| [X] | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|-----|---------------------------------------------------------------------------------------------------|

| [   ] | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|----------------------|-----------------------------------------------------------------------------------------------------|

|                                                                | Delaware                                  |   | 54-1272589 |   |
|---------------------------------------------------------------------|-------------------------------------------|--------|------------|--------|
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification No.) |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |          September 27,                |    |   | December      31, |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              2008 |    |   |         2007 |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                 |    |   |   |   |
| Current      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |   |   |   |
| Cash                                                                                                                                                                                                 |   | $                                                    | 36,739  |   |   | $ | 31,648 |   |
| Accounts receivable, less      allowances of $2,105 and $1,482                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                 | 25,127  |   |   |   | 25,393 |   |
| Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                 |    |   |   |   |   |   |
| Finished      goods                                                                                                                                                                                       |   |                                                 | 38,426  |   |   |   | 46,250 |   |
| Work-in-process                                                                                                                                                                                           |   |                                                 | 3,345   |   |   |   | 4,432 |   |
| Raw      materials                                                                                                                                                                                        |   |                                                 | 5,775   |   |   |   | 7,404 |   |
| Total      inventories                                                                                                                                                                                         |   |                                                 | 47,546  |   |   |   | 58,086 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |   |   |   |   |   |
| Prepaid      expenses and other current      assets                                                                                                                                   |   |                                                 | 3,457   |   |   |   | 1,767 |   |
| Deferred      income      taxes                                                                                                                                                       |   |                                                 | 3,656   |   |   |   | 3,381 |   |
| Total current      assets                                                                                                                                                                       |   |                                                 | 116,525 |   |   |   | 120,275 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |   |   |   |   |   |
| Property,      plant and equipment,      net                                                                                                                                          |   |                                                 | 37,525  |   |   |   | 43,898 |   |
| Goodwill                                                                                                                                                                              |   |                                                 | 9,072   |   |   |   | 9,072 |   |
| Other      assets                                                                                                                                                                     |   |                                                 | 1,058   |   |   |   | 486 |   |
| Total      assets                                                                                                                                                                               |   | $                                                    | 164,180 |   |   | $ | 173,731 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |   |   |   |   |   |
| LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                 |    |   |   |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                 |    |   |   |   |   |   |
| Current maturities of long-term      debt                                                                                                                                                            |   | $                                                    | 1,429   |   |   | $ | 1,428 |   |
| Accounts      payable                                                                                                                                                                                |   |                                                 | 12,103  |   |   |   | 16,106 |   |
| Accrued salaries, wages and      benefits                                                                                                                                                            |   |                                                 | 9,319   |   |   |   | 7,108 |   |
| Other accrued      expenses                                                                                                                                                                          |   |                                                 | 4,531   |   |   |   | 3,781 |   |
| Total current      liabilities                                                                                                                                                                            |   |                                                 | 27,382  |   |   |   | 28,423 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |   |   |   |   |   |
| Long-term      debt, exclusive of current      maturities                                                                                                                             |   |                                                 | 27,857  |   |   |   | 29,286 |   |
| Deferred      income      taxes                                                                                                                                                       |   |                                                 | 3,078   |   |   |   | 4,824 |   |
| Other      long-term      liabilities                                                                                                                                                 |   |                                                 | 8,220   |   |   |   | 8,347 |   |
| Total      liabilities                                                                                                                                                                                    |   |                                                 | 66,537  |   |   |   | 70,880 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |   |   |   |   |   |
| STOCKHOLDERS’      EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                 |    |   |   |   |   |   |
| Common      stock, $.02 par value, 25,000,000 shares authorized10,332,179 shares issued and      outstanding                                                                                    |   |                                                 | 207     |   |   |   | 207 |   |
| Capital      in excess of par      value                                                                                                                                              |   |                                                 | 920     |   |   |   | 591 |   |
| Retained      earnings                                                                                                                                                                |   |                                                 | 97,391  |   |   |   | 102,999 |   |
| Accumulated      other comprehensive      loss                                                                                                                                        |   |                                                 | (875    | ) |   |   | (946 | ) |
| Total stockholders’      equity                                                                                                                                                                |   |                                                 | 97,643  |   |   |   | 102,851 |   |
| Total liabilities and      stockholders’      equity                                                                                                                                                |   | $                                                    | 164,180 |   |   | $ | 173,731 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                 |    |   |   |   |   |   |

