##### 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 June 27, 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
 July 13, 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 4. Submission of Matters to a Vote of Security HoldersItem 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.
 June 27,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash
    
    $
    40,715
    
    
    $
    44,013Accounts receivable, less allowances of $1,753 and $1,644
    
    
    19,850
    
    
    
    21,873Inventories:Finished goods
    
    
    30,401
    
    
    
    36,803Work-in-process
    
    
    5,016
    
    
    
    3,493Raw materials
    
    
    5,774
    
    
    
    7,048Total inventories
    
    
    41,191
    
    
    
    47,344Prepaid expenses and other current assets
    
    
    5,773
    
    
    
    3,758Deferred income taxes
    
    
    3,895
    
    
    
    3,906Total current assets
    
    
    111,424
    
    
    
    120,894Property, plant and equipment, net
    
    
    34,284
    
    
    
    35,445Goodwill
    
    
    9,072
    
    
    
    9,072Other assets
    
    
    1,468
    
    
    
    460Total assets
    
    $
    156,248
    
    
    $
    165,871LIABILITIESCurrent liabilities:Current maturities of long-term debt
    
    $
    1,429
    
    
    $
    1,429Accounts payable
    
    
    9,586
    
    
    
    11,236Accrued salaries, wages and benefits
    
    
    7,829
    
    
    
    6,280Other accrued expenses
    
    
    2,040
    
    
    
    4,890Total current liabilities
    
    
    20,884
    
    
    
    23,835Long-term debt, exclusive of current maturities
    
    
    26,428
    
    
    
    27,857Deferred income taxes
    
    
    2,472
    
    
    
    2,778Other long-term liabilities
    
    
    8,218
    
    
    
    8,293Total liabilities
    
    
    58,002
    
    
    
    62,763STOCKHOLDERS EQUITYCommon stock, $.02 par value, 25,000,000 shares authorized and
10,332,179 shares issued and outstanding
    
    
    207
    
    
    
    207Capital in excess of par value
    
    
    1,551
    
    
    
    1,058Retained earnings
    
    
    97,204
    
    
    
    102,603Accumulated other comprehensive loss
    
    
    (716
    )
    
    
    (760
    )Total stockholders equity
    
    
    98,246
    
    
    
    103,108Total liabilities and stockholders equity
    
    $
    156,248
    
    
    $
    165,871
   2




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STANLEY FURNITURE COMPANY, INC.
 Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    42,326
    
    
    $
    59,148
    
    
    $
    82,090
    
    
    $
    121,682Cost of sales
    
    
    38,751
    
    
    
    49,187
    
    
    
    73,773
    
    
    
    100,901Gross profit
    
    
    3,575
    
    
    
    9,961
    
    
    
    8,317
    
    
    
    20,781Selling, general and administrative expenses
    
    
    7,653
    
    
    
    8,982
    
    
    
    15,470
    
    
    
    17,752Operating income (loss)
    
    
    (4,078
    )
    
    
    979
    
    
    
    (7,153
    )
    
    
    3,029Other income, net
    
    
    43
    
    
    
    165
    
    
    
    88
    
    
    
    237Interest income
    
    
    6
    
    
    
    153
    
    
    
    41
    
    
    
    357Interest expense
    
    
    907
    
    
    
    930
    
    
    
    1,856
    
    
    
    1,849Income (loss) before income taxes
    
    
    (4,936
    )
    
    
    367
    
    
    
    (8,880
    )
    
    
    1,774Income tax expense (benefit)
    
    
    (1,913
    )
    
    
    435
    
    
    
    (3,481
    )
    
    
    794Net income (loss)
    
    $
    (3,023
    )
    
    $
    (68
    )
    
    $
    (5,399
    )
    
    $
    980Earnings (loss) per share:Basic
    
    $
    (0.29
    )
    
    $
    (.01
    )
    
    $
    (0.52
    )
    
    $
    .09Diluted
    
    $
    (0.29
    )
    
