701
                                                    )
                                                    
                                                    
                                                    (265,842
                                                    )
                                                    
                                                    
                                                    (40,156
                                                    )
                                                    
                                                    
                                                    (316,418
                                                    )Income
      taxes paid, net
                                                    
                                                    
                                                    (7,219
                                                    )
                                                    
                                                    
                                                    (12,717
                                                    )
                                                    
                                                    
                                                    (480
                                                    )
                                                    
                                                    
                                                    (8,741
                                                    )Interest
      received (paid), net
                                                    
                                                    
                                                    167
                                                    
                                                    
                                                    
                                                    1,195
                                                    
                                                    
                                                    
                                                    28
                                                    
                                                    
                                                    
                                                    (111
                                                    )Net
      cash provided by operating activities
                                                    
                                                    
                                                    3,730
                                                    
                                                    
                                                    
                                                    43,825
                                                    
                                                    
                                                    
                                                    16,261
                                                    
                                                    
                                                    
                                                    23,805Cash
      flows from investing activitiesAcquisitions,
      net of cash required
                                                    
                                                    
                                                    (181
                                                    )
                                                    
                                                    
                                                    (15,826
                                                    )Purchase
      of property, plant and equipment
                                                    
                                                    
                                                    (2,271
                                                    )
                                                    
                                                    
                                                    (1,942
                                                    )
                                                    
                                                    
                                                    (419
                                                    )
                                                    
                                                    
                                                    (4,268
                                                    )Proceeds
      from the sale of property and equipment
                                                    
                                                    
                                                    28
                                                    
                                                    
                                                    
                                                    3,668
                                                    
                                                    
                                                    
                                                    22
                                                    
                                                    
                                                    
                                                    3,409Premiums
      paid on life insurance policies
                                                    
                                                    
                                                    (1,328
                                                    )
                                                    
                                                    
                                                    (1,411
                                                    )
                                                    
                                                    
                                                    (46
                                                    )
                                                    
                                                    
                                                    (1,477
                                                    )Proceeds
      received on life insurance policies
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,244Net
      cash used in investing activities
                                                    
                                                    
                                                    (3,752
                                                    )
                                                    
                                                    
                                                    (14,267
                                                    )
                                                    
                                                    
                                                    (443
                                                    )
                                                    
                                                    
                                                    (2,336
                                                    )Cash
      flows from financing activitiesPurchase
      and retirement of common stock
                                                    
                                                    
                                                    (14,097
                                                    )
                                                    
                                                    
                                                    (36,028
                                                    )Cash
      dividends paid
                                                    
                                                    
                                                    (4,459
                                                    )
                                                    
                                                    
                                                    (5,036
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (3,687
                                                    )Payments
      on long-term debt
                                                    
                                                    
                                                    (2,694
                                                    )
                                                    
                                                    
                                                    (2,503
                                                    )
                                                    
                                                    
                                                    (597
                                                    )
                                                    
                                                    
                                                    (2,283
                                                    )Net
      cash used in financing activities
                                                    
                                                    
                                                    (21,250
                                                    )
                                                    
                                                    
                                                    (43,567
                                                    )
                                                    
                                                    
                                                    (597
                                                    )
                                                    
                                                    
                                                    (5,970
                                                    )Net
      (decrease) increase in cash and cash equivalents
                                                    
                                                    
                                                    (21,272
                                                    )
                                                    
                                                    
                                                    (14,009
                                                    )
                                                    
                                                    
                                                    15,221
                                                    
                                                    
                                                    
                                                    15,499Cash
      and cash equivalents at beginning of year
                                                    
                                                    
                                                    33,076
                                                    
                                                    
                                                    
                                                    47,085
                                                    
                                                    
                                                    
                                                    31,864
                                                    
                                                    
                                                    
                                                    16,365Cash
      and cash equivalents at end of year
                                                    
                                                    $
                                                    11,804
                                                    
                                                    
                                                    $
                                                    33,076
                                                    
                                                    
                                                    $
                                                    47,085
                                                    
                                                    
                                                    $
                                                    31,864Reconciliation
      of net income (loss) to net cash provided by operating
      activitiesNet
      income (loss)
                                                    
                                                    $
                                                    6,910
                                                    
                                                    
                                                    $
                                                    19,655
                                                    
                                                    
                                                    $
                                                    (18,415
                                                    )
                                                    
                                                    $
                                                    14,138Depreciation
      and amortization
                                                    
                                                    
                                                    2,912
                                                    
                                                    
                                                    
                                                    3,352
                                                    
                                                    
                                                    
                                                    681
                                                    
                                                    
                                                    
                                                    4,645Non-cash
      ESOP cost
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    18,141
                                                    
                                                    
                                                    
                                                    2,646Restricted
      stock compensation cost
                                                    
                                                    
                                                    74
                                                    
                                                    
                                                    
                                                    47
                                                    
                                                    
                                                    
                                                    8
                                                    
                                                    
                                                    
                                                    18Impairment
      of goodwill and intangibles
                                                    
                                                    
                                                    4,914Restructuring
      and related asset impairment charges
                                                    
                                                    
                                                    (951
                                                    )
                                                    
                                                    
                                                    309
                                                    
                                                    
                                                    
                                                    2,973
                                                    
                                                    
                                                    
                                                    6,881Loss
      (gain) on disposal of property
                                                    
                                                    
                                                    154
                                                    
                                                    
                                                    
                                                    (100
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2Donation
      of showroom facilities
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,082Provision
      (credit) for doubtful accounts
                                                    
                                                    
                                                    2,245
                                                    
                                                    
                                                    
                                                    1,313
                                                    
                                                    
                                                    
                                                    (182
                                                    )
                                                    
                                                    
                                                    1,920Loss
      (gain) on life insurance policies
                                                    
                                                    
                                                    95
                                                    
                                                    
                                                    
                                                    (788
                                                    )
                                                    
                                                    
                                                    143
                                                    
                                                    
                                                    
                                                    (102
                                                    )Deferred
      income tax expense (benefit)
                                                    
                                                    
                                                    (2,005
                                                    )
                                                    
                                                    
                                                    2,624
                                                    
                                                    
                                                    
                                                    (787
                                                    )
                                                    
                                                    
                                                    (3,273
                                                    )Changes
      in assets and liabilities, net of effect from
acquisitions:Trade
      accounts receivable
                                                    
                                                    
                                                    5,767
                                                    
                                                    
                                                    
                                                    2,972
                                                    
                                                    
                                                    
                                                    7,882
                                                    
                                                    
                                                    
                                                    (3,371
                                                    )Inventories
                                                    
                                                    
                                                    (9,629
                                                    )
                                                    
                                                    
                                                    18,757
                                                    
                                                    
                                                    
                                                    5,336
                                                    
                                                    
                                                    
                                                    579Prepaid
      expenses and other assets
                                                    
                                                    
                                                    (730
                                                    )
                                                    
                                                    
                                                    (186
                                                    )
                                                    
                                                    
                                                    747
                                                    
                                                    
                                                    
                                                    355Trade
      accounts payable
                                                    
                                                    
                                                    (4,633
                                                    )
                                                    
                                                    
                                                    2,063
                                                    
                                                    
                                                    
                                                    (1,180
                                                    )
                                                    
                                                    
                                                    (2,621
                                                    )Accrued
      salaries, wages and benefits
                                                    
                                                    
                                                    (669
                                                    )
                                                    
                                                    
                                                    (3,256
                                                    )
                                                    
                                                    
                                                    (1,589
                                                    )
                                                    
                                                    
                                                    (1,340
                                                    )Accrued
      income taxes
                                                    
                                                    
                                                    (1,274
                                                    )
                                                    
                                                    
                                                    (3,826
                                                    )
                                                    
                                                    
                                                    1,607
                                                    
                                                    
                                                    
                                                    2,489Other
      accrued expenses
                                                    
                                                    
                                                    79
                                                    
                                                    
                                                    
                                                    (1,198
                                                    )
                                                    
                                                    
                                                    255
                                                    
                                                    
                                                    
                                                    313Other
      long-term liabilities
                                                    
                                                    
                                                    471
                                                    
                                                    
                                                    
                                                    1,005
                                                    
                                                    
                                                    
                                                    641
                                                    
                                                    
                                                    
                                                    526Net
      cash provided by operating activities
                                                    
                                                    $
                                                    3,730
                                                    
                                                    
                                                    $
                                                    43,825
                                                    
                                                    
                                                    $
                                                    16,261
                                                    
                                                    
                                                    $
                                                    23,805








See
accompanying Notes to Consolidated Financial Statements.


F-7





HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY


(In
thousands, except per share data)


For
The Twelve Month Period Ended November 30, 2006; The Two-Month Transition Period
Ended January 28, 2007; The Fifty-Three Week Period Ended February 3, 2008 and
The Fifty-Two Week Period Ended February 1, 2009





AccumulatedUnearned
                                  
                                  
                                  
                                  
                                  
                                  Other
                                  
                                  
                                  TotalCommon Stock
                                  
                                  
                                  ESOP
                                  
                                  
                                  Retained
                                  
                                  
                                  Comprehensive
                                  
                                  
                                  Shareholders’Shares
                                  
                                  
                                  Amount
                                  
                                  
                                  Shares
                                  
                                  
                                  Earnings
                                  
                                  
                                  Income (Loss)
                                  
                                  
                                  EquityBalance
      at November 30, 2005
                                  
                                  
                                  14,425
                                  
                                  
                                  $
                                  9,516
                                  
                                  
                                  $
                                  (15,861
                                  )
                                  
                                  $
                                  155,183
                                  
                                  
                                  $
                                  (226
                                  )
                                  
                                  $
                                  148,612Cumulative
      effect adjustment as a result of the implementation of SEC Staff
      Accounting Bulletin No. 108
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  692
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  692Balance
      at December 1, 2005
                                  
                                  
                                  14,425
                                  
                                  
                                  
                                  9,516
                                  
                                  
                                  
                                  (15,861
                                  )
                                  
                                  
                                  155,875
                                  
                                  
                                  
                                  (226
                                  )
                                  
                                  
                                  149,304Net
      income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  14,138
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  14,138Unrealized
      gain on interest rate swap
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  117
                                  
                                  
                                  
                                  117Total
      comprehensive income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  14,255Cash
      dividends ($0.31 per share)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (3,687
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (3,687
                                  )Restricted
      stock grants, net of forfeitures
                                  
                                  
                                  4Restricted
      stock compensation cost
                                  
                                  
                                  
                                  
                                  
                                  
                                  18
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  18ESOP
      cost
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,620
                                  
                                  
                                  
                                  1,026
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  2,646Balance
      at November 30, 2006
                                  
                                  
                                  14,429
                                  
                                  
                                  
                                  11,154
                                  
                                  
                                  
                                  (14,835
                                  )
                                  
                                  
                                  166,326
                                  
                                  
                                  
                                  (109
                                  )
                                  
                                  
                                  162,536Net
      loss
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (18,415
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (18,415
                                  )Unrealized
      gain on interest rate swap
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  40
                                  
                                  
                                  
                                  40Total
      comprehensive loss
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (18,375
                                  )Restricted
      stock grants
                                  
                                  
                                  5Restricted
      stock compensation cost
                                  
                                  
                                  
                                  
                                  
                                  
                                  8
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  8ESOP
      termination
                                  
                                  
                                  (1,165
                                  )
                                  
