----

|                                                                            |
|---------------------------------------------------------------------------------|
| UNITED                  STATES                                                  |
| SECURITIES                  AND EXCHANGE COMMISSION                             |
| Washington,                  D.C. 20549                                         |
| **FORM                  10-K**                                                  |
|                                                                            |
| ANNUAL                  REPORT                  PURSUANT TO SECTION 13 OR 15(d) |
| OF                  THE                  SECURITIES EXCHANGE ACT OF 1934        |

**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, VA 24168                                                                                                                                                                                   |
| (Address                  of                  principal executive offices, Zip                  Code)                                                                                                                                                       |

| Common                  Stock, par value $.02 per share                           10,928,610                                                  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Class                  of                  Common Stock)                             Number                  of                  Shares |

----

|  Part                1 |   |                                                                           Page |
|-----------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |
|                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |
| Item                  1     |   | Business                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 3 |
| Item                  1A    |   | Risk                  Factors                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 6 |
| Item                  1B    |   | Unresolved                  Staff Comments                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 7 |
| Item                  2     |   | Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 8 |
| Item                  3     |   | Legal                  Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 8 |
| Item                  4     |   | Submission                  of                  Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                                                                                                                            |   | 8 |

| Item                  5  |   | Market                  for                  Registrant’s Common Equity, Related Stockholder  |   |   |
|--------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|--------|
|                     |   | Matters                  and                  Issuer Purchases of Equity Securities                      |   | 10     |
| Item                  6  |   | Selected                  Financial Data                                                                 |   | 12     |
| Item                  7  |   | Management’s                  Discussion and Analysis of Financial Condition                       |   |   |
|                     |   | and                  Results                  of Operation                                               |   | 13     |
| Item                  7A |   | Quantitative                  and Qualitative Disclosures About Market Risk                              |   | 18     |
| Item                  8  |   | Financial                  Statements and Supplementary Data                                             |   | 18     |
| Item                  9  |   | Changes                  in                  and Disagreements With Accountants on Accounting            |   |   |
|                     |   | and                  Financial                  Disclosure                                               |   | 18     |
| Item                  9A |   | Controls                  and                  Procedures                                                |   | 18     |
| Item                  9B |   | Other                  Information                                                                       |   | 19     |

| Item                  10 |   | Directors,                  Executive Officers and Corporate Governance                                     |   | 19     |
|--------------------------|--------|-------------------------------------------------------------------------------------------------------------|--------|--------|
| Item                  11 |   | Executive                  Compensation                                                                     |   | 19     |
| Item                  12 |   | Security                  Ownership of Certain Beneficial Owners and                                        |   |   |
|                     |   | Management                  and Related Stockholder Matters                                                 |   | 19     |
| Item                  13 |   | Certain                  Relationships and Related Transactions, and Director                  Independence |   | 20     |
| Item                  14 |   | Principal                  Accounting Fees and Services                                                     |   | 20     |

| Item                  15 |   | Exhibits,                  Financial Statement Schedules |   | 20 |
|--------------------------|--------|----------------------------------------------------------|--------|----|

| Signatures                                                                                |   |                       23 |
|-------------------------------------------------------------------------------------------|--------|----------------------------------------------|
|                                                                                      |   |                                         |
| Index                  to                  Consolidated Financial Statements and Schedule |   |                       F1 |
|                                                                                      |   |                                         |

----

**PART        I**

**Item        1.**

**General**

**Products        and Styles**

**Distribution**

**Manufacturing        and Offshore Sourcing**

| ·   | Smaller,                more                frequent and cost-effective production                runs |
|--------------------|--------------------------------------------------------------------------------------------------------|
| ·   | Identification                and elimination of manufacturing bottlenecks and                waste |
|--------------------|-----------------------------------------------------------------------------------------------------|
| ·   | Employment                of                statistical process control and other quality                tools |
|--------------------|----------------------------------------------------------------------------------------------------------------|
| ·   | Use                of                cellular manufacturing in the production of                components |
|--------------------|------------------------------------------------------------------------------------------------------------|
| ·   | Improvement                of our relationships with suppliers by establishing primary                suppliers |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

**Raw        Materials**

**Competition**

*Furniture/Today*

----

**Associates**

**Trademarks**

**Governmental        Regulations**

**Forward-Looking        Statements**

**Available        Information**

----

**Item        1A.**

***Our        results of operations and financial condition can be adversely affected by        numerous risks. You should carefully consider the risk factors detailed below        in        conjunction with the other information contained in this document. Should        any of        these risks actually materialize, our business, financial condition and future        prospects could be negatively impacted.***

***We        may        not be able to sustain current sales and earnings due to economic        downturns.***

***We        may        not be able to sustain current sales and earnings due to the actions and        strength of our competitors.***

