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 April 3, 2010
 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- 2010
 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




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PART I. FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 STANLEY FURNITURE COMPANY, INC.
 April 3,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash
    
    $
    33,646
    
    
    $
    41,827Accounts receivable, less allowances of $1,750 and $1,747
    
    
    16,123
    
    
    
    15,297Inventories:Finished goods
    
    
    23,858
    
    
    
    22,376Work-in-process
    
    
    5,839
    
    
    
    8,184Raw materials
    
    
    5,793
    
    
    
    6,665Total inventories
    
    
    35,490
    
    
    
    37,225Income tax receivable
    
    
    7,743
    
    
    
    6,882Prepaid expenses and other current assets
    
    
    4,688
    
    
    
    4,898Deferred income taxes
    
    
    1,981
    
    
    
    3,433Total current assets
    
    
    99,671
    
    
    
    109,562Property, plant and equipment, net
    
    
    30,338
    
    
    
    31,375Goodwill
    
    
    
    
    
    
    9,072Other assets
    
    
    132
    
    
    
    453Total assets
    
    $
    130,141
    
    
    $
    150,462LIABILITIESCurrent liabilities:Current maturities of long-term debt
    
    $
    12,857
    
    
    $
    1,429Accounts payable
    
    
    11,239
    
    
    
    11,633Accrued salaries, wages and benefits
    
    
    5,493
    
    
    
    6,597Other accrued expenses
    
    
    2,794
    
    
    
    2,626Total current liabilities
    
    
    32,383
    
    
    
    22,285Long-term debt, exclusive of current maturities
    
    
    15,000
    
    
    
    26,428Deferred income taxes
    
    
    1,981
    
    
    
    2,128Other long-term liabilities
    
    
    6,716
    
    
    
    6,774Total liabilities
    
    
    56,080
    
    
    
    57,615STOCKHOLDERS EQUITYCommon stock, $.02 par value, 25,000,000 shares authorized
and 10,344,679 and 10,332,179 shares issued and
outstanding
    
    
    207
    
    
    
    207Capital in excess of par value
    
    
    2,197
    
    
    
    1,897Retained earnings
    
    
    71,779
    
    
    
    90,852Accumulated other comprehensive loss
    
    
    (122
    )
    
    
    (109
    )Total stockholders equity
    
    
    74,061
    
    
    
    92,847Total liabilities and stockholders equity
    
    $
    130,141
    
    
    $
    150,462
   2




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##### 



STANLEY FURNITURE COMPANY, INC.
 Three Months EndedApril 3,
    
    
    March 28,2010
    
    
    2009Net sales
    
    $
    36,524
    
    
    $
    39,764Cost of sales
    
    
    38,895
    
    
    
    35,022Gross profit (loss)
    
    
    (2,371
    )
    
    
    4,742Selling, general and administrative expenses
    
    
    6,138
    
    
    
    7,817Goodwill impairment charge
    
    
    9,072Operating loss
    
    
    (17,581
    )
    
    
    (3,075
    )Other income, net
    
    
    15
    
    
    
    45Interest income
    
    
    2
    
    
    
    36Interest expense
    
    
    1,058
    
    
    
    950Loss before income taxes
    
    
    (18,622
    )
    
    
    (3,944
    )Income tax expense (benefit)
    
    
    451
    
    
    
    (1,568
    )Net loss
    
    $
    (19,073
    )
    
    $
    (2,376
    )Loss per share:Basic
    
    $
    (1.85
    )
    
    $
    (.23
    )Diluted
    
    $
    (1.85
    )
    
    $
    (.23
    )Weighted average shares outstanding:Basic
    
    
    10,335
    
    
    
    10,332Diluted
    
    
    10,335
    
    
    
    10,332
   3




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##### 



STANLEY FURNITURE COMPANY, INC.
 Three Months EndedApril 3,
    
    
    March 28,2010
    
    
    2009Cash flows from operating activities:Cash received from customers
    
    $
    35,594
    
    
    $
    40,254Cash paid to suppliers and employees
    
    
    (43,748
    )
    
    
    (41,596
    )Interest received (paid), net
    
    
    (1
    )
    
    
    20Income taxes received (paid), net
    
    
    3
    
    
    
    (2,414
    )Net cash used by operating activities
    
    
    (8,152
    )
    
    
    (3,736
    )Cash flows from investing activities:Capital expenditures
    
    
    (2
    )
    