                                  
                                  9,678
                                  
                                  
                                  
                                  14,835
                                  
                                  
                                  
                                  (6,372
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  18,141Balance
      at January 28, 2007
                                  
                                  
                                  13,269
                                  
                                  
                                  
                                  20,840
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  141,539
                                  
                                  
                                  
                                  (69
                                  )
                                  
                                  
                                  162,310Net
      income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  19,655
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  19,655Unrealized
      loss on interest rate swap
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (122
                                  )
                                  
                                  
                                  (122
                                  )Total
      comprehensive income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  19,533Cash
      dividends ($0.40 per share)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (5,036
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (5,036
                                  )Restricted
      stock grants, net of forfeitures
                                  
                                  
                                  4Restricted
      stock compensation cost
                                  
                                  
                                  
                                  
                                  
                                  
                                  47
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  47Purchase
      and retirement of common stock
                                  
                                  
                                  (1,712
                                  )
                                  
                                  
                                  (2,705
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (33,323
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (36,028
                                  )Balance
      at February 3, 2008
                                  
                                  
                                  11,561
                                  
                                  
                                  
                                  18,182
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  122,835
                                  
                                  
                                  
                                  (191
                                  )
                                  
                                  
                                  140,826Net
      income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  6,910
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  6,910Unrealized
      gain on interest rate swap
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  49
                                  
                                  
                                  
                                  49Unrealized
      gain on deferred compensation
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  407
                                  
                                  
                                  
                                  407Total
      comprehensive income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  7,366Cash
      dividends ($0.40 per share)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (4,459
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (4,459
                                  )Restricted
      stock grants, net of forfeitures
                                  
                                  
                                  10Restricted
      stock compensation cost
                                  
                                  
                                  
                                  
                                  
                                  
                                  74
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  74Purchase
      and retirement of common stock
                                  
                                  
                                  (799
                                  )
                                  
                                  
                                  (1,261
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (12,836
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (14,097
                                  )Balance
      at February 1, 2009
                                  
                                  
                                  10,772
                                  
                                  
                                  $
                                  16,995
                                  
                                  
                                  $
                                  
                                  
                                  
                                  $
                                  112,450
                                  
                                  
                                  $
                                  265
                                  
                                  
                                  $
                                  129,710





See
accompanying Notes to Consolidated Financial Statements.


F-8


NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature
of Business





Hooker
Furniture Corporation and subsidiaries (the “Company”, we, our) design, import,
manufacture and market residential household furniture for sale to wholesale and
retail merchandisers located principally in North America.





Consolidation





The
consolidated financial statements include the accounts of Hooker Furniture
Corporation and its wholly owned subsidiaries.  All material
intercompany accounts and transactions have been eliminated in
consolidation.





Certain
items in the consolidated financial statements and the notes to the consolidated
financial statements for the periods prior to fiscal year 2009 have been
reclassified to conform to the fiscal year 2009 method of
presentation.  Beginning with the fiscal 2009 Form 10-K, we have also
reclassified shipping and warehousing costs from selling, general and
administrative expense to cost of sales as described in more detail in Note
8.





Cash
and Cash Equivalents





We
temporarily invest unused cash balances in a high quality, diversified money
market fund that provides for daily liquidity and pays dividends
monthly.  Cash equivalents are stated at cost plus accrued interest,
which approximates market.





Trade
Accounts Receivable





Substantially
all of our trade accounts receivable are due from retailers and dealers that
sell residential home furnishings, which consist of a large number of entities
with a broad geographical dispersion.  We continually perform credit
evaluations of our customers and generally do not require
collateral.  Our upholstered furniture subsidiaries factor
substantially all of their receivables on a non-recourse
basis.  Accounts receivable are reported net of allowance for doubtful
accounts.





Fair
Value of Financial Instruments





The
carrying value for each of our financial instruments (consisting of cash and
cash equivalents, trade accounts receivable and payable, and accrued
liabilities) approximates fair value because of the short-term nature of those
instruments.  The fair value of our term loan is estimated based on
the quoted market rates for similar debt with a similar remaining
maturity.  The fair value of our interest rate swap agreement is based
on values provided by the issuer.





Inventories





All
inventories are stated at the lower of cost, using the last-in, first-out (LIFO)
method, or market.





Property,
Plant and Equipment





Property,
plant and equipment is stated at cost, less allowances for
depreciation.  Provision for depreciation has been computed (generally
by the declining balance method) at annual rates that will amortize the cost of
the depreciable assets over their estimated useful lives.





Impairment
of Long-Lived Assets





Long-lived
assets, such as property, plant and equipment, are evaluated for impairment when
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through the estimated undiscounted future cash
flows from the use of those assets.  When any such impairment exists,
the related assets are written down to fair value.  Long-lived assets
to be disposed of by sale are measured at the lower of their carrying amount or
fair value less cost to sell, are no longer depreciated, and are reported
separately as “assets held for sale” in the consolidated balance
sheets.


F-9


Goodwill
and Intangible Assets





Hooker
Furniture Corporation owns certain amortizable and indefinite-lived intangible
assets and goodwill related to Bradington-Young, Sam Moore and Opus Designs by
Hooker.  The principal amortizable intangible assets are non-compete
agreements and furniture designs, which are amortized over their estimated
useful lives.  The principal indefinite-lived intangible assets are
trademarks and trade names which are not amortized but are tested for impairment
annually or more frequently if events or circumstances indicate that the asset
might be impaired.





The fair
value of the indefinite-lived intangible assets is determined based on the
estimated earnings and cash flow capacity of those assets.  The
impairment test consists of a comparison of the fair value of the
indefinite-lived intangible assets with their carrying amount.  If the
carrying value of the indefinite-lived intangible assets exceeds their fair
value, an impairment loss is recognized in an amount equal to that
excess.





Goodwill
is tested for impairment at the reporting unit level and involves two
steps.  First, we determine the fair value of the reporting unit and
compare it to the reporting unit’s carrying amount including
goodwill.  Second, if the carrying amount of the reporting unit
exceeds its fair value, an impairment loss is recognized to the extent the
carrying amount of the reporting unit’s goodwill exceeds the implied fair value
of that goodwill.  The implied fair value of goodwill is determined by
allocating the fair value of the reporting unit to its assets in a manner
similar to a purchase price allocation.  The residual fair value
resulting from this allocation is the implied fair value of the reporting unit
goodwill.





Cash Surrender Value of Life
Insurance Policies





Hooker
Furniture Corporation owns life insurance policies on certain executives and
other key employees.  Proceeds of the policies are used to fund
certain employee benefits and for other general corporate
purposes.  We account for life insurance as a component of employee
benefits cost.  Consequently the cost of the coverage and any
resulting gains or losses related to those insurance policies are recorded as a
decrease or increase to operating income.





Derivative
Instruments and Hedging Activities





We use
interest rate swap agreements to manage variable interest rate exposure on the
majority of our long-term debt.  Our objective for holding these
derivatives is to decrease the volatility of future cash flows associated with
interest payments on its variable rate debt.  We do not issue
derivative instruments for trading purposes.  We account for our
interest rate swap agreements as cash flow hedges.  For derivatives
designated as cash flow hedges, the effective portion of changes in the fair
value of the derivative is initially reported in “accumulated other
comprehensive income or loss” on the consolidated balance sheets and
subsequently reclassified to interest expense when the hedged exposure affects
income (i.e. as interest expense accrues on the related  outstanding
debt).  Differences between the amounts paid and amounts received
under the swap agreements are recognized in interest expense.





In some
cases, such as upon the early repayment of a debt instrument, we may continue to
hold an interest rate swap for a period of time after the related principal has
been paid rendering the hedge ineffective.  Changes in the ineffective
portion of the fair value of the derivative are accounted for through interest
expense.





Revenue
Recognition





Sales
revenue is recognized when title and the risk of loss pass to the customer,
which occurs at the time of shipment.  Sales are recorded net of
allowances for trade promotions, estimated product returns, rebate advertising
programs and other discounts.





Advertising





We offer
advertising programs to qualified dealers under which we may provide signage,
catalogs and other marketing support to our customers and may reimburse
advertising and other costs incurred by our customers in connection with
promoting our products.  The cost of these programs does not exceed
the fair value of the benefit received.  We charge the cost of
point-of-purchase materials (including signage and catalogs) to selling and
administrative expense as incurred. The cost for other advertising allowance
programs is charged against net sales.


F-10


Income
Taxes





Income
taxes are accounted for under the asset and liability
method.  Deferred income taxes reflect the expected future tax
consequences of differences between the book and income tax bases of assets and
liabilities using enacted tax rates in effect in the years in which those
differences are expected to reverse.





We
recognize positions taken or expected to be taken in our tax returns in the
financial statements when it is more likely than not (i.e., a likelihood of more
than fifty percent) that the position would be sustained upon examination by tax
authorities. A recognized tax position is then measured at the largest amount of
benefit that is more likely than not of being realized upon ultimate
settlement.  We classify interest and penalties related to uncertain
tax positions as income tax expense.





Earnings
Per Share





Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period.  Diluted earnings per share reflects the potential dilutive
effect of securities that could share in the earnings of the
Company.  We have issued restricted stock awards to non-employee
members of the board of directors under the Hooker Furniture Corporation 2005
Stock Incentive Plan, and expect to continue to grant these awards to
non-employee board members in the future.





Use
of Estimates





The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, as well as disclosures
regarding contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenue and expenses during the reported
periods.  Significant items subject to such estimates and assumptions
include the useful lives of fixed assets; allowance for doubtful accounts; the
valuation of derivatives; deferred tax assets; fixed assets, and stock-based
compensation. These estimates and assumptions are based on Management’s best
judgments. Management evaluates its estimates and assumptions on an ongoing
basis using historical experience and other factors, including the current
economic environment, which Management believes to be reasonable under the
circumstances. Management adjusts such estimates and assumptions as facts and
circumstances dictate. Illiquid credit markets and volatile equity markets have
combined to increase the uncertainty inherent in such estimates and assumptions.
Actual results could differ from those estimates.





Accounting
Pronouncements




In March
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No.
133.”   The objective of this statement is to require enhanced
disclosures about an entity’s derivative and hedging activities and to improve
the transparency of financial reporting.  This statement changes the
disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.  This statement is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. This statement encourages, but does not require,
comparative disclosures for earlier periods at initial
adoption. We expect to adopt this standard effective with our fiscal
year 2010 first quarter, which began February 2, 2009.




In
December 2007, the FASB issued a revision to SFAS No. 141R, “Business
Combinations”.  The objective of this Statement is to improve the
relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial reports about a business
combination and its effects. To accomplish that, this statement establishes
principles and requirements for how the acquirer:  a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the
acquiree;  b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  This
statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.  Early adoption of
this standard is not permitted.  Consequently, we adopted the standard
in our fiscal year 2010 first quarter, which began February 2,
2009.  The adoption of SFAS 141R is not expected to have a material
impact on our financial position or results of operations.