    $
    (.01
    )
    
    $
    (0.52
    )
    
    $
    .09Weighted average shares outstanding:Basic
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332Diluted
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,334Cash dividend declared and paid per common share
    
    
    
    
    
    $
    .10
    
    
    
    
    
    
    $
    .20
   3




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STANLEY FURNITURE COMPANY, INC.
 Six Months EndedJune 27,
    
    
    June 28,2009
    
    
    2008Cash flows from operating activities:Cash received from customers
    
    $
    83,912
    
    
    $
    121,163Cash paid to suppliers and employees
    
    
    (82,979
    )
    
    
    (110,287
    )Interest paid
    
    
    (2,729
    )
    
    
    (2,291
    )Income taxes paid
    
    
    (2,463
    )
    
    
    (3,810
    )Net cash provided (used) by operating activities
    
    
    (4,259
    )
    
    
    4,775Cash flows from investing activities:Capital expenditures
    
    
    (637
    )
    
    
    (584
    )Purchase of other assets
    
    
    (23
    )Proceeds from sale of assets
    
    
    1,303Net cash provided (used) by investing activities
    
    
    643
    
    
    
    (584
    )Cash flows from financing activities:Repayment of senior notes
    
    
    (1,429
    )
    
    
    (1,429
    )Proceeds from insurance policy loans
    
    
    1,651
    
    
    
    1,550Dividends paid
    
    
    
    
    
    
    (2,066
    )Other, net
    
    
    96Net cash provided (used) by financing activities
    
    
    318
    
    
    
    (1,945
    )Net increase (decrease) in cash
    
    
    (3,298
    )
    
    
    2,246Cash at beginning of period
    
    
    44,013
    
    
    
    31,648Cash at end of period
    
    $
    40,715
    
    
    $
    33,894Reconciliation of net income
to net cash provided (used)
by operating activities:Net income (loss)
    
    $
    (5,399
    )
    
    $
    980Depreciation and amortization
    
    
    2,194
    
    
    
    2,869Deferred income taxes
    
    
    (295
    )
    
    
    (1,223
    )Stock-based compensation
    
    
    493
    
    
    
    368Changes in assets and liabilities:Accounts receivable
    
    
    2,023
    
    
    
    (524
    )Inventories
    
    
    6,153
    
    
    
    6,970Prepaid expenses and other current assets
    
    
    (5,560
    )
    
    
    (1,437
    )Accounts payable
    
    
    (1,650
    )
    
    
    (3,675
    )Accrued salaries, wages and benefits
    
    
    1,676
    
    
    
    2,705Other accrued expenses
    
    
    (2,932
    )
    
    
    (1,394
    )Other assets
    
    
    (887
    )
    
    
    (784
    )Other long-term liabilities
    
    
    (75
    )
    
    
    (80
    )Net cash provided (used) by operating activities
    
    $
    (4,259
    )
    
    $
    4,775
   4




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STANLEY FURNITURE COMPANY, INC.
 Preparation of Interim Unaudited Consolidated Financial Statements
  Property, Plant and Equipment
 June 27,
    
    
    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
    
    
    592
    
    
    
    120Property, plant and equipment, at cost
    
    
    104,195
    
    
    
    119,570Less accumulated depreciation
    
    
    69,911
    
    
    
    84,125Property, plant and equipment, net
    
    $
    34,284
    
    
    $
    35,445
 Debt
 June 27,
    
    
    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
 Employee Benefit Plans
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    20
    
    
    $
    22
    
    
    $
    39
    
    
    $
    44Interest cost
    
    
    71
    
    
    
    72
    
    
    
    142
    
    
    
    143Amortization of transition obligation
    
    
    32
    
    
    
    33
    
    
    
    65
    
    
    
    65Amortization of prior service cost
    
    
    (2
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    (4
    )Amortization of accumulated loss
    
    
    4
    
    
    
    8
    
    
    
    9
    
    
    
