Hooker dropping employee stock plan

MARTINSVILLE, Va. — Case goods and leather source Hooker Furniture has dropped


its employee stock ownership plan to save millions of dollars over the next 19 years.
While discontinuing the ESOP will cost Hooker $18.4 million for a one-time charge, the plan has cost more than $10 million over the past three years and could have cost $80 million or more going forward.
“Our decision to discontinue the ESOP was primarily based on the fundamental change in our company’s business model over the last few years,” said Paul Toms Jr., chairman, CEO and president. “In light of our changing business model, terminating the ESOP is in the mutual best interests of the company, its shareholders and its employees.”
In 2000, the ESOP became the largest shareholder in Hooker when it purchased, using a loan from the company, 3.36 million shares (split adjusted) in a public tender offer.
Closing the program “will significantly reduce our benefits expense going forward and position Hooker to be more competitive in our marketplace,” said Toms.
Analysts say ESOPs can benefit a company by giving workers a financial stake in its success. But with Hooker closing its U.S. case goods factories and moving to an import business model, many assembly-line jobs have disappeared. In August 2003, the company had more than 2,300 employees, but when its last domestic wood furniture plant closes in March, the number will be close to 750. (It still produces Bradington-Young leather upholstery domestically.)
To end the ESOP, the company redeemed about 1.17 million shares held by the ESOP for $17.2 million or $15.01 per share.
While ending the program could sound like a loss for employees, the move will provide an immediate boon. Rather than getting stock over the next 19 years, employees will get half that total amount this year.
In Martinsville, 280 employees of the company’s last case goods plant, which is closing in March, will still get their shares because they were employed on the effective date of the ESOP discontinuation, Jan. 26.
Just days after the ESOP announcement, Hooker said its board also authorized $18.3 million for a stock repurchase plan. Toms said the action “demonstrates its confidence in the company’s strategy, growth opportunities and financial strength.”
The board also raised the quarterly cash dividend to 10 cents per share, up from 8 cents, payable Feb. 28 to shareholders of record on Feb. 19.