F-11


In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115”.   This statement permits entities to choose
to measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. This statement is expected to expand the use of fair
value measurement, which is consistent with FASB’s long-term measurement
objectives for accounting for financial instruments.  This statement
is effective as of the beginning of an entity’s first fiscal year that begins
after November 15, 2007. Early adoption is permitted as of the beginning of a
fiscal year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements.  Consequently, Hooker adopted the standard in our fiscal
year 2009 first quarter, which began February 4, 2008.  The adoption
of SFAS 159 did not have a material impact on our financial position or results
of operations.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements”.  This statement defines fair value, establishes a
framework for measuring fair value under U.S. generally accepted accounting
principles, and expands disclosures about fair value measurements. This
statement applies under other accounting pronouncements that require or permit
fair value measurements, the FASB having previously concluded in those
accounting pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice.  This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years.  Consequently, Hooker
adopted the standard in our fiscal year 2009 first quarter, which began February
4, 2008.  The adoption of SFAS 157 did not have a material impact on
our financial position or results of operations.





NOTE
2 – CHANGE IN FISCAL YEAR





On August
29, 2006, we approved a change in our fiscal year.  After the fiscal
year that ended November 30, 2006, our fiscal years will end on the Sunday
nearest to January 31.  In addition, starting with the fiscal year
that began January 29, 2007, we adopted quarterly periods based on thirteen-week
“reporting periods” (which will end on a Sunday) rather than quarterly periods
consisting of three calendar months.  As a result, each quarterly
period generally will be thirteen weeks, or 91 days, long.  However,
since our fiscal year will end on the Sunday closest to January 31, in some
years (generally once every six years) the fourth quarter will be fourteen weeks
long and the fiscal year will consist of fifty-three weeks (for example, the
fiscal year that ended February 3, 2008 was fifty-three weeks).





We
completed a two-month transition period that began December 1, 2006 and ended
January 28, 2007 and filed a transition report on Form 10-Q for that period on
March 16, 2007.  These financial statements are being filed as part of
an annual report on Form 10-K covering the fifty-two week period that began
February 4, 2008 and ended February 1, 2009 and the fifty-three week period that
began January 29, 2007 and ended February 3, 2008.  These financial
statements also include the two-month transition period that began December 1,
2006 and ended January 28, 2007 and the twelve-month period that ended November
30, 2006.  We did not recast the financial statements for the
twelve-month period ended November 30, 2006 principally because the financial
reporting processes in place for that period included certain procedures that
were completed only on a quarterly basis.  Consequently, to recast
that period would have been impractical and would not have been
cost-justified.





References
to the 2009 fiscal year and comparable terminology in the notes to the
consolidated financial statements mean the fiscal year that began February 4,
2008 and ended February 1, 2009.  References to the 2008 fiscal year
and comparable terminology in the notes to the consolidated financial statements
mean the fiscal year that began January 29, 2007 and ended February 3,
2008.  References to the 2007 two-month transition period and
comparable terminology in the notes to the consolidated financial statements
refers to the period that began December 1, 2006 and ended January 28,
2007.  References to the 2006 fiscal year and comparable terminology
in the notes to the consolidated financial statements refer to the fiscal year
that began December 1, 2005 and ended November 30, 2006.


F-12





NOTE
3 – ALLOWANCE FOR DOUBTFUL ACCOUNTS





The
activity in the allowance for doubtful accounts was:





Fifty-Two
                  
                  Fifty-Three
                  
                  Two-Months
                  
                  TwelveWeeks Ended
                  
                  Weeks Ended
                  
                  Ended
                  
                  MonthsEndedFebruary 1,
                  
                  February 3,
                  
                  January 28,
                  
                  November 30,2009
                  
                  2008
                  
                  2007
                  
                  2006Balance
      at beginning of year
                  
                  $
                  1,750
                  
                  
                  $
                  1,436
                  
                  
                  $
                  1,807
                  
                  
                  $
                  1,352Non-cash
      charges to cost and expenses
                  
                  
                  2,070
                  
                  
                  
                  1,313
                  
                  
                  
                  (182
                  )
                  
                  
                  1,920Allowance
      for doubtful accounts acquired in acquisitions
                  
                  
                  
                  
                  
                  
                  257Less
      uncollectible receivables written off, net of recoveries
                  
                  
                  (1,613
                  )
                  
                  
                  (1,256
                  )
                  
                  
                  (189
                  )
                  
                  
                  (1,465
                  )Balance
      at end of year
                  
                  $
                  2,207
                  
                  
                  $
                  1,750
                  
                  
                  $
                  1,436
                  
                  
                  $
                  1,807





NOTE
4 – INVENTORIES





February 1,
                  
                  February 3,2009
                  
                  2008Finished
      furniture
                  
                  $
                  64,865
                  
                  
                  $
                  52,602Furniture
      in process
                  
                  
                  900
                  
                  
                  
                  1,217Materials
      and supplies
                  
                  
                  8,207
                  
                  
                  
                  7,814Inventories
      at FIFO
                  
                  
                  73,972
                  
                  
                  
                  61,633Reduction
      to LIFO basis
                  
                  
                  13,724
                  
                  
                  
                  11,073Inventories
                  
                  $
                  60,248
                  
                  
                  $
                  50,560





If the
first-in, first-out (FIFO) method had been used in valuing all inventories, net
income (loss) would have been $8.1 million in fiscal 2009, $19.5 million in
fiscal 2008, $(18.3) million in the 2007 two-month transition period and $13.7
million in fiscal 2006.




As of
February 1, 2009, we held $11.1 million in inventory (7.2% of total assets)
outside of the United States, in China.





NOTE
5 – PROPERTY, PLANT AND EQUIPMENT





Depreciable Lives
                              
                              February 1,
                              
                              February 3,(In years)
                              
                              2009
                              
                              2008Buildings
      and land improvements
                              
                              
                              15
      – 30
                              
                              
                              $
                              23,676
                              
                              
                              $
                              23,076Machinery
      and equipment
                              
                              
                              10
                              
                              
                              
                              3,665
                              
                              
                              
                              3,425Furniture
      and fixtures
                              
                              
                              3 -
      8
                              
                              
                              
                              26,656
                              
                              
                              
                              27,516Other
                              
                              
                              5
                              
                              
                              
                              3,886
                              
                              
                              
                              3,740Total
      depreciable property at cost
                              
                              
                              
                              
                              
                              
                              57,883
                              
                              
                              
                              57,757Less
      accumulated depreciation
                              
                              
                              
                              
                              
                              
                              35,695
                              
                              
                              
                              34,558Total
      depreciable property, net
                              
                              
                              
                              
                              
                              
                              22,188
                              
                              
                              
                              23,199Land
                              
                              
                              
                              
                              
                              
                              1,357
                              
                              
                              
                              1,387Construction
      in progress
                              
                              
                              
                              
                              
                              
                              1,051
                              
                              
                              
                              767Property,
      plant and equipment, net
                              
                              
                              
                              
                              
                              $
                              24,596
                              
                              
                              $
                              25,353


F-13





Capitalized Software
Costs





Certain
costs incurred in connection with developing or obtaining computer software for
internal use are capitalized.  These costs are amortized over five
years or less, and generally over five years.  Capitalized software is
reported as a component of furniture and fixtures on our balance
sheet.  The activity in capitalized software costs was:


Fifty-Two
                                                  
                                                  Fifty-Three
                                                  
                                                  Two-Months
                                                  
                                                  TwelveWeeks
      Ended
                                                  
                                                  Weeks
      Ended
                                                  
                                                  Ended
                                                  
                                                  Months
      EndedFebruary
      1,
                                                  
                                                  February
      3,
                                                  
                                                  January
      28,
                                                  
                                                  November
      30,2009
                                                  
                                                  2008
                                                  
                                                  2007
                                                  
                                                  2006Balance
      beginning of year
                                                  
                                                  $
                                                  3,293
                                                  
                                                  
                                                  $
                                                  1,847
                                                  
                                                  
                                                  $
                                                  1,576
                                                  
                                                  
                                                  $
                                                  2,961Software
      acquired in the acquisition of Sam Moore
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  458Purchases
                                                  
                                                  
                                                  635
                                                  
                                                  
                                                  
                                                  2,176
                                                  
                                                  
                                                  
                                                  540
                                                  
                                                  
                                                  
                                                  166Amortization
      expense
                                                  
                                                  
                                                  (1,065
                                                  )
                                                  
                                                  
                                                  (1,142
                                                  )
                                                  
                                                  
                                                  (269
                                                  )
                                                  
                                                  
                                                  (1,407
                                                  )Disposals
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (46
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (144
                                                  )Balance
      end of year
                                                  
                                                  $
                                                  2,863
                                                  
                                                  
                                                  $
                                                  3,293
                                                  
                                                  
                                                  $
                                                  1,847
                                                  
                                                  
                                                  $
                                                  1,576





NOTE
6 – GOODWILL AND INTANGIBLE ASSETS


Useful
      Lives
                              
                              
                              February
      1,
                              
                              February
      3,(In
      years)
                              
                              
                              2009
                              
                              2008Goodwill
                              
                              
                              
                              
                              
                              
                              
                              $
                              3,774Non-amortizable
      Intangible AssetsTrademarks
      and trade names – Bradington-Young
                              
                              
                              
                              
                              $
                              3,289
                              
                              
                              $
                              4,400Trademarks
      and trade names – Sam Moore
                              
                              
                              
                              
                              
                              396
                              
                              
                              
                              396Trademarks
      and trade names – Opus Designs
                              
                              
                              
                              
                              
                              1,057
                              
                              
                              
                              1,000Total
      trademarks and trade names
                              
                              
                              
                              
                              
                              4,742
                              
                              
                              
                              5,796Amortizable
      Intangible AssetsNon-compete
      agreements
                              
                              
                              4
                              
                              
                              
                              700
                              
                              
                              
                              700Furniture
      designs
                              
                              
                              3
                              
                              
                              
                              100
                              
                              
                              
                              100Total
      amortizable intangible assets
                              
                              
                              
                              
                              
                              
                              800
                              
                              
                              
                              800Less
      accumulated amortization
                              
                              
                              
                              
                              
                              
                              737
                              
                              
                              
                              704Net
      carrying value
                              
                              
                              
                              
                              
                              
                              63
                              
                              
                              
                              96Intangible
      assets
                              
                              
                              
                              
                              
                              $
                              4,805
                              
                              
                              $
                              5,892





We
recorded goodwill and certain intangible assets related to Bradington-Young, Sam
Moore and Opus Designs.  The goodwill, trademarks and trade names have
indefinite useful lives and consequently are not subject to amortization for
financial reporting purposes but are tested for impairment annually or more
frequently if events or circumstances indicate that the asset might be
impaired.  See “Note 1 – Summary of Significant Accounting Policies:
Goodwill and Intangible Assets.”  For tax reporting purposes the
goodwill and intangible assets are being amortized over 15 years on a straight
line basis.





Goodwill
results from business acquisitions and represents the excess of acquisition
costs over the fair value of the net assets acquired.  In those
acquisitions, we also purchased trade names and trademarks, which we recorded as
indefinite-lived intangible assets.  Goodwill and trade names are
tested for impairment annually as of the first day of our fiscal fourth quarter
or more frequently if events or changes in circumstances indicate that the asset
might be impaired.  Circumstances that could indicate a potential
impairment include a significant adverse change in the economic or business
climate either within the furniture industry or the national or global economy,
significant changes in demand for our products, loss of key personnel or the
likelihood that a reporting unit or significant portion of a reporting unit will
be sold or otherwise disposed of.  These circumstances could lead to
our net book value exceeding our market capitalization which is another
indicator of a potential impairment in goodwill.  First, the fair
value of each reporting unit is compared to its carrying value to determine
whether an indication of impairment exists.  Goodwill on our balance
sheet is related to the acquisitions of Bradington-Young and Opus Designs and is
unique to each of these business units.  Second, if impairment is
indicated, then the fair value of the reporting unit’s goodwill is determined by
allocating the unit’s fair value to its assets and liabilities (including any
unrecognized intangible assets) as if the reporting unit had been acquired in a
business combination on the impairment test date.  The amount of
impairment for goodwill is measured as the excess of the carrying value of the
reporting unit over its fair value.