    16Net periodic postretirement benefit cost
    
    $
    125
    
    
    $
    133
    
    
    $
    251
    
    
    $
    264
  5




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Stockholders Equity
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Weighted average shares outstanding for
basic calculation
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332Add: Effect of dilutive stock options (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Weighted average shares outstanding 

Adjusted for diluted calculation
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,334
 (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
    
    
    
    
    
    
    
    
    
    
    (5,399
    )Stock-based compensation
    
    
    
    
    
    
    493Adjustment to net periodic benefit cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44Balance, June 27, 2009
    
    $
    207
    
    
    $
    1,551
    
    
    $
    97,204
    
    
    $
    (716
    )
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    (3,023
    )
    
    $
    (68
    )
    
    $
    (5,399
    )
    
    $
    980Adjustment to net periodic benefit cost
    
    
    22
    
    
    
    38
    
    
    
    44
    
    
    
    77Comprehensive income (loss)
    
    $
    (3,001
    )
    
    $
    30
    
    
    $
    (5,355
    )
    
    $
    1,057
 Restructuring and Related Charges
   6




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Severance and othertermination costs
    
    
    Other Cost
    
    
    TotalAccrual at January 1, 2009
    
    $
    1,446
    
    
    
    
    
    
    $
    1,446Charges to expense
    
    
    79
    
    
    $
    82
    
    
    
    161Cash payments
    
    
    1,386
    
    
    
    82
    
    
    
    1,468Accrual at June 27, 2009
    
    $
    139
    
    
    $
    0
    
    
    $
    139
  
 
 ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    91.6
    
    
    
    83.2
    
    
    
    89.9
    
    
    
    82.9Gross profit
    
    
    8.4
    
    
    
    16.8
    
    
    
    10.1
    
    
    
    17.1Selling, general and administrative expenses
    
    
    18.0
    
    
    
    15.2
    
    
    
    18.8
    
    
    
    14.6Operating income (loss)
    
    
    (9.6
    )
    
    
    1.6
    
    
    
    (8.7
    )
    
    
    2.5Other income, net
    
    
    .1
    
    
    
    .3
    
    
    
    .1
    
    
    
    .2Interest income
    
    
    
    
    
    
    .3
    
    
    
    
    
    
    
    .3Interest expense
    
    
    2.1
    
    
    
    1.6
    
    
    
    2.3
    
    
    
    1.5Income (loss) before income taxes
    
    
    (11.6
    )
    
    
    0.6
    
    
    
    (10.8
    )
    
    
    1.5Income taxes
    
    
    4.5
    
    
    
    (0.7
    )
    
    
    4.2
    
    
    
    (0.7
    )Net income (loss)
    
    
    (7.1
    )
    
    
    (0.1
    )
    
    
    (6.6
    )
    
    
    .8
     7




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Financial Condition, Liquidity and Capital Resources
       8




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Twelve Months EndingJune 27, 2009Loss before income taxes
    
    $
    (5,894
    )Interest expense, net
    
    
    3,521Restructuring charge
    
    
    7,050Earnings before interest and taxes
(as defined in our note agreement)
    
    $
    4,677
 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.
     9




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Critical Accounting Policies
  Forward-Looking Statements
  
 
 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
  
 
 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 second 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
 
 
 Submission of Matters to a Vote of Security Holders
 (a.)
    
    The annual meeting of the Companys stockholders was held on April 16, 2009.
 (c.)
    
    The stockholders of the Company elected two directors for a three-year term expiring at the
annual meeting of stockholders to be held in 2012. The election was approved by the following
vote:
 For
    
    
    WithheldMichael P. Haley
    
    
    9,474,884
    
    
    
    163,798Albert L. Prillaman
    
    
    9,487,544
    
    
    
    151,138
 
 
 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 September 8, 2008).31.1
    
    
    Certification by Albert L. Prillaman, our 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 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: July 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
 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 September 8, 2008).31.1
    
    
    Certification by Albert L. Prillaman, our 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 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