MESSAGE TO OUR SHAREHOLDERS DESIGNING OUR FUTURE  Without a doubt, planning is an essential part of any business. Some plans are routine, such as production schedules, project timelines and  daily to-do lists, while other plans are more strategic, such as marketing  initiatives, new product launches, employee development and annual  operating and capital budgets. If we are to be a company of long-lasting significance, however, we must  move beyond plans. We need a design for our future—an in-depth, multi- faceted collection of plans to move us intentionally toward the goals  outlined in our strategic vision. Progress in several of our operational goals this year enabled us to grow net  income 56% on a modest 3% sales increase. As the year moved forward,  we reduced excess inventory, improved our cash flow and cut operating  losses in our upholstery division significantly. Operating income for our  casegoods division was over 10% higher than a year ago…even while discounting to reduce inventory levels and dealing with the unfavorable  impact of volatile ocean freight rates. We believe new inventory manage- ment processes implemented this year will reduce the risk of future sur- pluses and further improve availability of best-selling items. Our design for the future means having the right products, at the right  price, at the right distribution points, at the right time. The “right prod- uct” starts with design. Collaboration between experienced merchants and  newer members of our merchandising team has brought fresh new ideas  and products. Our Mélange collection, for example, offers an unexpected  blend of colors, textures and materials in an eclectic line of accent furni- ture that has proven to be a best seller. One of our Mélange items, the  Rafferty Console, received the 2011 Pinnacle Design Award for excellence  and originality from the American Society of Furniture Designers in the  occasional table category. Our upholstery division also freshened their product line with fashion forward fabric-to-frame marriages and new categories such as fabric-covered  reclining chairs, along with more contemporary styles and colors. The sharing of merchandising, design and specialized manufacturing skills  between divisions has enhanced the product lines of each company and  allowed us to collaborate on whole home collections like Harbour Pointe  and Primrose Hill that include both casegoods and upholstery. In our goal to return our upholstery division to profitability, we still have work to do, but are encouraged by the improvements this year, in which we  reduced operating losses by almost 25%, despite the write-down of our  Bradington-Young trade name. The improvements were a result of exten- sive cost reduction, a revitalization of the product line and modest sales  gains. We wrote down the carrying value of the Bradington-Young trade  name this year due to operating losses sustained over the last few years and  near-term performance expectations, but continue to believe the division is  important to our future and expect it to become a contributor to Hooker  Furniture’s overall profitability in fiscal 2013. Just as we collaborate on product design between divisions, we also believe  that the ideal way to showcase our product line at the High Point Market  is in a consolidated showroom. We have moved our casegoods showroom  from its long-time location in the International Home Furnishings Center  in High Point, North Carolina to a higher-traffic location down the hall  where all our lines will share a corporate show space. A team of designers,  architects, builders and company personnel worked long hours to have the space ready for the April 2012 High Point Market. This new show- room reflects our commitment to design leadership and customer relation- ship building through innovative and fresh displays, dramatic lighting, a  welcoming lobby, café and guest workstations.  International sales remain a key component of our design for the future  too. We grew international sales volume 40% this year, and international  sales now comprise approximately 5% of total company revenues. During  the year, we tripled the number of international customers we sell, expanding our footprint to include a total of 37 countries including new customers in  Kazakhstan, Taiwan, Ukraine, Netherlands and Ireland.  As the global manufacturing environment changes, we have been chal- lenged to redesign our network of suppliers. We moved away from one  supplier who was unable to meet our quality expectations and discontin- ued other suppliers who were unable to compete due to increasing costs.  We began an initiative to expand our sourcing to suppliers in other coun- tries with developing furniture manufacturing capacity and competitive  cost structures, including Vietnam and Indonesia. We still expect to have a  significant presence in China, especially with a long-standing supplier who  continues to offer products of incomparable design and style.  During fiscal 2012, many of our employees were involved in designing a  key aspect of our future, as over 100 of them participated in the design,  testing and implementation of our new Enterprise Resource Planning sys- tem, which we expect to go live during the coming year. During fiscal  2012 our “subject matter experts” worked to design the system, which will  be our operating backbone for the foreseeable future and is designed to  help us provide a single, more efficient face to our customers and bring best  practices to our processes. This system implementation is an investment in  our future and has been embraced by the people involved, as evidenced by  the hours invested by so many in design, testing, training and documenta- tion, all done in addition to day-to-day responsibilities.  One last, but key part of the design for our future is our culture of community  citizenship. “Community” at Hooker Furniture encompasses both our internal  community of co-workers and the communities in which we live and work.  We offer health initiatives, financial planning seminars and cultural events  to our employees and encourage them to participate actively in building  the communities outside our doors through volunteer work and giving.  Beyond these more structured opportunities, however, we observe that our  employees exhibit a spirit of camaraderie and eagerness to help by finding  needs and developing solutions with only minimal corporate involvement.  With these, and many other plans, we have a design for our future—a col- lection of plans and initiatives that work together to build and rebuild our company to face changing business environments and new expectations  as we perpetuate our long tradition of success, significance and innovation. Sincerely, Paul B. Toms Jr. Chairman and Chief Executive Officer Alan D. Cole President, Hooker Furniture Paul Toms, Chairman and Chief Executive Officer of Hooker Furniture and Alan Cole, President of Hooker Furniture, left.