F-14




When
estimating fair values of a reporting unit for our goodwill impairment test, we
use a combination of an income approach and a market
approach which incorporates both management’s views and those of the
market.  The income approach provides an estimated fair value based on
each reporting unit’s anticipated cash flows that are discounted using a
weighted average cost of capital rate.  The market approach provides
an estimated fair value based on our market capitalization that is computed
using the market price of our common stock and number of shares outstanding on
our measurement date.  The estimated fair values computed using the
income approach and the market approach are then weighted and combined into a
single fair value.  The primary assumptions used in the income
approach are estimated cash flows and weighted average cost of
capital.  Estimated cash flows are primarily based on projected
revenues, operating costs and capital expenditures and are discounted based on
comparable industry average rates for weighted average cost of
capital.





The
estimated fair values of our reporting units were negatively impacted by
significant reductions in estimated cash flows for the income approach component
and a significant reduction in our market capitalization for the market approach
component of our fair value estimation process.  Our goodwill was
initially recorded in connection with the acquisitions of Bradington-Young and
Opus Designs, which occurred when the US economy was much stronger, estimates of
revenue, margin and cash flow growth were much greater, and our market
capitalization was at higher levels.  Our goodwill impairment analysis lead
us to conclude that there would be no remaining implied fair value attributable
to our goodwill and accordingly, we recorded a non−cash impairment charge of
$3.8 million for the year ended February 1, 2009.





Trade
names and trademarks are related to the acquisitions of Bradington-Young, Sam
Moore and Opus Designs.  The circumstances which impact the valuation
of goodwill could also be an indicator of impairment of trade names or
trademarks, as could changes in legal circumstances, marketing plans or customer
demand.  In conjunction with our evaluation of goodwill and the cash
flows generated by the business units, we evaluated the carrying value of trade
names and trademarks using the relief from royalty method, which values the
trademark by estimating the savings achieved by ownership of the trade name when
compared to licensing the name from an independent owner.  Our trade
name analysis led us to conclude that the Bradington-Young trade name was
impaired and accordingly we recorded a non-cash impairment charge of $1.1
million for the year ended February 1, 2009.





NOTE
7 – ACQUISITIONS





On April
28, 2007, Hooker Furniture completed its acquisition of substantially all of the
assets of Bedford, Virginia-based Sam Moore Furniture Industries, Inc., a
manufacturer of upscale occasional chairs with an emphasis on fabric-to-frame
customization in the upper-medium to high-end price niches.  We
operate the business as Sam Moore Furniture LLC.  Hooker acquired
the Sam Moore operation for an aggregate purchase price of $12.1 million,
consisting of $10.3 million in cash (net of cash acquired), $1.5 million in
assumed liabilities and acquisition-related fees of $333,000.





Based on
an appraisal of the assets of Sam Moore, the fair value of those assets exceeded
the purchase price.  This $3.6 million excess over purchase price was
allocated as a reduction to the fair value of property, plant and equipment and
intangible assets in determining their recorded values.




The
recorded values of the assets acquired and liabilities assumed
were:
 April 28, 2007Current
      assets
                    
                    $
                    8,668Property,
      plant and equipment
                    
                    
                    3,076Intangible
      assets
                    
                    
                    396Total
      assets acquired
                    
                    
                    12,140Current
      liabilities assumed
                    
                    
                    1,487Net
      assets acquired
                    
                    $
                    10,653
 
 On
December 14, 2007, we completed our acquisition of Opus Designs Furniture LLC, a
specialist in imported moderately-priced youth bedroom furniture.  We
have integrated this business with our existing imported wood and metal
furniture business and will offer this brand to customers as Opus Designs by
Hooker.  We acquired the accounts receivable, inventory, intangible
assets and goodwill of Opus Designs Furniture LLC for an aggregate purchase
price of $5.4 million, consisting of $5.3 million in cash and
acquisition-related fees of $54,000.
  F-15
 
 The
recorded values of the assets acquired and liabilities assumed
were:
 December 14, 2007Current
      assets
                    
                    $
                    2,876Goodwill
      and intangible assets
                    
                    
                    2,557Total
      assets acquired
                    
                    $
                    5,433
 
 NOTE
8 – RECLASSIFICATIONS AND REVISIONS
 
 We made a
change in accounting principle in fiscal 2009 to classify shipping and
warehousing costs associated with the distribution of finished products to our
customers, as well as certain supply chain and operations management
expenses,  as cost of sales (previously recorded in selling, general
and administrative expense).  We believe this accounting principle is
preferable because the classification of these shipping and warehousing costs in
cost of sales better reflects the cost of producing, selling and distributing
our products.  The reclassification due to this change in accounting
principle amounted to $16.8 million in fiscal 2009, $15.5 million in fiscal
2008, $2.4 million in the 2007 two-month transition period and $20.9 million in
fiscal 2006.
 
 We
determined that in the Consolidated Statements of Cash Flows the cash payments
related to our life insurance policies should be reported as investing
activities rather than operating activities, therefore we increased “net cash
provided by operating activities” by $167,000 in fiscal 2008, $46,000 in the
2007 two-month transition period, and $1.5 million in fiscal 2006, with a
corresponding increase in “net cash used in investing activities” in each
respective period.  We reviewed the impact of this error on the prior
periods in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,”
and determined that the error was not material to the prior
periods.
 
 NOTE
9 – SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
 
 Fifty-Two
                    
                    
                    Fifty-Three
                    
                    
                    Two-Months
                    
                    
                    TwelveWeeks
      Ended
                    
                    
                    Weeks
      Ended
                    
                    
                    Ended
                    
                    
                    Months
      EndedFebruary
      1,
                    
                    
                    February
      3,
                    
                    
                    January
      28,
                    
                    
                    November
      30,2009
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2006Restricted
      stock grants, net of forfeitures
                    
                    $
                    85
                    
                    
                    $
                    85
                    
                    
                    $
                    74
                    
                    
                    $
                    62Donation
      of showroom facilities
                    
                    
                    
                    
                    
                    
                    1,082Liabilities
      assumed in connection with acquisition of Sam Moore
    Furniture
                    
                    
                    
                    
                    
                    
                    1,487Note
      received in connection with the sale of the Pleasant Garden, N.C.
      facility
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    400
 
 NOTE
10 – LONG-TERM DEBT
 February
      1,
                    
                    
                    February
      3,2009
                    
                    
                    2008Term
      loan
                    
                    $
                    5,218
                    
                    
                    $
                    7,912Less
      current maturities
                    
                    
                    2,899
                    
                    
                    
                    2,694Long-term
      debt, less current maturities
                    
                    $
                    2,319
                    
                    
                    $
                    5,218
 
 The term
loan bears interest at a variable rate, 1.0% on February 1, 2009 and 5.3% on
February 3, 2008 and is unsecured.  Principal and interest payments
are due quarterly through September 1, 2010.  We have entered into an
interest rate swap agreement that in effect provides for a fixed rate of
interest of 4.1% on the term loan.  See “Note 11 –
Derivatives.”  On February 1, 2009 and February 3, 2008, the carrying
value of the term loan approximated fair value.
 
 We also
have a revolving credit facility that is unsecured and provides for borrowings
of up to $15.0 million at variable interest rates, 1.0% on February 1, 2009 and
5.3% on February 3, 2008.  Up to $3.0 million of the revolving credit
line may be used for the issuance of letters of credit.  Interest is
payable monthly.  No borrowings were outstanding under the revolving
credit line as of February 1, 2009 or February 3, 2008.  As of
February 1, 2009, we had an aggregate $12.6 million available under this
revolving credit facility to fund working capital needs.  Outstanding
letters of credit under that line which is used to collateralize certain
insurance arrangements and for imported product purchases amounted to $2.4
million as of February 1, 2009.  The revolving credit line expires on
March 1, 2011.  On February 19, 2009, we amended our credit facility
with Bank of America, N.A.  The amendment, effective as of January 1,
2009 modified the definition of “Cash Flow” to exclude all non-cash charges,
including goodwill and intangible asset impairment from the calculation of Cash
Flow for purposes of the Company’s Debt Service Coverage Ratio under the credit
agreement; and increased the Commitment Fee and the fee for LIBOR Loans and
Letters of Credit under the credit agreement.  All other terms were
unchanged.
  F-16
  The
credit agreement for the term loan and the revolving credit facility contains
customary representations and warranties, covenants and events of default,
including 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.  We
were in compliance with these covenants as of February 1, 2009.
 
 As of
February 1, 2009, aggregate future maturities for our long-term debt were $2.9
million in fiscal 2010 and $2.3 million in fiscal 2011.
  NOTE
11 – DERIVATIVES
  We use
interest rate swap agreements to manage variable interest rate exposures on the
majority of our long-term debt.  The notional principal value of our
currently outstanding swap agreement is substantially equal to the outstanding
principal balance of the corresponding debt instrument.  We believe
that this swap agreement is effective in managing the volatility of future cash
flows associated with interest payments on variable rate debt.  We
account for interest rate swap agreements as cash flow hedges.
 
 In
February 2003, in connection with the refinancing of our bank debt, we
terminated an interest rate swap agreement that in effect provided a fixed
interest rate of 7.4% on our term loan and entered into a new interest rate swap
agreement.  The new swap agreement is on substantially the same terms
as the terminated agreement, except that it provides for a fixed interest rate
of 4.1% through 2010 on the term loan.  We made a $3.0 million payment
to terminate the former swap agreement, which is being amortized as interest
expense over the remaining repayment period for the related term loan, resulting
in an effective fixed interest rate of approximately 7.4% on the term
loan.
 
 The
aggregate fair market value of our swap agreement decreases when interest rates
decline and increases when interest rates rise.  Overall, interest
rates have declined since the inception of our swap agreement.  The
aggregate decrease in the fair market value of the effective portion of the
agreement of $142,000 ($229,000 pretax) as of February 1, 2009, $191,000
($311,000 pretax) as of February 3, 2008 and $69,000 ($111,000 pre-tax) as of
January 28, 2007 is reflected under the caption “accumulated other comprehensive
income (loss)” in the consolidated balance sheets.  See “Note 12 –
Other Comprehensive Income (Loss).”
 
