##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 26, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission file number: 0-14938
 STANLEY FURNITURE COMPANY, INC.
  Delaware
    
    54-1272589(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1641 Fairystone Park Highway, Stanleytown, Virginia 24168
 (276) 627- 2000
 Yes þ No o
 o o
  Large accelerated filer o
    

Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller
 reporting company)
 o þ
 October 12, 2009, 10,332,179




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsITEM 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 3. Quantitative and Qualitative Disclosures about Market RiskITEM 4. Controls and ProceduresPART II. OTHER INFORMATIONITEM 1A. Risk FactorsITEM 6. ExhibitsSIGNATUREEXHIBIT INDEXExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    Consolidated Financial Statements
 STANLEY FURNITURE COMPANY, INC.
   September 26,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash
    
    $
    42,430
    
    
    $
    44,013Accounts receivable, less allowances of $1,797 and $1,644
    
    
    18,052
    
    
    
    21,873Inventories:Finished goods
    
    
    23,909
    
    
    
    36,803Work-in-process
    
    
    5,589
    
    
    
    3,493Raw materials
    
    
    5,876
    
    
    
    7,048Total inventories
    
    
    35,374
    
    
    
    47,344Prepaid expenses and other current assets
    
    
    9,023
    
    
    
    3,758Deferred income taxes
    
    
    3,726
    
    
    
    3,906Total current assets
    
    
    108,605
    
    
    
    120,894Property, plant and equipment, net
    
    
    33,255
    
    
    
    35,445Goodwill
    
    
    9,072
    
    
    
    9,072Other assets
    
    
    1,013
    
    
    
    460Total assets
    
    $
    151,945
    
    
    $
    165,871LIABILITIESCurrent liabilities:Current maturities of long-term debt
    
    $
    1,429
    
    
    $
    1,429Accounts payable
    
    
    10,157
    
    
    
    11,236Accrued salaries, wages and benefits
    
    
    7,102
    
    
    
    6,280Other accrued expenses
    
    
    2,837
    
    
    
    4,890Total current liabilities
    
    
    21,525
    
    
    
    23,835Long-term debt, exclusive of current maturities
    
    
    26,428
    
    
    
    27,857Deferred income taxes
    
    
    2,406
    
    
    
    2,778Other long-term liabilities
    
    
    8,192
    
    
    
    8,293Total liabilities
    
    
    58,551
    
    
    
    62,763STOCKHOLDERS EQUITYCommon stock, $.02 par value, 25,000,000 shares authorized
10,332,179 shares issued and outstanding
    
    
    207
    
    
    
    207Capital in excess of par value
    
    
    1,750
    
    
    
    1,058Retained earnings
    
    
    92,131
    
    
    
    102,603Accumulated other comprehensive loss
    
    
    (694
    )
    
    
    (760
    )Total stockholders equity
    
    
    93,394
    
    
    
    103,108Total liabilities and stockholders equity
    
    $
    151,945
    
    
    $
    165,871
   1




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STANLEY FURNITURE COMPANY, INC.
   Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    38,455
    
    
    $
    54,483
    
    
    $
    120,545
    
    
    $
    176,165Cost of sales
    
    
    39,056
    
    
    
    49,493
    
    
    
    112,829
    
    
    
    150,394Gross profit (loss)
    
    
    (601
    )
    
    
    4,990
    
    
    
    7,716
    
    
    
    25,771Selling, general and administrative expenses
    
    
    6,875
    
    
    
    10,606
    
    
    
    22,345
    
    
    
    28,358Operating loss
    
    
    (7,476
    )
    
    
    (5,616
    )
    
    
    (14,629
    )
    
    
    (2,587
    )Other income (expense), net
    
    
    45
    
    
    
    (22
    )
    
    
    133
    
    
    
    215Interest income
    
    
    3
    
    
    
    158
    
    
    
    44
    
    
    
    516Interest expense
    
    
    953
    
    
    
    957
    
    
    
    2,809
    
    
    
    2,807Loss before income taxes
    
    
    (8,381
    )
    
    
    (6,437
    )
    
    
    (17,261
    )
    
    
    (4,663
    )Income tax benefit
    
    
    (3,308
    )
    
    
    (2,948
    )
    
    
    (6,789
    )
    
    
    (2,154
    )Net loss
    
    $
    (5,073
    )
    
    $
    (3,489
    )
    