----

|                                                  |                                                         | Three      Months                                                                                     |   |   |           Nine Months                                                                                                             |   |
|-------------------------------------------------------|--------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                  |                                                         |                      Ended |   |   |                              Ended |   |
|                                                  |            |    September                                                                           |   |   |            September                                                                                                    |   |   |              September |   |   |                   September |   |
|                                                  |                                                         |                    27,  2008    |   |   | 29,  2007                                                                                                                                        |   |   |                27,  2008 |   |   |     29,  2007 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                                        |                                                         | $                                                                                                     | 54,483 |   |                                                                                                                                                  | $      | 73,181 |   |   | $ | 176,165 |   |   | $ | 216,011 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of sales                                    |                                                         |                                                                                                  | 49,493 |   |                                                                                                                                                  |   | 60,432 |   |   |   | 150,394 |   |   |   | 176,128 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                          |                                                         |                                                                                                  | 4,990  |   |                                                                                                                                                  |   | 12,749 |   |   |   | 25,771 |   |   |   | 39,883 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expenses     |                                                         |                                                                                                  | 10,606 |   |                                                                                                                                                  |   | 9,608 |   |   |   | 28,358 |   |   |   | 30,116 |   |
| Pension      plan termination charge                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   | 6,605 |   |
| Operating income      (loss)                          |                                                         |                                                                                                  | (5,616 | )      |                                                                                                                                                  |   | 3,141 |   |   |   | (2,587 | ) |   |   | 3,162 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      income, net                                |                                                         |                                                                                                  | (22    | )      |                                                                                                                                                  |   | 79 |   |   |   | 215 |   |   |   | 187 |   |
| Interest      income                                  |                                                         |                                                                                                  | 158    |   |                                                                                                                                                  |   | 139 |   |   |   | 516 |   |   |   | 325 |   |
| Interest      expense                                 |                                                         |                                                                                                  | 957    |   |                                                                                                                                                  |   | 955 |   |   |   | 2,807 |   |   |   | 2,299 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income      taxes           |                                                         |                                                                                                  | (6,437 | )      |                                                                                                                                                  |   | 2,404 |   |   |   | (4,663 | ) |   |   | 1,375 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      taxes                                     |                                                         |                                                                                                  | (2,948 | )      |                                                                                                                                                  |   | 769 |   |   |   | (2,154 | ) |   |   | 440 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Net income(loss)                                      |                                                         | $                                                                                                     | (3,489 | )      |                                                                                                                                                  | $      | 1,635 |   |   | $ | (2,509 | ) |   | $ | 935 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      per share:                              |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                 |                                                         | $                                                                                                     | (0.34  | )      |                                                                                                                                                  | $      | .16 |   |   | $ | (0.24 | ) |   | $ | .09 |   |
| Diluted                                               |                                                         | $                                                                                                     | (0.34  | )      |                                                                                                                                                  | $      | .16 |   |   | $ | (0.24 | ) |   | $ | .09 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding:             |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                 |                                                         |                                                                                                  | 10,332 |   |                                                                                                                                                  |   | 10,312 |   |   |   | 10,332 |   |   |   | 10,521 |   |
| Diluted                                               |                                                         |                                                                                                  | 10,332 |   |                                                                                                                                                  |   | 10,503 |   |   |   | 10,332 |   |   |   | 10,744 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Cash      dividend declared and paid per common share |                                                         | $                                                                                                     | .10    |   |                                                                                                                                                  | $      | .10 |   |   | $ | .30 |   |   | $ | .30 |   |
|                                                  |                                                         |                                                                                                  |   |   |                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |    Nine Months    Ended                                                 |     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |    September                                                       |     |   |  September |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                   27, 2008 |     |   |                 29, 2007 |   |
| Cash      flows from operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                              |     |   |   |   |   |   |
| Cash      received from      customers                                                                                                       |   | $                                                                                 | 176,259  |   |   | $ | 212,857 |   |
| Cash      paid to suppliers and      employees                                                                                               |   |                                                                              | (160,516 | ) |   |   | (204,407 | ) |
| Interest      paid,      net                                                                                                                 |   |                                                                              | (2,143   | ) |   |   | (1,488 | ) |
| Income      taxes paid,      net                                                                                                             |   |                                                                              | (4,046   | ) |   |   | (3,537 | ) |
| Net cash provided by operating      activities                                                                                                                   |   |                                                                              | 9,554    |   |   |   | 3,425 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                              |     |   |   |   |   |   |
| Cash      flows from investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                              |     |   |   |   |   |   |
| Capital      expenditures                                                                                                                    |   |                                                                              | (1,485   | ) |   |   | (3,206 | ) |
| Other,      net                                                                                                                              |   |                                                                              |     |   |   |   | (28 | ) |
| Net cash used by investing      activities                                                                                                                       |   |                                                                              | (1,485   | ) |   |   | (3,234 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                              |     |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                              |     |   |   |   |   |   |
| Issuance      of senior      notes                                                                                                           |   |                                                                              |     |   |   |   | 25,000 |   |
| Repayment      of senior      notes                                                                                                          |   |                                                                              | (1,429   | ) |   |   | (1,428 | ) |
| Purchase      and retirement of common      stock                                                                                            |   |                                                                              |     |   |   |   | (13,557 | ) |
| Proceeds      from insurance policy      loans                                                                                               |   |                                                                              | 1,550    |   |   |   | 1,386 |   |
| Dividends      paid                                                                                                                          |   |                                                                              | (3,099   | ) |   |   | (3,161 | ) |
| Proceeds      from exercised stock      options                                                                                              |   |                                                                              |     |   |   |   | 532 |   |
| Tax      benefit from exercise of stock      options                                                                                         |   |                                                                              |     |   |   |   | 32 |   |
| Net cash provided (used) by      financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                              | (2,978   | ) |   |   | 8,804 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                              |     |   |   |   |   |   |
| Net      increase in      cash                                                                                                               |   |                                                                              | 5,091    |   |   |   | 8,995 |   |
| Cash      at beginning of      period                                                                                                        |   |                                                                              | 31,648   |   |   |   | 6,269 |   |
| Cash at end of      period                                                                                                                                       |   | $                                                                                 | 36,739   |   |   | $ | 15,264 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                              |     |   |   |   |   |   |