 NOTE
12 – OTHER COMPREHENSIVE INCOME (LOSS)
 Fifty-Two
                      
                      
                      Fifty-Three
                      
                      
                      Two-Months
                      
                      
                      TwelveWeeks
      Ended
                      
                      
                      Weeks
      Ended
                      
                      
                      Ended
                      
                      
                      Months
      EndedFebruary
      1,
                      
                      
                      February
      3,
                      
                      
                      January
      28,
                      
                      
                      November
      30,2009
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Net
      income (loss)
                      
                      $
                      6,910
                      
                      
                      $
                      19,655
                      
                      
                      $
                      (18,415
                      )
                      
                      $
                      14,138(Loss)
      gain on interest rate swaps
                      
                      
                      (126
                      )
                      
                      
                      (256
                      )
                      
                      
                      56
                      
                      
                      
                      88Less
      amount of swaps’ fair value reclassified to interest
    expense
                      
                      
                      205
                      
                      
                      
                      58
                      
                      
                      
                      9
                      
                      
                      
                      101Unrealized
      gain (loss) on interest rate swaps
                      
                      
                      79
                      
                      
                      
                      (198
                      )
                      
                      
                      65
                      
                      
                      
                      189Unrealized
      accumulated actuarial gain on SupplementalRetirement
      Income Plan (deferred compensation)
                      
                      
                      653Other
      comprehensive income (loss) before tax
                      
                      
                      732
                      
                      
                      
                      (198
                      )
                      
                      
                      65
                      
                      
                      
                      189Income
      tax expense (benefit)
                      
                      
                      276
                      
                      
                      
                      (76
                      )
                      
                      
                      25
                      
                      
                      
                      72Other
      comprehensive income (loss), net of tax
                      
                      
                      456
                      
                      
                      
                      (122
                      )
                      
                      
                      40
                      
                      
                      
                      117Comprehensive
      income (loss)
                      
                      $
                      7,366
                      
                      
                      $
                      19,533
                      
                      
                      $
                      (18,375
                      )
                      
                      $
                      14,255
  NOTE
13 – EMPLOYEE BENEFIT PLANS
  Employee
Savings Plans
 
 We
sponsor a tax-qualified 401(k) plan covering substantially all
employees.  This plan assists employees in meeting their savings and
retirement planning goals through employee salary deferrals and discretionary
matching contributions made by the company.  Company contributions to
the plan amounted to $617,000 in fiscal 2009, $574,000 in fiscal 2008, $112,000
in the 2007 two-month transition period, and $489,000 in fiscal
2006.
  F-17
 
 Executive
Benefits
 
 Through
fiscal 2008 we provided salary continuation and supplemental executive
retirement benefits to certain management employees, which consisted of
individual contracts with participants to pay amounts as specified in each
agreement upon retirement, disability or death.  The supplemental
executive retirement arrangements also provided for benefit payments to
participants upon a change in control of the Company as defined in the
agreements.  These agreements were unfunded and all benefits were
payable solely from the general assets of the Company.  We accounted
for our obligation to each participant individually on the accrual basis in
accordance with the terms of the underlying agreements.  The total
accrued liabilities relating to these agreements approximated $5.6 million as of
February 3, 2008.  These amounts are included in “accrued salaries,
wages and benefits” and “deferred compensation” in the consolidated balance
sheets.  The cost of the program amounted to $2.0 million in fiscal
2008, $342,000 in the 2007 two-month transition period and $2.7 million in
fiscal 2006.
 
 Effective
for fiscal 2009, we replaced these agreements with a new supplemental retirement
income plan (“SRIP”).  The SRIP provides monthly payments to
participants or their designated beneficiaries based on the participant’s “final
average monthly earnings” and “specified percentage” participation level as
defined in the plan, subject to a vesting schedule that may vary for each
participant.  The benefit is payable for a 15-year period following
the participant’s termination of employment due to retirement, disability or
death.  In addition, the monthly retirement benefit for each
executive, regardless of age, becomes fully vested and the present value of that
benefit is paid to each participant in a lump sum upon a change in control of
the Company as defined in the plan.  The SRIP is unfunded and all
benefits are payable solely from the general assets of the Company.
 
 Fifty-twoWeeks
      endedFebruary 1, 2009Amount
      recognized in the consolidated balance sheet:Current
      liabilities
                      
                      $
                      175Non-current
      liabilities
                      
                      
                      5,606Total
                      
                      $
                      5,781Net
      periodic benefit costService
      cost
                      
                      $
                      750Interest
      cost
                      
                      
                      350Net
      periodic benefit cost
                      
                      
                      1,100Other
      changes recognized in accumulated other comprehensive
    incomeNet
      (gain) loss arising during period
                      
                      
                      (653
                      )Total
      recognized in net periodic benefit cost and accumulated other
      comprehensive income
                      
                      $
                      447
  F-18
 
 The
financial status of the plan at February 1, 2009 is as follows:
 Fifty-twoWeeks
      endedFebruary 1, 2009Change
      in benefit obligation:Beginning
      benefit obligation
                          
                          $
                          5,601Service
      cost
                          
                          
                          750Interest
      cost
                          
                          
                          350Benefits
      paid
                          
                          
                          (267
                          )Actuarial
      loss (gain)
                          
                          
                          (653
                          )Ending
      benefit obligation
                          
                          $
                          5,781Change
      in plan assets:Beginning
      fair value of plan assetsEmployer
      contributions
                          
                          $
                          267Benefits
      paid
                          
                          
                          (267
                          )Ending
      fair value of plan assetsFunded
      status at end of year
                          
                          $
                          (5,781
                          )
  We also
provide a life insurance program for certain executives.  The life
insurance program provides death benefit protection for these executives during
employment.  Coverage under the program automatically terminates when
the executive terminates employment with Hooker Furniture Corporation for any
reason, other than death, or when the executive attains age 65, whichever occurs
first.  The life insurance policies funding this program are owned by
the Company with a specified portion of the death benefits payable under those
policies endorsed to the insured executives’ designated
beneficiaries.
 
 Mr.
Douglas C. Williams, our former President and Chief Operating Officer retired
effective October 31, 2006.  Mr. Williams was offered an early
retirement arrangement in late August 2006.  Consequently, we recorded
$1.4 million in compensation expense for benefits payable to him under the SRIP
and other early retirement benefits payable the 2006 third quarter related to
Mr. Williams early retirement arrangement.  Substantially all of Mr.
Williams’ retirement benefits were paid during fiscal 2008.
 
 Performance
Grants
 
 On April
30, 2008, the Compensation Committee of our board of directors awarded two
performance grants to certain senior executives under the 2005 Stock Incentive
Plan.  Payments under each fixed dollar grant will be based on our
cumulative earnings per share (“EPS”) and average annual return on equity
(“ROE”) for the grant’s designated performance and service
period.  The respective performance periods for the two grants are the
fiscal two-year period ending January 31, 2010 and the fiscal three-year period
ending January 30, 2011.  Payment, if any, under each performance
grant will be paid in cash, shares of our common stock or a combination of both,
at the discretion of the Compensation Committee.
  These
performance grants have been classified as liabilities since the (i) settlement
amount for each grant will not be known until after the applicable performance
period is completed and (ii) settlement of the grants may be made in common
stock, cash or a combination of both.  The estimated cost of each
grant will be recorded as compensation expense over the respective performance
periods when it becomes probable that the EPS and ROE performance targets will
be achieved.  The expected cost of the grants will be revalued each
reporting period.  As assumptions change regarding the expected
achievement of target performance levels, a cumulative adjustment will be
recorded and future compensation expense will increase or decrease based on the
currently projected performance levels.  If we determine that it is
not probable that the minimum EPS and ROE performance thresholds for the grants
will be met, no further compensation cost will be recognized and any previously
recognized compensation cost will be reversed.  A maximum of $3.2
million could be paid under these grants.  As of February 1, 2009 no
compensation expense has been recorded for these performance
grants.
 
 Employee
Stock Ownership Plan
 
 In
January 2007, we terminated our leveraged employee stock ownership plan (the
“ESOP”) which provided retirement benefits for substantially all
employees.  As a result of the ESOP termination, approximately 1.2
million shares of previously unallocated shares of Hooker Furniture Corporation
common stock held by the ESOP were allocated to eligible employees, resulting in
an $18.4 million, non-cash, non-tax deductible charge to earnings in January
2007 with a corresponding increase in shareholders’ equity.  To effect
the termination of the ESOP, we redeemed and retired approximately 1.2 million
of the shares of Hooker Furniture Corporation common stock held by the ESOP,
with proceeds to the ESOP of $17.2 million (or $15.01 per share).  The
ESOP used the proceeds to repay the outstanding balance on the ESOP
loan.
  F-19
 
 Prior to
the termination, we recorded non-cash ESOP cost for the number of shares
that it committed to release to eligible employees at the average closing market
price of Hooker Furniture Corporation common stock during each
period.  Those shares were treated as outstanding for computing
earnings per share. “Unearned ESOP shares” in shareholders’ equity was
reduced by the aggregate cost basis in the shares that were committed to be
released.  Those shares had a cost basis of $6.25 per
share.  “Common stock” was increased by the aggregate average
market price in excess of the cost basis of those shares.
 
 Dividends
paid on allocated shares held by the ESOP were charged against retained earnings
in the consolidated balance sheets.  Dividends paid on unallocated
shares were in effect recorded as a reduction of principal and interest on the
ESOP Loan.  The cost of the ESOP amounted to:
  Fifty-Two
                      
                      
                      Fifty-Three
                      
                      
                      Two-Months
                      
                      
                      TwelveWeeks
      Ended
                      
                      
                      Weeks
      Ended
                      
                      
                      Ended
                      
                      
                      Months
      EndedFebruary
      1,
                      
                      
                      February
      3,
                      
                      
                      January
      28,
                      
                      
                      November
      30,2009
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Average
      fair market value per share
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      16.12Number
      of shares committed to be released (in whole shares)
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      164,156Non-cash
      ESOP cost
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      2,646Administrative
      cost
                      
                      $
                      88
                      
                      
                      $
                      49
                      
                      
                      $
                      11
                      
                      
                      
                      86Total
      ESOP cost
                      
                      $
                      88
                      
                      
                      $
                      49
                      
                      
                      $
                      11
                      
                      
                      $
                      2,732
 
 Allocated
shares held by the ESOP pending distribution to employees were 1.7 million as of
February 3, 2008 and 2.2 million as of January 28, 2007.  All shares
were distributed to employees and the trust was terminated in October
2008.
 
 NOTE
14 –
SHARE-BASED COMPENSATION
 
 The
Hooker Furniture Corporation 2005 Stock Incentive Plan (“Stock Plan”) permits
incentive awards of restricted stock, restricted stock units, stock appreciation
rights and performance grants to key employees and non-employee
directors.  A maximum of 750,000 shares of the Company’s common stock
was approved for issuance under the Stock Plan.  We expect to issue
restricted stock or other forms of stock-based compensation awards to eligible
directors and employees under the plan.  We issued restricted stock
awards to each non-employee member of the board of directors in January 2006,
2007, 2008 and 2009.  These shares will vest if the director remains
on the board through a 36-month service period or may vest earlier in accordance
with terms specified in the Stock Plan.  During fiscal 2006, 784 of
4,851 shares were forfeited and 147 shares vested.  During fiscal
2009, the remaining 3,920 of these shares vested.  The grant-date fair
value of stock awards issued during the fiscal 2009 fourth quarter was $8.12 per
share,  $19.61 per share  for stock awards issued during the
fiscal 2008 fourth quarter, $15.23 per share for stock awards issued during the
2007 two-month transition period and $15.31 for stock awards issued during the
fiscal 2006 first quarter.
 