    $
    (10,472
    )
    
    $
    (2,509
    )Loss per share:Basic
    
    $
    (0.49
    )
    
    $
    (0.34
    )
    
    $
    (1.01
    )
    
    $
    (0.24
    )Diluted
    
    $
    (0.49
    )
    
    $
    (0.34
    )
    
    $
    (1.01
    )
    
    $
    (0.24
    )Weighted average shares outstanding:Basic
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332Diluted
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332Cash dividend declared and paid per common
share
    
    $
    
    
    
    $
    .10
    
    
    $
    
    
    
    $
    .30
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STANLEY FURNITURE COMPANY, INC.
   Nine Months EndedSeptember 26,
    
    
    September 27,2009
    
    
    2008Cash flows from operating activities:Cash received from customers
    
    $
    124,071
    
    
    $
    176,259Cash paid to suppliers and employees
    
    
    (120,262
    )
    
    
    (160,516
    )Interest paid
    
    
    (2,725
    )
    
    
    (2,143
    )Income taxes paid
    
    
    (2,531
    )
    
    
    (4,046
    )Net cash provided (used) by operating activities
    
    
    (1,447
    )
    
    
    9,554Cash flows from investing activities:Capital expenditures
    
    
    (1,702
    )
    
    
    (1,485
    )Purchase of other assets
    
    
    (55
    )Proceeds from sale of assets
    
    
    1,303Net cash provided (used) by investing activities
    
    
    (454
    )
    
    
    (1,485
    )Cash flows from financing activities:Repayment of senior notes
    
    
    (1,429
    )
    
    
    (1,429
    )Proceeds from insurance policy loans
    
    
    1,651
    
    
    
    1,550Dividends paid
    
    
    
    
    
    
    (3,099
    )Other, net
    
    
    96Net cash provided (used) by financing activities
    
    
    318
    
    
    
    (2,978
    )Net increase (decrease) in cash
    
    
    (1,583
    )
    
    
    5,091Cash at beginning of period
    
    
    44,013
    
    
    
    31,648Cash at end of period
    
    $
    42,430
    
    
    $
    36,739Reconciliation of net loss to net cash
provided (used) by operating activities:Net loss
    
    $
    (10,472
    )
    
    $
    (2,509
    )Depreciation and amortization
    
    
    4,291
    
    
    
    7,517Deferred income taxes
    
    
    (192
    )
    
    
    (2,021
    )Stock-based compensation
    
    
    692
    
    
    
    329Other, net
    
    
    
    
    
    
    27Changes in assets and liabilities:Accounts receivable
    
    
    3,821
    
    
    
    266Inventories
    
    
    11,970
    
    
    
    10,540Prepaid expenses and other current assets
    
    
    (8,809
    )
    
    
    (3,164
    )Accounts payable
    
    
    (1,079
    )
    
    
    (4,003
    )Accrued salaries, wages and benefits
    
    
    997
    
    
    
    2,351Other accrued expenses
    
    
    (2,161
    )
    
    
    698Other assets
    
    
    (404
    )
    
    
    (334
    )Other long-term liabilities
    
    
    (101
    )
    
    
    (143
    )Net cash provided (used) by operating activities
    
    $
    (1,447
    )
    
    $
    9,554
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STANLEY FURNITURE COMPANY, INC.
   Preparation of Interim Unaudited Consolidated Financial Statements
  Property, Plant and Equipment
 September 26,
    
    
    December 31,2009
    
    
    2008Land and buildings
    
    $
    38,851
    
    
    $
    41,615Machinery and equipment
    
    
    63,468
    
    
    
    76,451Office furniture and equipment
    
    
    1,284
    
    
    
    1,384Construction in process
    
    
    1,656
    
    
    
    120Property, plant and equipment, at cost
    
    
    105,259
    
    
    
    119,570Less accumulated depreciation
    
    
    72,004
    
    
    
    84,125Property, plant and equipment, net
    
    $
    33,255
    
    
    $
    35,445
 Debt
  September 26,
    
    
    December 31,2009
    
    
    20086.73% senior notes due through May 3, 2017
    
    $
    25,000
    
    
    $
    25,0006.94% senior notes due through May 3, 2011
    
    
    2,857
    
    
    
    4,286Total
    
    
    27,857
    
    
    
    29,286Less current maturities
    
    
    1,429
    
    
    