| Net      income      (loss)                                                                                          |   | $      | (2,509 | )      |   | $      | 935    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Depreciation and      amortization                                                                                                       |   |   | 7,517  |   |   |   | 4,562  |   |
| Pension      termination                                                                                                                 |   |   |   |   |   |   | 5,002  |   |
| Deferred income      taxes                                                                                                               |   |   | (2,021 | )      |   |   | (2,290 | )      |
| Tax benefit from exercise of      stock      options                                                                                     |   |   |   |   |   |   | (32    | )      |
| Stock-based      compensation                                                                                                            |   |   | 329    |   |   |   | 492    |   |
| Other,      net                                                                                                                          |   |   | 27     |   |   |   | 194    |   |
| Changes in assets and      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Accounts      receivable                                                                                                                                |   |   | 266    |   |   |   | (3,010 | )      |
| Inventories                                                                                                                                             |   |   | 10,540 |   |   |   | (2,974 | )      |
| Prepaid expenses and other      current      assets                                                                                                     |   |   | (3,164 | )      |   |   | (959   | )      |
| Accounts      payable                                                                                                                                   |   |   | (4,003 | )      |   |   | (457   | )      |
| Accrued salaries, wages and      benefits                                                                                                               |   |   | 2,351  |   |   |   | 481    |   |
| Other accrued      expenses                                                                                                                             |   |   | 698    |   |   |   | 1,384  |   |
| Other      assets                                                                                                                                       |   |   | (334   | )      |   |   | (308   | )      |
| Other long-term      liabilities                                                                                                                        |   |   | (143   | )      |   |   | 405    |   |
| Net cash provided by operating      activities                                                                                                                                   |   | $      | 9,554  |   |   | $      | 3,425  |   |