 We
account for these awards as “non-vested equity shares.”  The awards
outstanding as of February 1, 2009 had an aggregate grant-date fair value of
$244,000, after taking vested and forfeited shares into account.  As
of February 1, 2009, we have recognized non-cash compensation expense of
approximately $85,000 related to these non-vested awards and $62,000 for shares
that have vested.  The remaining $160,000 of grant-date fair value
will be recognized over the remaining months of the vesting periods for these
awards.
  F-20
  
 For each
restricted common stock issuance, the following table summarizes the actual
number of shares that have been issued/vested/forfeited, the weighted average
issue price of those shares on the grant date, the fair value of each grant on
the grant date, compensation expense recognized for the non-vested shares of
each grant and the remaining fair value of the non-vested shares of each grant
as of February 1, 2009:
 
 Whole
                                
                                
                                Grant-Date
                                
                                
                                Aggregate
                                
                                
                                Compensation
                                
                                
                                Grant-Date
      Fair ValueNumber
      of
                                
                                
                                Fair
      Value
                                
                                
                                Grant-Date
                                
                                
                                Expense
                                
                                
                                Unrecognized
      AtShares
                                
                                
                                Per
      Share
                                
                                
                                Fair
      Value
                                
                                
                                Recognized
                                
                                
                                February
      1, 2009Shares
      Issued on January 16, 2006Issued
                                
                                
                                4,851
                                
                                
                                $
                                15.31
                                
                                
                                $
                                74Forfeited
                                
                                
                                (784
                                )
                                
                                
                                15.31
                                
                                
                                
                                (12
                                )Vested
                                
                                
                                (4,067
                                )
                                
                                
                                15.31
                                
                                
                                
                                (62
                                )
                                
                                $
                                62Balance
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                62Shares
      Issued on January 15, 2007Issued
                                
                                
                                4,875
                                
                                
                                $
                                15.23
                                
                                
                                
                                74
                                
                                
                                
                                51
                                
                                
                                $
                                23Shares
      Issued on January 15, 2008Issued
                                
                                
                                4,335
                                
                                
                                $
                                19.61
                                
                                
                                
                                85
                                
                                
                                
                                31
                                
                                
                                
                                54Shares
      Issued on January 15, 2009Issued
                                
                                
                                10,474
                                
                                
                                $
                                8.12
                                
                                
                                
                                85
                                
                                
                                
                                2
                                
                                
                                
                                83Awards
      outstanding at February 1,
      2009:
                                
                                
                                19,684
                                
                                
                                
                                
                                
                                
                                $
                                244
                                
                                
                                $
                                146
                                
                                
                                $
                                160
 
 NOTE
15 – EARNINGS (LOSS) PER SHARE
 
 Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period.  Unearned ESOP shares are not considered outstanding for
purposes of calculating basic or diluted earnings per share.  Diluted
earnings per share reflects the potential dilutive effect of securities that
could share in our earnings.  In January 2006, 2007, 2008, and 2009 we
issued restricted stock awards to non-employee members of the board of directors
under the Stock Plan, and expect to continue to grant these awards to
non-employee board members in the future.  As of February 1, 2009,
February 3, 2008, January 28, 2007, and November 30, 2006 there were 19,684,
13,130, 8,795 and 3,920 shares, respectively, of restricted stock outstanding,
net of forfeitures and vested shares on each date.  Restricted shares
awarded that have not yet vested are considered when computing diluted earnings
per share.
 
 Fifty-Two
                    
                    
                    Fifty-Three
                    
                    
                    Two-Months
                    
                    
                    TwelveWeeks
      Ended
                    
                    
                    Weeks
      Ended
                    
                    
                    Ended
                    
                    
                    Months
      EndedFebruary
      1,
                    
                    
                    February
      3,
                    
                    
                    January
      28,
                    
                    
                    November
      30,2009
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2006Net
      income
                    
                    $
                    6,910
                    
                    
                    $
                    19,655
                    
                    
                    $
                    (18,415
                    )
                    
                    $
                    14,138Weighted
      average shares outstanding for basic earnings per share
                    
                    
                    11,060
                    
                    
                    
                    12,442
                    
                    
                    
                    12,113
                    
                    
                    
                    11,951Dilutive
      effect of restricted stock awards
                    
                    
                    6
                    
                    
                    
                    4
                    
                    
                    
                    
                    
                    
                    
                    2Weighted
      average shares outstanding for diluted earnings per share
                    
                    
                    11,066
                    
                    
                    
                    12,446
                    
                    
                    
                    12,113
                    
                    
                    
                    11,953Basic
      earnings per share
                    
                    $
                    0.62
                    
                    
                    $
                    1.58
                    
                    
                    $
                    (1.52
                    )
                    
                    $
                    1.18Diluted
      earnings per share
                    
                    $
                    0.62
                    
                    
                    $
                    1.58
                    
                    
                    $
                    (1.52
                    )
                    
                    $
                    1.18
  F-21
  NOTE
16 – INCOME TAXES
  The
provision for income taxes:
  Fifty-Two
                    
                    
                    Fifty-Three
                    
                    
                    Two-Months
                    
                    
                    TwelveWeeks
      Ended
                    
                    
                    Weeks
      Ended
                    
                    
                    Ended
                    
                    
                    Months
      EndedFebruary
      1,
                    
                    
                    February
      3,
                    
                    
                    January
      28,
                    
                    
                    November
      30,2009
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2006Current
      expenseFederal
                    
                    $
                    5,660
                    
                    
                    $
                    7,937
                    
                    
                    $
                    2,000
                    
                    
                    $
                    10,792State
                    
                    
                    99
                    
                    
                    
                    953
                    
                    
                    
                    362
                    
                    
                    
                    1,050Total
      current expense
                    
                    
                    5,759
                    
                    
                    
                    8,890
                    
                    
                    
                    2,362
                    
                    
                    
                    11,842Deferred
      (benefit) expenseFederal
                    
                    
                    (2,237
                    )
                    
                    
                    2,609
                    
                    
                    
                    (519
                    )
                    
                    
                    (2,833
                    )State
                    
                    
                    232
                    
                    
                    
                    15
                    
                    
                    
                    (543
                    )
                    
                    
                    (440
                    )Total
      deferred (benefit) expense
                    
                    
                    (2,005
                    )
                    
                    
                    2,624
                    
                    
                    
                    (1,062
                    )
                    
                    
                    (3,273
                    )Income
      tax expense
                    
                    $
                    3,754
                    
                    
                    $
                    11,514
                    
                    
                    $
                    1,300
                    
                    
                    $
                    8,569
 
 In
connection with the termination of the ESOP, we wrote off the related deferred
tax asset in the amount of $855,000 in January 2007.  The effective
income tax rate differed from the federal statutory tax rate as
follows:
 
 Fifty-Two
                    
                    
                    Fifty-Three
                    
                    
                    Two-Months
                    
                    
                    TwelveWeeks
      Ended
                    
                    
                    Weeks
      Ended
                    
                    
                    Ended
                    
                    
                    Months
      EndedFebruary
      1,
                    
                    
                    February
      3,
                    
                    
                    January
      28,
                    
                    
                    November
      30,2009
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2006Income
      taxes at statutory rate
                    
                    
                    35.0
                    %
                    
                    
                    35.0
                    %
                    
                    
                    35.0
                    %
                    
                    
                    35.0
                    %Increase
      (decrease) in tax rate resulting from:State
      taxes, net of federal benefit
                    
                    
                    1.9
                    
                    
                    
                    2.0
                    
                    
                    
                    (0.7
                    )
                    
                    
                    1.7Non-cash
      charitable contribution of appreciated inventory
                    
                    
                    (1.1
                    )
                    
                    
                    (0.3
                    )
                    
                    
                    0.1
                    
                    
                    
                    (0.3
                    )Employee
      stock ownership plan
                    
                    
                    
                    
                    
                    
                    (0.7
                    )
                    
                    
                    (42.0
                    )
                    
                    
                    0.3Captive
      insurance assessments
                    
                    
                    
                    
                    
                    
                    0.3
                    
                    
                    
                    
                    
                    
                    
                    0.7Officer’s
      life insurance
                    
                    
                    (0.9
                    )
                    
                    
                    (0.9
                    )
                    
                    
                    (0.2
                    )
                    
                    
                    (0.4
                    )Other
                    
                    
                    0.3
                    
                    
                    
                    1.5
                    
                    
                    
                    0.2
                    
                    
                    
                    0.7Effective
      income tax rate
                    
                    
                    35.2
                    %
                    
                    
                    36.9
                    %
                    
                    
                    (7.6
                    )%
                    
                    
                    37.7
                    %
 
 The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets and liabilities were:
 
 February
      1,
                    
                    
                    February
      3,2009
                    
                    
                    2008AssetsDeferred
      compensation
                    
                    $
                    2,179
                    
                    
                    $
                    2,156Interest
      rate swaps
                    
                    
                    79
                    
                    
                    
                    117Allowance
      for bad debts
                    
                    
                    832
                    
                    
                    
                    674State
      income taxes
                    
                    
                    510
                    
                    
                    
                    780Restructuring
                    
                    
                    17
                    
                    
                    
                    393Property,
      plant and equipment
                    
                    
                    298
                    
                    
                    
                    107Intangible
      assets
                    
                    
                    669Other
                    
                    
                    172
                    
                    
                    
                    89Total
      deferred tax assets
                    
                    
                    4,756
                    
                    
                    
                    4,316LiabilitiesInventories
                    
                    
                    70
                    
                    
                    
                    328Employee
      benefits
                    
                    
                    379
                    
                    
                    
                    359Intangible
      assets
                    
                    
                    
                    
                    
                    
                    971Other
                    
                    
                    7
                    
                    
                    
                    87Total
      deferred tax liabilities
                    
                    
                    456
                    
                    
                    
                    1,745Net
      deferred tax asset
                    
                    $
                    4,300
                    
                    
                    $
                    2,571
  F-22
 
 As of
February 1, 2009, $3.5 million of deferred income taxes was classified as “other
long-term assets” and $835,000 was classified as “other current assets” in the
consolidated balance sheets.  At February 3, 2008, $2.3 million of
deferred income taxes was classified as “other long-term assets” and $312,000
was classified as “other current assets” in the consolidated balance
sheets.  We expect to fully utilize the deferred tax assets in future
periods when the amounts become deductible, consequently no valuation allowance
was recorded as of February 1, 2009 or February 3, 2008.
 
 At
February 1, 2009 and February 3, 2008, we had net loss carryovers for state
income tax purposes, the state tax effect net of federal taxes of which was
$145,000 and $361,000 respectively.  At February 1, 2009 and February
3, 2008, we had state income tax credit carryovers of $340,000 and $320,000,
respectively.  The state loss and credit carryovers begin to expire in
2021 and 2018, respectively.
 
 A portion
of the change in the net deferred income tax asset (liability) relates to
unrealized gains and losses on interest rate swaps and our supplemental
retirement plan (deferred compensation) that are classified in “accumulated
other comprehensive income (loss)” in the consolidated balance
sheets.  The related income taxes amounted to deferred expense of
$276,000 in fiscal 2009, a deferred benefit of $76,000 in fiscal 2008 and
deferred expense of $25,000 in the 2007 two-month transition period, and $72,000
in fiscal 2006.
 
 On
January 29, 2007, we adopted Financial Accounting Standards Interpretation No.
48, Accounting for Uncertainty in Income Taxes, or FIN 48.  FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS 109, Accounting for
Income Taxes.  FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return.  FIN 48
also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosures and
transition.
 