    1,429Long-term debt, exclusive of current maturities
    
    $
    26,428
    
    
    $
    27,857
  4




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Employee Benefit Plans
  Three Months Ended
    
    

Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    19
    
    
    $
    22
    
    
    $
    58
    
    
    $
    66Interest cost
    
    
    71
    
    
    
    71
    
    
    
    213
    
    
    
    214Amortization of transition obligation
    
    
    33
    
    
    
    32
    
    
    
    98
    
    
    
    97Amortization of prior service cost
    
    
    (2
    )
    
    
    (2
    )
    
    
    (6
    )
    
    
    (6
    )Amortization of accumulated loss
    
    
    5
    
    
    
    8
    
    
    
    14
    
    
    
    24Net periodic postretirement benefit cost
    
    $
    126
    
    
    $
    131
    
    
    $
    377
    
    
    $
    395
 Stockholders Equity
  Three Months Ended
    
    

Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Weighted average shares outstanding
for basic calculation
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332Add: Effect of dilutive stock options (1)Weighted average shares outstanding
Adjusted for diluted calculation
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
 (1)
    
    The dilutive effect of stock options is not recognized in periods in which a net loss has
occurred.   AccumulatedCapital in
    
    
    
    
    
    
    OtherCommon
    
    
    Excess of
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Par Value
    
    
    Earnings
    
    
    LossBalance, December 31, 2008
    
    $
    207
    
    
    $
    1,058
    
    
    $
    102,603
    
    
    $
    (760
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (10,472
    )Stock-based compensation
    
    
    
    
    
    
    692Adjustment to net periodic benefit cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Balance, September 26, 2009
    
    $
    207
    
    
    $
    1,750
    
    
    $
    92,131
    
    
    $
    (694
    )
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Three Months Ended
    
    

Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (5,073
    )
    
    $
    (3,489
    )
    
    $
    (10,472
    )
    
    $
    (2,509
    )Adjustment to net periodic benefit cost
    
    
    22
    
    
    
    (5
    )
    
    
    66
    
    
    
    71Comprehensive loss
    
    $
    (5,051
    )
    
    $
    (3,494
    )
    
    $
    (10,406
    )
    
    $
    (2,438
    )
 Restructuring and Related Charges
    Severance and othertermination costs
    
    
    Other Cost
    
    
    TotalAccrual at January 1, 2009
    
    $
    1,446
    
    
    
    
    
    
    $
    1,446Charges to expense
    
    
    109
    
    
    $
    82
    
    
    
    191Cash payments
    
    
    1,385
    
    
    
    82
    
    
    
    1,467Accrual at September 26, 2009
    
    $
    170
    
    
    $
    
    
    
    $
    170
  
 ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
     6




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Financial Condition, Liquidity and Capital Resources
      7




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Twelve Months EndingSeptember 26, 2009Loss before income taxes
    
    $
    (7,861
    )Interest expense, net
    
    
    3,685Restructuring charge
    
    
    1,777Earnings (loss) before interest and taxes
(as defined in our note agreement)
    
    $
    (2,399
    )
 Continued Dumping and Subsidy Offset Act (CDSOA)
   
    
    the annual administrative review process which can retroactively increase or
decrease the actual duties owed on entries secured by cash deposits and bonds,
 
    
    the ultimate resolution of the legal appeals discussed above, and
 
    
    other administrative and legal challenges that may be instituted.
   8




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Critical Accounting Policies
  Forward-Looking Statements
  
 ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
   9




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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.
  10




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PART II. OTHER INFORMATION
 
 ITEM 1A.
    
    Risk Factors
  Our strategy to transition Young America Products (infant-to-teen furniture) to our domestic
manufacturing facilities has, and will in the near term, increase operating expenses. If we are
not successful in the implementation of this strategy, we may continue to experience significant
disruptions to our operations that may result in a decline in revenues in addition to a continued
increase in operating expenses.
  
 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 3.1 to the Registrants Form 8-K (Commission File No. 0-14938
filed on August 26, 2009).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)
 
 (1)
    
    Filed herewith  11




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SIGNATURE
  Date: October 15, 2009
    STANLEY FURNITURE COMPANY, INC.By:
    /s/ Douglas I. PayneDouglas I. PayneExecutive V.P.  Finance & Administration
And Secretary
(Principal Financial and Accounting Officer)  12




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EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    
    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)
 
 (1)
    
    Filed herewith  13