----

| 1. | Preparation of Interim      Unaudited Consolidated Financial  Statements |
|----|--------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                      September                        |                                     December  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                          27,      2008 |                                           31, 2007 |
| Land      and      buildings                                                                                                  | $      41,874                                                                                                                                                                                      | $      41,874                                                                                                                                                                                  |
| Machinery      and      equipment                                                                                             | 75,971                                                                                                                                                                                             | 80,589                                                                                                                                                                                         |
| Office      furniture and      equipment                                                                                      | 1,377                                                                                                                                                                                              |     1,377                                                                                                                                                                  |
| Construction      in      process                                                                                             |      1,130                                                                                                                                                                |           61                                                                                                                                 |
| Property, plant and equipment,      at      cost                                                                                             | 120,352                                                                                                                                                                                            | 123,901                                                                                                                                                                                        |
| Less      accumulated      depreciation                                                                                       |    82,827                                                                                                                                                                           |    80,003                                                                                                                                                                       |
| Property, plant and equipment,      net                                                                                                      | $ 37,525                                                                                                                                                                                           | $43,898                                                                                                                                                                                        |

| 3. | Debt |
|----|------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               September                  |   |   |  December                                                                         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                  27, 2008 |   |   |                   31,      2007 |   |
| 6.94%      senior notes due through May 3,      2011                                                                                      |   | $                                                                                | 4,286  |   |                                                                                   | $      | 5,714 |   |
| 6.73%      senior notes due through May 3,      2017                                                                                      |   |                                                                             | 25,000 |   |                                                                                   |   | 25,000 |   |
| Total                                                                                                                                                    |   |                                                                             | 29,286 |   |                                                                                   |   | 30,714 |   |
| Less      current      maturities                                                                                                         |   |                                                                             | 1,429  |   |                                                                                   |   | 1,428 |   |
| Long-term debt, exclusive of      current maturities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                                                                                | 27,857 |   |                                                                                   | $      | 29,286 |   |

|                                          |   | Three      Months                                  |   |   | Nine      Months                                         |   |
|-----------------------------------------------|--------|----------------------------------------------------|--------|--------|----------------------------------------------------------|--------|
|                                          |   |  Ended                                        |   |   | Ended                                                    |   |
|                                          |   |             September     |   |   |             September      |   |   |             September |   |   |             September |   |
|                                          |   |        27,      2008 |   |   |         29,      2007 |   |   |        27,      2008 |   |   |         29,      2007 |   |
| Service      cost                             |   | $                                                  | 22     |   |                                                     | $      | 20 |   |   | $ | 66 |   |   | $ | 62 |   |
| Interest      cost                            |   |                                               | 71     |   |                                                     |   | 40 |   |   |   | 214 |   |   |   | 119 |   |
| Amortization      of transition obligation    |   |                                               | 32     |   |                                                     |   | 32 |   |   |   | 97 |   |   |   | 97 |   |
| Amortization      of prior service cost       |   |                                               | (2     | )      |                                                     |   | (2 | ) |   |   | (6 | ) |   |   | (6 | ) |
| Amortization      of accumulated loss         |   |                                               | 8      |   |                                                     |   | 6 |   |   |   | 24 |   |   |   | 17 |   |
| Net periodic postretirement      benefit cost |   | $                                                  | 131    |   |                                                     | $      | 96 |   |   | $ | 395 |   |   | $ | 289 |   |