 A
reconciliation of beginning and ending unrecognized tax benefits is as
follows:
 
 Fifty-ThreeWeeks
      EndedFebruary
      3,2008Balance
      at January 29, 2007 (net of interest)
                    
                    $
                    845,000Increase
      due to positions taken during prior period
                    
                    
                    45,000Settlements
                    
                    
                    (890,000
                    )Balance
      at February 3, 2008
                    
                    $
 
 We had no
material unrecognized tax benefits at February 1, 2009, and there were no
material increases or decreases in unrecognized tax benefits during fiscal
2009.
 
 Upon
adoption of FIN 48 we elected to classify interest and penalties recognized in
accordance with FIN 48 as income tax expense.  Interest and penalties
charged to tax expense during fiscal 2008 were $24,000.  No interest
or penalties were charged to tax expense during fiscal 2009.  Accrued
interest and penalties in addition to these unrecognized tax benefits amounted
to $87,000 as of January 29, 2007.  No interest or penalties were
accrued as of February 1, 2009 or February 3, 2008.
 
 Tax years
beginning December 1, 2004, through February 3, 2008 remain subject to
examination by major jurisdictions.
  NOTE
17 –SUPPLIER COMMITMENTS
 
 In fiscal
2009 we advanced payments to one of our finished goods suppliers against our
purchase orders placed with that supplier.  The purpose of the
advances was to facilitate the supplier’s purchase of raw materials in order to
ensure timely delivery of furniture shipments to us.  The current
balance of the advances is approximately $107,000.  We also assisted
the supplier in obtaining additional bank financing by issuing a standby letter
of credit in the amount of $600,000, which expires in July 2009, as security for
that financing.  In conjunction with the issuance of the letter of credit,
we entered into a security agreement with the supplier, which provides us with a
security interest in certain assets of the supplier and its
shareholders.  Our maximum exposure under the advances and the standby
letter of credit as of February 1, 2009 is approximately $707,000, which we
believe to be adequately secured under this arrangement.
  F-23
 
 NOTE
18 – RESTRUCTURING CHARGES AND ASSETS HELD FOR SALE
  We have
incurred significant restructuring and asset impairment charges since 2000 in
connection with the closing of our domestic wood furniture manufacturing
facilities.  These charges included severance and related benefits for
terminated employees, asset impairment charges to write down real and personal
property to fair market value (as determined based on market prices for similar
assets in similar condition) less selling costs, and factory disassembly and
other related costs to prepare each facility for sale.
  Pretax
restructuring and asset impairment charges increased operating income by 0.4% of
net sales in fiscal 2009 and decreased operating income by 0.1% of net sales in
fiscal 2008, 6.1% of net sales in the 2007 two-month transition
period,  and  2.0% of net sales in fiscal 2006.
  During
fiscal 2009 we recorded aggregate restructuring credits of $951,000 ($592,000
after tax, or $0.05 per share) principally for:
  ·
              previously
      accrued health care benefits principally for the Martinsville and Roanoke,
      Va. facilities which are not expected to be paid ($834,000),
      and
 
 ·
              previously
      accrued environmental monitoring costs at the Kernersville, N.C. and
      Martinsville, Va. facilities, which are not expected to be paid
      ($117,000).
 
 During
fiscal 2008 we recorded aggregate restructuring and asset impairment charges of
$309,000 ($190,000 after tax, or $0.02 per share) principally for:
  ·
              additional
      asset impairment, disassembly and exit costs associated with the March
      2007 closing of the Martinsville, Va. domestic wood manufacturing facility
      ($553,000); net of
 
 ·
              a
      restructuring credit of $244,000, principally for previously accrued
      health care benefits for the Pleasant Garden, N.C., Martinsville, Va. and
      Roanoke, Va. facilities, which are not expected to be
  paid.
 
 During
the 2007 two-month transition period, we recorded aggregate restructuring and
asset impairment charges of $3.0 million ($1.8 million after tax, or $0.15 per
share) principally related to:
 
 ·
              severance
      and related benefits for approximately 280 hourly and salaried employees
      at the Martinsville, Va. manufacturing facility who were terminated ($2.3
      million) and additional asset impairment charges for the estimated costs
      to sell the Martinsville, Va. facility
  ($655,000).
 
 The real
and personal property at the Martinsville facility were sold during the fiscal
year 2008 third and fourth quarters for an aggregate $3.5 million in cash, net
of selling expenses.
 
 In
December 2007, we donated two showrooms formerly operated by Bradington-Young,
located in High Point, N.C., which had a fair market value of $1.1 million to a
local university.
 
 During
fiscal 2006 we recorded aggregate restructuring and asset impairment charges of
$6.9 million ($4.3 million after tax, or $0.36 per share) principally
for:
  ·
              the
      write down of real and personal property at the Martinsville, Va. plant to
      estimated fair value in connection with the planned closing announced
      January 17, 2007 ($4.2 million);
  ·
              the
      August 2006 closing of the Roanoke, Va. manufacturing facility ($2.7
      million), which included $1.6 million in severance and related benefits
      for approximately 260 terminated hourly and salaried employees and $1.1
      million in asset impairment
charges;
  ·
              the
      final sale of the Pleasant Garden, N.C. wood furniture plant and the
      related closing of the Martinsville, Va. plywood plant ($161,000);
      and
  ·
              the
      planned disposition of the two Bradington-Young showrooms located in High
      Point, N.C. ($140,000); net of
  F-24
  ·
              a
      restructuring credit for previously accrued health care benefits for
      terminated employees at the former Pleasant Garden and Kernersville, N.C.
      facilities that are not expected to be paid
  ($295,000).
 
 In
October 2006, we completed the sale of the Roanoke, Va. plant for $2.2 million,
net of selling costs.
 
 In May
2006, we completed the sale of the Pleasant Garden
facility.  Aggregate proceeds from that sale, including proceeds from
equipment auctions at both the Pleasant Garden facility and Martinsville plywood
facility held in December 2005, amounted to $1.5 million ($1.1 million in cash
and a note receivable for $400,000), net of selling expenses.
 
 The
following table sets forth the significant components of and activity related to
the accrued restructuring and asset impairment charges for fiscal year 2006, the
2007 two-month transition period and fiscal years 2008 and 2009:
 
 Severance
      and
                                      
                                      
                                      Asset
                                      
                                      
                                      
                                      
                                      
                                      Pretax
                                      
                                      
                                      After-TaxRelated Benefits
                                      
                                      
                                      Impairment
                                      
                                      
                                      Other
                                      
                                      
                                      Amount
                                      
                                      
                                      AmountAccrued
      balance at November 30, 2005
                                      
                                      $
                                      789
                                      
                                      
                                      
                                      
                                      
                                      $
                                      218
                                      
                                      
                                      $
                                      1,007Restructuring
      charges accrued during fiscal 2006
                                      
                                      
                                      1,257
                                      
                                      
                                      $
                                      5,523
                                      
                                      
                                      
                                      101
                                      
                                      
                                      
                                      6,881
                                      
                                      
                                      $
                                      4,266Non-cash
      charges
                                      
                                      
                                      
                                      
                                      
                                      
                                      (5,523
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (5,523
                                      )Cash
      payments
                                      
                                      
                                      (1,364
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (116
                                      )
                                      
                                      
                                      (1,480
                                      )Accrued
      balance at November 30, 2006
                                      
                                      
                                      682
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      203
                                      
                                      
                                      
                                      885Restructuring
      charges accrued during the 2007 two-month transition
period
                                      
                                      
                                      2,318
                                      
                                      
                                      
                                      655
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      2,973
                                      
                                      
                                      $
                                      1,843Non-cash
      charges
                                      
                                      
                                      
                                      
                                      
                                      
                                      (655
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (655
                                      )Cash
      payments
                                      
                                      
                                      (17
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (3
                                      )
                                      
                                      
                                      (20
                                      )Accrued
      balance at January 28, 2007
                                      
                                      
                                      2,983
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      200
                                      
                                      
                                      
                                      3,183Restructuring
      charges accrued during fiscal 2008
                                      
                                      
                                      (244
                                      )
                                      
                                      
                                      25
                                      
                                      
                                      
                                      528
                                      
                                      
                                      
                                      309
                                      
                                      
                                      $
                                      190Non-cash
      charges
                                      
                                      
                                      
                                      
                                      
                                      
                                      (25
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (25
                                      )Cash
      payments
                                      
                                      
                                      (1,910
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (535
                                      )
                                      
                                      
                                      (2,445
                                      )Accrued
      balance at February 3, 2008
                                      
                                      
                                      829
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      193
                                      
                                      
                                      
                                      1,022Restructuring
      credits accrued during fiscal 2009
                                      
                                      
                                      (834
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (117
                                      )
                                      
                                      
                                      (951
                                      )
                                      
                                      $
                                      (592
                                      )Cash
      payments
                                      
                                      
                                      5
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (31
                                      )
                                      
                                      
                                      (26
                                      )Accrued
      balance at February 1,
      2009
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      45
                                      
                                      
                                      $
                                      45
  Accrued
restructuring charges are included in “accrued salaries, wages and benefits,”
“other accrued expenses” and “other long-term liabilities” in the consolidated
balance sheets.  The expenses are included in “restructuring (credits)
charges” in the consolidated statements of operations.
  NOTE
19 – SEGMENT INFORMATION
 
 We are
organized and report our results of operations in one operating segment that
designs, imports, manufactures and markets residential furniture products,
principally in North America.  The nature of the products, production
processes, distribution methods, types of customers and regulatory environment
are similar for substantially all of our products.
 
 NOTE
20 – COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET
ARRANGEMENTS
  We lease
warehousing facilities, showroom space, and an upholstery frame plant and
certain manufacturing, office and computer equipment under leases expiring over
the next five years.  Rent expense was $2.5 million in fiscal 2009,
$2.2 million in fiscal 2008, $406,000 in the fiscal 2007 two-month transition
period, and $2.4 million in fiscal 2006.  Future minimum annual
commitments under leases and operating agreements amount to $3.6 million in
fiscal 2010, $1.5 million in fiscal 2011, $861,000 in fiscal 2012, $729,000 in
fiscal 2013, $717,000 in fiscal 2014 and $185,000 thereafter.
  F-25
  We had
letters of credit outstanding totaling $2.4 million on February 1,
2009.  We utilize letters of credit to collateralize certain imported
inventory purchases and certain insurance arrangements.
  In the
ordinary course of its business, we may become involved in legal proceedings
involving contractual and employment relationships, product liability claims,
intellectual property rights and a variety of other matters.  We do
not believe that any pending legal proceedings will have a material impact on
our financial position or results of operations.
 
 NOTE
21 – CONCENTRATIONS OF SOURCING RISK
 
 We source
imported products through over 40 different vendors, from 59 separate factories,
located in seven countries.  Because of the large number and diverse
nature of the foreign factories from which we can source our imported products,
we have some flexibility in the placement of products in any particular factory
or country.
 