    
    (471
    )Purchase of other assets
    
    
    (146
    )Proceeds from sale of assets
    
    
    
    
    
    
    1,303Net cash (used) provided by investing activities
    
    
    (148
    )
    
    
    832Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    119Net cash provided by financing activities
    
    
    119Net decrease in cash
    
    
    (8,181
    )
    
    
    (2,904
    )Cash at beginning of period
    
    
    41,827
    
    
    
    44,013Cash at end of period
    
    $
    33,646
    
    
    $
    41,109Reconciliation of net loss to
net cash used by operating activities:Net loss
    
    $
    (19,073
    )
    
    $
    (2,376
    )Goodwill impairment charge
    
    
    9,072Depreciation and amortization
    
    
    1,042
    
    
    
    1,102Deferred income taxes
    
    
    1,307
    
    
    
    (115
    )Stock-based compensation
    
    
    181
    
    
    
    153Changes in assets and liabilities:Accounts receivable
    
    
    (826
    )
    
    
    590Inventories
    
    
    1,735
    
    
    
    1,387Income tax receivable
    
    
    (861
    )Prepaid expenses and other current assets
    
    
    192
    
    
    
    (2,131
    )Accounts payable
    
    
    (394
    )
    
    
    (1,406
    )Accrued salaries, wages and benefits
    
    
    (1,124
    )
    
    
    232Other accrued expenses
    
    
    175
    
    
    
    (1,582
    )Other assets
    
    
    482
    
    
    
    450Other long-term liabilities
    
    
    (60
    )
    
    
    (40
    )Net cash used by operating activities
    
    $
    (8,152
    )
    
    $
    (3,736
    )
   4




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STANLEY FURNITURE COMPANY, INC.
 Preparation of Interim Unaudited Consolidated Financial Statements
  Property, Plant and Equipment
 April 3,
    
    
    December 31,2010
    
    
    2009Land and buildings
    
    $
    33,900
    
    
    $
    33,900Machinery and equipment
    
    
    63,403
    
    
    
    63,403Office furniture and equipment
    
    
    1,284
    
    
    
    1,284Construction in process
    
    
    672
    
    
    
    670Property, plant and equipment, at cost
    
    
    99,259
    
    
    
    99,257Less accumulated depreciation
    
    
    68,921
    
    
    
    67,882Property, plant and equipment, net
    
    $
    30,338
    
    
    $
    31,375
 Debt
 April 3,
    
    
    December 31,2010
    
    
    20098.23% senior notes due through May 3, 2015
    
    $
    25,000
    
    
    $
    25,0008.44% senior notes due through May 3, 2011
    
    
    2,857
    
    
    
    2,857Total
    
    
    27,857
    
    
    
    27,857Less current maturities
    
    
    12,857
    
    
    
    1,429Long-term debt, exclusive of current maturities
    
    $
    15,000
    
    
    $
    26,428
     5




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Income taxes
  Goodwill
  Employee Benefits Plans
  Three Months EndedApril 3,
    
    
    March 28,2010
    
    
    2009Service cost
    
    
    
    
    
    $
    19Interest cost
    
    $
    47
    
    
    
    71Amortization of transition obligation
    
    
    
    
    
    
    33Amortization of prior service cost
    
    
    (38
    )
    
    
    (2
    )Amortization of accumulated loss
    
    
    18
    
    
    
    5Net periodic postretirement benefit cost
    
    $
    27
    
    
    $
    126
 Stockholders Equity
  Three Months EndedApril 3,
    
    
    March 28,2010
    
    
    2009Weighted average shares outstanding
for basic calculation
    
    
    10,335
    
    
    
    10,332Add: Effect of dilutive stock optionsWeighted average shares outstanding,
adjusted for diluted calculation
    
    
    10,335
    
    
    
    10,332
   6




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AccumulatedCapital in
    
    
    
    
    
    
    OtherCommon
    
    
    Excess of
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Par Value
    
    
    Earnings
    
    
    LossBalance, December 31, 2009
    
    $
    207
    
    
    $
    1,897
    
    
    $
    90,852
    
    
    $
    (109
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (19,073
    )Exercise of stock options
    
    
    
    
    
    
    119Stock-based compensation
    
    
    
    
    
    
    181Adjustment to net periodic benefit cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Balance, April 3, 2010
    
    $
    207
    
    
    $
    2,197
    
    
    $
    71,779
    
    
    $
    (122
    )
  Three Months EndedApril 3,
    
    
    March 28,2010
    
    
    2009Net loss
    
    $
    (19,073
    )
    