----

|                                                                          |   | Three      Months                                                                                                                                                                               |   |   | Nine      Months                                                                                                                                                                          |   |
|-------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                          |   |                                     Ended |   |   |                                    Ended |   |
|                                                                          |   |  September                                                                                                                                                                                 |   |   |  September                                                                                                                                                                           |   |   |          September |   |   |  September |   |
|                                                                          |   |        27,      2008                                                                                                                                              |   |   |         29,      2007                                                                                                                                  |   |   |         27,      2008 |   |   |         29,      2007 |   |
| Weighted      average shares outstandingfor basic      calculation            |   |                                                                                                                                                                                            | 10,332 |   |                                                                                                                                                                                      |   | 10,312 |   |   |   | 10,332 |   |   |   | 10,521 |   |
| Add:      Effect of dilutive stock options (1)                                |   |                                                                                                                                                                                            |   |   |                                                                                                                                                                                      |   |  191 |   |   |   |   |   |   |   |  223 |   |
| Weighted      average shares outstandingAdjusted for diluted      calculation |   |                                                                                                                                                                                            | 10,332 |   |                                                                                                                                                                                      |   | 10,503 |   |   |   | 10,332 |   |   |   | 10,744 |   |

| (1)   | The      dilutive effect of stock options is not recognized in periods in which a      net loss has occurred. |
|-----------------|---------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                     |   |   |                                                                   |   |   |     |   |   | Accumulated   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------|--------|--------|----------|--------|--------|---------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                     |   |   |                Capital in |   |   |     |   |   | Other         |   |
|                                                                                                                                                                                                                                                                                                                                                                                              |   |                 Common |   |   |               Excess of        |   |   | Retained |   |   | Comprehensive |   |
|                                                                                                                                                                                                                                                                                                                                                                                              |   |                Stock        |   |   |    Par Value                                                 |   |   | Earnings |   |   | Loss          |   |
| Balance,      December 31,      2007                                                            |   | $                                                                        | 207    |   |                                                                   | $      | 591    |     |   | $      | 102,999       |   |   | $ | (946 | ) |
| Net      Income                                                                                                |   |                                                                     |   |   |                                                                   |   |   |     |   |   | (2,509        | )      |   |   |   |   |
| Stock-based      compensation                                                                                  |   |                                                                     |   |   |                                                                   |   | 329    |     |   |   |          |   |   |   |   |   |
| Cash dividends paid, $.30 per      share                                                                                                                                                                                                                                                                                                                                                          |   |                                                                     |   |   |                                                                   |   |   |     |   |   | (3,099        | )      |   |   |   |   |
| Adjustment to net periodic benefit      cost                                                                                                                                                                                                                                                                                                                                                      |   |                                                                     |   |   |                                                                   |   |   |     |   |   |          |   |   |   | 71 |   |
| Balance,      September 27,      2008                                                           |   | $                                                                        | 207    |   |                                                                   | $      | 920    |     |   | $      | 97,391        |   |   | $ | (875 | ) |

|                                         |         | Three      Months                                                                                                                                                                               |   |                            | Nine      Months                                                                                                                                                                    |    |
|----------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                         |         |                                     Ended |   |                            |                                   Ended |    |
|                                         |         |   September                                                                                                                                                                           |   |                            | September                                                                                                                                                                           |    |   | September |   |   |  September |   |
|                                         |         |        27,      2008                                                                                                                                              |   |                            |               29, 2007                                                                                                                      |    |   |        27,      2008 |   |   |               29, 2007 |   |
| Net      income (loss)                       |    |  $                                                                                                                                                                                         | (3,489 | )                               |                                                                                                                                                                                |  $ | 1,635 |   |   |  $ | (2,509 | ) |   |  $ | 935 |   |
| Pension      termination                     |         |                                                                                                                                                                                            |   |                            |                                                                                                                                                                                |    |   |   |   |   |   |   |   |   | 3,739 |   |
| Adjustment      to net periodic benefit cost |         |                                                                                                                                                                                            | (5     | )      |                                                                                                                                                                                |    |  22 |   |   |   | 71 |   |   |   | 181 |   |
| Comprehensive      income (loss)             |         | $                                                                                                                                                                                               | (3,494 | )                               |                                                                                                                                                                                |  $ | 1,657 |   |   | $ | (2,438 | ) |   | $ | 4,855 |   |