 Factories
located in China have become an important resource for Hooker
Furniture.  In fiscal year 2009, imported products sourced from China
accounted for approximately 90% of import purchases, and the factory in China
from which we directly source the most product accounted for approximately 46%
of our worldwide purchases of imported product.  A sudden disruption
in our supply chain from this factory, or from China in general, could
significantly impact our ability to fill customer orders for products
manufactured at that factory or in that country.  If such a disruption
were to occur, we believe that we would have sufficient inventory to adequately
meet demand for approximately four months.  Also, with the broad
spectrum of product we offer, we believe that, in some cases, buyers could be
offered similar product available from alternative sources.  We
believe that we could, most likely at higher cost, source most of the products
currently sourced in China from factories in other countries and could produce
certain upholstered products domestically at our own
factories.  However, supply disruptions and delays on selected items
could occur for approximately six months.  If we were to be
unsuccessful in obtaining those products from other sources, or at comparable
cost, then a sudden disruption in the supply chain from our largest import
furniture supplier, or from China in general, could have a short-term material
adverse effect on our results of operations.  Given the capacity
available in China and other low-cost producing countries, we believe the risks
from these potential supply disruptions are manageable.
  NOTE
22 – QUARTERLY DATA (Unaudited)
  Fiscal
      QuarterFirst
                    
                    
                    Second
                    
                    
                    Third
                    
                    
                    Fourth2009Net
      sales
                    
                    $
                    71,027
                    
                    
                    $
                    64,628
                    
                    
                    $
                    68,996
                    
                    
                    $
                    56,511Cost
      of sales
                    
                    
                    54,291
                    
                    
                    
                    50,501
                    
                    
                    
                    53,319
                    
                    
                    
                    42,767Gross
      profit
                    
                    
                    16,736
                    
                    
                    
                    14,127
                    
                    
                    
                    15,677
                    
                    
                    
                    13,744Selling
      and administrative expenses
                    
                    
                    12,786
                    
                    
                    
                    11,264
                    
                    
                    
                    11,530
                    
                    
                    
                    10,400Net
      income
                    
                    
                    2,605
                    
                    
                    
                    2,074
                    
                    
                    
                    2,950
                    
                    
                    
                    (719
                    )Basic
      and diluted earnings per share
                    
                    $
                    0.23
                    
                    
                    $
                    0.18
                    
                    
                    $
                    0.27
                    
                    
                    $
                    (0.07
                    )2008Net
      sales
                    
                    $
                    77,294
                    
                    
                    $
                    73,441
                    
                    
                    $
                    83,768
                    
                    
                    $
                    82,298Cost
      of sales
                    
                    
                    59,179
                    
                    
                    
                    53,953
                    
                    
                    
                    60,779
                    
                    
                    
                    61,145Gross
      profit
                    
                    
                    18,115
                    
                    
                    
                    19,488
                    
                    
                    
                    22,989
                    
                    
                    
                    21,153Selling
      and administrative expenses
                    
                    
                    12,037
                    
                    
                    
                    11,560
                    
                    
                    
                    13,664
                    
                    
                    
                    14,478Net income
                    
                    
                    4,286
                    
                    
                    
                    4,858
                    
                    
                    
                    5,911
                    
                    
                    
                    4,600Basic
      and diluted earnings per share
                    
                    $
                    0.33
                    
                    
                    $
                    0.39
                    
                    
                    $
                    0.48
                    
                    
                    $
                    0.39
 
 Shipping
and warehousing costs for periods prior to the 2009 fourth quarter have been
reclassified from selling and administrative expenses to cost of sales in order
to conform to the current method of presentation.  The
reclassification due to this change in accounting principle amounted to $16.8
million in fiscal 2009 and $15.5 million in fiscal 2008.  For 2009 we
reclassified; $4.6 million, $4.2 million, $4.1 million and $3.9 million for
quarters one, two, three and four respectively.  For fiscal 2008 we
reclassified; $4.0 million, $3.5 million, $3.6 million and $4.4 million for
quarters one, two, three and four respectively.
 
 During
fiscal 2009, we recorded $4.9 million ($3.1 million after tax, or $0.28 per
share) in goodwill and intangible asset impairment charges.
  F-26
 
 Earnings
per share for each fiscal quarter is derived using the weighted average number
of shares outstanding during that quarter.  Unearned ESOP shares are
not considered outstanding for purposes of calculating earnings per
share.  Earnings per share for the fiscal year is derived using the
weighted average number of shares outstanding on an annual
basis.  Consequently, the sum of earnings per share for the quarters
may not equal earnings per share for the full fiscal year.
  F-27




EXHIBIT INDEX




EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES


(a)
              Documents
      filed as part of this report on
10-K:
  (1)
              The
      following financial statements are included in this report on Form
      10-K:
 
 Report
      of Independent Registered Public Accounting
Firm
 
 Consolidated
      Balance Sheets as of February 1, 2009 and February 3,
  2008
 
 Consolidated
      Statements of Operations for the fifty-two weeks ended February 1, 2009,
      the fifty-three weeks ended February 3, 2008, the two-month transition
      period ended January 28, 2007 and the twelve months ended November 30,
      2006
 
 Consolidated
      Statements of Cash Flows for the fifty-two weeks ended February 1, 2009,
      the fifty-three weeks ended February 3, 2008, the two-month transition
      period ended January 28, 2007 and the twelve months ended November 30,
      2006
 
 Consolidated
Statements of Shareholders’ Equity for the twelve months ended November 30,
2006, the two-month transition period ended January 28, 2007, the fifty-three
weeks ended February 3, 2008 and the fifty-two weeks ended February 1,
2009
 
 Notes
      to Consolidated Financial
Statements
 
 (2)
              Financial
      Statement Schedules:
 
 Financial
      Statement Schedules have been omitted because the information required has
      been separately disclosed in the consolidated financial statements or
      related notes.
 
 (b)
              Exhibits:
 
 3.1
              Amended
      and Restated Articles of Incorporation of the Company, as amended March
      28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form
      10-Q (SEC File No. 000-25349) for the quarter ended February 28,
      2003)
 
 3.2
              Amended
      and Restated Bylaws of the Company (incorporated by reference to Exhibit
      3.2 to the Company’s Form 10-Q ((SEC File No. 000-25349) for the quarter
      ended August 31, 2006)
 
 4.1
              Amended
      and Restated Articles of Incorporation of the Company (See Exhibit
      3.1)
 
 4.2
              Amended
      and Restated Bylaws of the Company (See Exhibit
  3.2)
 
 4.3(a)
              Credit
      Agreement, dated April 30, 2003, between Bank of America, N.A., and the
      Company (incorporated by reference to Exhibit 4.1 of the Company’s Form
      10-Q (SEC File No. 000-25349) for the quarter ending May 31,
      2003)
 
 4.3(b)
              First
      Amendment to Credit Agreement, dated as of February 18, 2005, among the
      Company, the Lenders party thereto, and Bank of America, N.A., as agent
      (incorporated by reference to Exhibit 10.2 of the Company’s Form 10-Q (SEC
      File No. 000-25349) for the quarter ending February 28,
    2005)
 
 4.3(c)
              Second
      Amendment to Credit Agreement dated as of February 27, 2008, among the
      Company and Bank of America, N.A. as lender and agent (incorporated by
      reference to Exhibit 4.3(c) of the Company’s Annual Report on Form 10-K
      (SEC File No. 000-25349) filed April 16,
2008)
 
 4.3(d)
              Third
      Amendment to Credit Agreement dated as of February 19, 2009, between the
      Company and Bank of America, N.A.  (incorporated by reference to
      Exhibit 4.3(d) of the Company’s Annual Report on Form 10-K (SEC File No.
      000-25349) filed on February 20,
2009)
 
 Pursuant
      to Regulation S-K, Item 601(b)(4)(iii), instruments evidencing long-term
      debt not exceeding 10% of the Company’s total assets have been omitted and
      will be furnished to the Securities and Exchange Commission upon
      request.
 
 10.1(a)
              Form
      of Executive Life Insurance Agreement dated December 31, 2003, between the
      Company and certain of its executive officers (incorporated by reference
      to Exhibit 10.1 of the Company’s Form 10-Q (SEC File No. 000-25349) for
      the quarter ended February 29,
2004)*
  
 
 10.1(b)(i)
              Supplemental
      Retirement Income Plan effective as of December 1, 2003 (incorporated by
      reference to Exhibit 10.3 of the Company’s Form 10-Q (SEC File No.
      000-25349) for the quarter ended February 29,
  2004)*
 
 10.1(b)(ii)
              First
      Amendment to the Supplemental Retirement Income Plan, dated as of May 24,
      2007 incorporated by reference to Exhibit 10.1(b)(ii) of Form 10-K (SEC
      File No. 000-25349) filed on April 16,
2008
 
 10.1(b)(iii)
              2008Amendment
      and Restatement of the Hooker Furniture Corporation Supplemental
      Retirement Income Plan, effective as of December 31, 2008 incorporated by
      reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC
      File No. 000-25349) filed on November 19,
2008*
 
 10.1(c)
              Summary
      of Compensation for Named Executive Officers (filed
    herewith)*
 
 10.1(d)
              Summary
      of Director Compensation (filed
herewith)*
 
 10.1(e)
              Hooker
      Furniture Corporation 2005 Stock Incentive Plan (incorporated by reference
      to Appendix B of the Company’s Definitive Proxy Statement dated March 1,
      2005 (SEC File No. 000-25349))*
 
 10.1(f)
              Form
      of Outside Director Restricted Stock Agreement (incorporated by reference
      to Exhibit 99.1 of the Company’s Current Report on Form 8-K (SEC File No.
      000-25349) filed January 17, 2006)*
 
 10.1(g)
              Retirement
      Agreement, dated October 26, 2006, between Douglas C. Williams and the
      Company (incorporated by reference to Exhibit 10.1(g) of the Company’s
      Annual Report on Form 10-K (SEC File No. 000-25349) filed February 28,
      2007)*
 
 10.1(h)
              Employment
      Agreement, dated June 15, 2007, between Alan D. Cole and the Company
      incorporated by reference to Exhibit 10.1(h) of the Company’s Annual
      Report on Form 10-K (SEC File No. 000-25349) filed on April 16,
      2008
 
 10.1(i)
              Employment
      Agreement, dated June 3, 2008, between Alan D. Cole and the Company
      incorporated by reference to Exhibit 10.1(i) of the Company’s Annual
      Report on Form 10-K (SEC File No. 000-25349) filed on June 5,
      2008
 
 10.2(a)
              Credit
      Agreement, dated April 30, 2003, between Bank of America, N.A., and the
      Company (See Exhibit 4.3(a))
 
 10.2(b)
              First
      Amendment to Credit Agreement, dated as of February 18, 2005, among the
      Company, the Lenders party thereto, and Bank of America, N.A., as agent
      (See Exhibit 4.3(b))
 
 10.2(c)
              Second
      Amendment to Credit Agreement, dated as of February 27, 2008, among the
      Company and Bank of America, N.A., as lender and agent (See Exhibit
      4.3(c))
 
 10.2(d)
              Third
      Amendment to Credit Agreement dated as of February 19, 2009, between
      Company and Bank of America, N.A. (See Exhibit
  4.3(d))
 
 18
              Preferability
      letter for a change in accounting principle related to the classification
      of shipping and warehousing costs as cost of sales (filed
      herewith)
 
 21
              List
      of Subsidiaries:
 
 Bradington-Young
      LLC, a Virginia limited liability
company
 Sam
      Moore Furniture LLC, a Virginia limited liability
  company
 
 23
              Consent
      of Independent Registered Public Accounting Firm (filed
      herewith)
 
 31.1
              Rule
      13a-14(a) Certification of the Company’s principal executive officer
      (filed herewith)
 
 31.2
              Rule
      13a-14(a) Certification of the Company’s principal financial officer
      (filed herewith)
 
 32.1
              Rule
      13a-14(b) Certification of the Company’s principal executive officer and
      principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
      herewith)
  *Management
contract or compensatory plan