According to a release from the company, Hooker Furniture has terminated its Employee Stock

Ownership Plan effective January 26, 2014. The termination will cost the company $18.4 million, but is expected to save the Hooker over $3.4 million a year.

“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 B. Toms Jr., chairman, chief executive officer 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,” he said.

In 2000, the ESOP became the largest single shareholder of the Company when it purchased, using a loan from the Company, 3.6 million shares (split adjusted) of Company common stock in a public tender offer. “Since then, the Company has evolved from being a domestic wood furniture manufacturer to a home furnishings marketing and logistics company with world-wide sourcing capabilities,” Toms said. “During this period, the Company’s workforce has declined from over 2,000 to approximately 1,000. In addition, we announced on January 17th that we plan to close our last wood furniture manufacturing facility, located in Martinsville, Va., which we expect will result in a further reduction of our workforce by approximately 280 employees,” he continued.

“The increase in the Company’s stock price since the tender offer has caused the annual expense of the ESOP to increase. This increase, coupled with the decline in the number of employees during the same period, has increased the Company’s retirement benefit costs as a percentage of payroll expense to a point we believe is significantly higher than industry average,” he said. “This move will significantly reduce our benefits expense going forward and position Hooker to be more competitive in our marketplace,” Toms said.

As a result of the ESOP termination, previously unallocated shares of Company common stock held by the ESOP will be allocated to eligible participants, including those employed at the Martinsville plant scheduled to close in late March. Under the terms of the ESOP, a participant’s ESOP account balance will be rolled over to the Company’s 401(k) plan, unless the participant otherwise elects to have all or part of the account balance distributed to him or her or rolled over to an individual retirement account or another employer’s retirement plan.