|                                                                                            |   | Restructuring      Charges |   |   | Cash      Payments |   |   | Restructuring      AccrualSeptember 27, 2008 |   |
|-------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------|--------|--------|----------------------------------------------|--------|
|                                                                                            |   |                       |   |   |               |   |   |                                         |   |
| Severance      and other     employee      termination  cost |   | $                          | 1,714  |   |               | $      | 167    |                                         |   | $ | 1,547 |   |

----

----

|                                              |   | Three      Months                                                                                                                                                                         |   |   | Nine      Months                                                                                                                                                                          |   |
|---------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                              |   |                                    Ended |   |   |                                    Ended |   |
|                                              |   | September                                                                                                                                                                                 |   |   | September                                                                                                                                                                                 |   |   |  September |   |   | September |   |
|                                              |   |         27,      2008                                                                                                                                  |   |   |                29, 2007                                                                                                                      |   |   |                27, 2008 |   |   |               29, 2007 |   |
| Net      sales                                    |   |                                                                                                                                                                                      | 100.0  | %      |                                                                                                                                                                                      |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Cost      of sales                                |   |                                                                                                                                                                                      | 90.8   |   |                                                                                                                                                                                      |   | 82.6 |   |   |   | 85.4 |   |   |   | 81.5 |   |
| Gross profit                                      |   |                                                                                                                                                                                      | 9.2    |   |                                                                                                                                                                                      |   | 17.4 |   |   |   | 14.6 |   |   |   | 18.5 |   |
| Selling,      general and administrative expenses |   |                                                                                                                                                                                      | 19.5   |   |                                                                                                                                                                                      |   | 13.1 |   |   |   | 16.1 |   |   |   | 13.9 |   |
| Pension      plan termination charge              |   |                                                                                                                                                                                      |   |   |                                                                                                                                                                                      |   |   |   |   |   |   | 3.1 |   |
| Operating income      (loss)                      |   |                                                                                                                                                                                      | (10.3  | )      |                                                                                                                                                                                      |   | 4.3 |   |   |   | (1.5 | ) |   |   | 1.5 |   |
| Other      income, net                            |   |                                                                                                                                                                                      |   |   |                                                                                                                                                                                      |   | .1 |   |   |   | .1 |   |   |   | .1 |   |
| Interest      income                              |   |                                                                                                                                                                                      | .2     |   |                                                                                                                                                                                      |   | .2 |   |   |   | .4 |   |   |   | .1 |   |
| Interest      expense                             |   |                                                                                                                                                                                      | 1.7    |   |                                                                                                                                                                                      |   | 1.3 |   |   |   | 1.6 |   |   |   | 1.1 |   |
| Income (loss) before income      taxes            |   |                                                                                                                                                                                      | (11.8  | )      |                                                                                                                                                                                      |   | 3.3 |   |   |   | (2.6 | ) |   |   | .6 |   |
| Income      taxes (benefit)                       |   |                                                                                                                                                                                      | (5.4   | )      |                                                                                                                                                                                      |   | 1.1 |   |   |   | (1.2 | ) |   |   | .2 |   |
| Net income(loss)                                  |   |                                                                                                                                                                                      | (6.4   | )%     |                                                                                                                                                                                      |   | 2.2 | % |   |   | (1.4 | )% |   |   | .4 | % |