    $
    (2,376
    )Adjustment to net periodic benefit cost
    
    
    (13
    )
    
    
    22Comprehensive loss
    
    $
    (19,086
    )
    
    $
    (2,354
    )
 Restructuring and Related Charges
   Severance and othertermination costs
    
    
    Other Cost
    
    
    TotalAccrual at January 1, 2010
    
    $
    1,070
    
    
    
    
    
    
    $
    1,070Charges to expense
    
    
    
    
    
    $
    24
    
    
    
    24Cash payments
    
    
    (532
    )
    
    
    (24
    )
    
    
    (556
    )Accrual at April 3, 2010
    
    $
    538
    
    
    $
    
    
    
    $
    538
  Severance and othertermination costs
    
    
    Other Cost
    
    
    TotalAccrual at January 1, 2009
    
    $
    1,446
    
    
    
    
    
    
    $
    1,446Charges to expense
    
    
    83
    
    
    $
    82
    
    
    
    165Cash payments
    
    
    (263
    )
    
    
    (82
    )
    
    
    (345
    )Accrual at March 28, 2009
    
    $
    1,266
    
    
    $
    
    
    
    $
    1,266
   7




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ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
  
    
    We will transition the majority of the manufacturing of the Stanley Furniture adult
product line from our Stanleytown, VA facility to several strategic off-shore vendors with
whom we have existing working relationships. A substantial portion of the Stanleytown
facility will become a warehousing and distribution center. In addition, we will retain a
domestic assembly and finish process in our Martinsville, VA facility to continue offering
multiple finish options on certain items across various product lines. These actions will
take place over the balance of 2010 and reflect our belief that current demand in our price
segment results in a unit volume below that necessary to support a facility the size of our
Stanleytown, VA facility.
 
    
    Our Young America nursery and youth product line will continue to be exclusively
manufactured in our Robbinsville, NC facility, except for certain component SKUs of nominal
revenue that will be phased over to our offshore vendors as part of our cost reduction
efforts.
    Results of Operations
      8




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Financial Condition, Liquidity and Capital Resources
        Critical Accounting Policies
   9




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##### 



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 first quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
  10




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Item 1A.
    
    Risk Factors
  Our restructuring plan announced in May 2010 may not be successful, and will increase our reliance
on foreign sourcing.
  Item 5.
    
    Other Information
 Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation.
    Costs Associated with Exit or Disposal Activities.
  
    
    The Company will transition the majority of the manufacturing of the Stanley Furniture
adult product line from its Stanleytown, Virginia facility to several strategic off-shore
vendors with whom the Company has existing working relationships. A substantial portion of
the Stanleytown facility will become a warehousing and distribution center. In addition,
the Company will relocate its domestic assembly and finish process capabilities to the
Martinsville, Virginia facility in order to continue offering
multiple finish options on certain items across various product lines. The Martinsville
facility is currently used for warehousing purposes. These actions will take place over the
balance of 2010 and reflect the Companys belief that current demand in our price segment
results in a unit volume below that necessary to support a facility the size of its
Stanleytown, Virginia facility.
  11




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
    
    The Companys Young America nursery and youth product line will continue to be
exclusively manufactured in our Robbinsville, North Carolina facility, except for certain
component SKUs of nominal revenue that will be phased over to the Companys offshore
vendors as part of its cost reduction efforts.
    Departure of Directors or Certain Officers; Appointment of Certain Officers
  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 December 7, 2007).4.1
    
    
    Second Amended and Restated Note Purchase and Private Shelf Agreement
dated as of May 11, 2010, among the Registrant, The Prudential
Insurance Company of America, the other purchasers named therein and
the affiliated of Prudential who became purchasers as defined
therein. (1)4.2
    
    
    Security Agreement dated as of May 11, 2010, by the Registrant,
certain subsidiaries of the Registrant, and Additional Grantors as
defined therein, in favor of The Bank of New York Mellon Trust
Company, N.A., as collateral agent for the benefit of The Prudential
Insurance Company of America and each holder of Notes. (1)31.1
    
    
    Certification by Glenn 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 Glenn 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)32.1
    
    
    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  12




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SIGNATURE
  Date: May 12, 2010
    STANLEY FURNITURE COMPANY, INC.By:
    /s/ Douglas I. PayneDouglas I. PayneExecutive V.P.  Finance &
 Administration
and Secretary

(Principal Financial and Accounting Officer)  13