----

----

| ITEM      3. |  Quantitative and      Qualitative Disclosures about MarketRisk |
|--------------|----------------------------------------------------------------------|

| ITEM      4. | Controls and      Procedures |
|--------------|------------------------------|

| (a) | Evaluation      of disclosure controls and procedures.  Under the supervision      and with the participation of our management, including our principal      executive officer and principal financial officer, we conducted an      evaluation of our disclosure controls and procedures, as such term is      defined under Rule 13a-15(e) promulgated under the Securities Exchange Act      of 1934, as amended (the Exchange Act).  Based on this      evaluation, our principal executive officer and our principal financial      officer concluded that our disclosure controls and procedures were      effective as of the end of the period covered by this quarterly      report. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Changes      in internal controls over financial reporting.  There were no      changes in our internal control over financial reporting that occurred      during the third quarter that have materially affected, or are reasonably      likely to materially affect, our internal control over financial      reporting. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ITEM      6. | Exhibits |
|--------------|----------|

|  3.1 | Restated      Certificate of Incorporation of the Registrant as amended (incorporated by      reference to Exhibit 3.1 to the Registrant’s Form 10-Q (Commission File      No. 0-14938) for the quarter ended July 2, 2005).                                                                       |   |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|      |                                                                                                                                                                                                                                                                                                     |   |
|  3.2 | By-laws      of the Registrant as amended (incorporated by reference to Exhibit 3 to      the Registrant’s Form 8-K (Commission File No. 0-14938 filed on September      25, 2008).                                                                                                                |   |
|      |                                                                                                                                                                                                                                                                                                     |   |
| 10.1      | Sixth      Amendment, to the revolving credit facility dated August 29, 2003, between      the Registrant and Wachovia Bank (incorporated by reference to Exhibit      10.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed on      August 20, 2008).                             |   |
|      |                                                                                                                                                                                                                                                                                                     |   |
| 10.2      | Form      of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to      the Registrant’s Form 8-K (Commission File No. 0-14938) filed on September      25, 2008).                                                                                                               |   |
|      |                                                                                                                                                                                                                                                                                                     |   |
| 10.3      | Voluntary      Separation Agreement and General Release by and between Jeffrey R.      Scheffer and Stanley Furniture Company, Inc. dated September 23, 2008      (incorporated by reference to Exhibit 10.2 to the Registrants Form 8-K      (Commission File No. 0-14938) filed on September 25,2008). |   |
|      |                                                                                                                                                                                                                                                                                                     |   |
| 31.1      | Certification      by Albert  L. Prillaman, our Chairman and Chief Executive      Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 302 of the Sarbanes-Oxley Act of 2002.(1)                                                                                   |   |
|      |                                                                                                                                                                                                                                                                                                     |   |
| 31.2      | Certification      by Douglas I. Payne, our Chief Financial Officer, pursuant to 18 U.S.C.      Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act      of 2002. (1)                                                                                                             |   |
|      |                                                                                                                                                                                                                                                                                                     |   |
| 32.1      | Certification      of Albert  L. Prillaman, our Chairman and Chief Executive      Officer, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to      section 906 of the Sarbanes-Oxley Act of 2002. (1)                                                                                |   |
|      |                                                                                                                                                                                                                                                                                                     |   |
| 32.2      | Certification      of Douglas I. Payne, our Chief Financial Officer, pursuant to 18 U. S. C.      Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act      of 2002. (1)                                                                                                           |   |

| Date:      October 14, 2008 |   | STANLEY      FURNITURE COMPANY, INC.                                       |
|-----------------------------|--------|----------------------------------------------------------------------------|
|                        |   | By:      /s/ Douglas I.  Payne                                             |
|                        |   | Douglas      I. Payne                                                      |
|                        |   | Executive      V.P. – Finance & AdministrationAnd      Secretary |
|                        |   | (Principal      Financial and Accounting Officer)                          |