***As        a        result of our reliance on foreign sourcing***
*:*

| ·   | **Our                ability to service customers could be adversely affected and result                in                lower sales and earnings.** |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Changes                    in political, economic and social conditions, as well as laws                    and                    regulations, in China** |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **or the other                countries                from which we source products could adversely affect                us.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | **International                trade policies of the United States and countries from which we source                products could adversely affect us**. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Manufacturing        realignment could result in a decrease in our        earnings.***

*** ***

----

***We        may        not be able to maintain or to raise prices in response to inflation and        increasing costs.***

***We        may        not be able to obtain sufficient quantities of quality raw materials in a        timely        manner, which could result in a decrease in our sales and        earnings.***

***Business        failures, or the loss, of large customers could result in a decrease in our        future sales and earnings.***

*** ***

***Failure        to anticipate or respond to changes in consumer tastes and fashions in a        timely        manner could result in a decrease in our sales and        earnings***

***Future        environmental costs could reduce our earnings.***

***Extended        business interruption at our manufacturing facilities could result in reduced        sales.***

**Item        1B.**

----

**Item        2.**

|                                             |   |                                                      |   | **Approximate**                    |   | **Owned**  |
|--------------------------------------------------|--------|-----------------------------------------------------------|--------|------------------------------------|--------|------------|
|                                             |   |                                                      |   | **Facility                  Size** |   | **or**     |
| **Location**                                     |   | **Primary                  Use**                          |   | **(Square                  Feet)** |   | **Leased** |
| Stanleytown,                  VA                 |   | Manufacturing                  and Corporate Headquarters |   | 1,721,000                          |   | Owned      |
| Martinsville,                  VA                |   | Manufacturing                                             |   | 300,000                            |   | Owned      |
| Lexington,                  NC                   |   | Manufacturing                                             |   | 635,000                            |   | Owned      |
| Robbinsville,                  NC                |   | Manufacturing                                             |   | 562,100                            |   | Owned      |
| High                  Point,                  NC |   | Showroom                                                  |   | 63,000                             |   | Leased     |
| Martinsville,                  VA                |   | Warehouse                                                 |   | 288,000                            |   | Leased     |

**Item        3.**

**Item        4.**

----

**Executive        Officers of the Registrant**

| Name                                                       |   | Age      |   | Position                                                                            |
|------------------------------------------------------------|--------|----------|--------|-------------------------------------------------------------------------------------|
| Jeffrey                  R.                  Scheffer      |   | 51       |   | Chairman,                  President and Chief ExecutiveOfficer                     |
|  Douglas                  I.                  Payne   |   |  48 |   |  Executive                  Vice President - Finance and                       |
|                                                       |   |     |   | Administration                  and Secretary                                       |
|  R.                  Glenn                  Prillaman |   |  35 |   |  Senior                  Vice                  President - Marketing and Sales |
|                                                       |   |     |   |                                                                                |
| Ricky                  D.                  Lovorn          |   | 50       |   | Senior                  Vice                  President - Manufacturing             |
|  Dennis                  K.                  Taggart  |   |  49 |   |  Vice                  President - Human Resources                             |
|                                                       |   |     |   |                                                                                |

**Jeffrey        R.        Scheffer**

**Douglas        I.        Payne **

**R.        Glenn        Prillaman**

**Ricky        D.        Lovorn **

**Dennis        K.        Taggart **

----

**PART        II**

**Item        5.**

**STLY.        **

|                                                                          |   | **2006** |      | 2005    |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|---------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |     |      |    |   | **Dividends** |   |   |   |   |   | Dividends |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **High** |      | **Low** |   | **Paid** |   | High |   | Low |   | Paid |   |
| **First                          Quarter**                                                                                                                                                                                                                                                                                                                                                                                                       |   | **$**    | **29.96** |    | **$**  | **22.77** |   | **$** | **.08** |   | $ | 26.85 |   | $ | 21.61 |   | $ | .06 |   |
| **Second                          Quarter**                                                                                                                                                                                                                                                                                                                                                                                                      |   |     | **29.58** |    |   | **20.00** |   |   | **.08** |   |   | 24.49 |   |   | 19.14 |   |   | .06 |   |
| **Third                          Quarter**                                                                                                                                                                                                                                                                                                                                                                                                       |   |     | **25.57** |    |   | **20.54** |   |   | **.08** |   |   | 30.89 |   |   | 23.16 |   |   | .06 |   |
| **Fourth                          Quarter**                                                                                                                                                                                                                                                                                                                                                                                                      |   |     | **24.06** |    |   | **19.11** |   |   | **.08** |   |   | 26.59 |   |   | 19.31 |   |   | .06 |   |

**Performance        Graph**

| (1)   | The                graph                shows the cumulative total return on $100 invested at the market                close on                December 31, 2001, the last trading day in 2001, in Common Stock                or the                specified index, including reinvestments of                dividends. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | SIC                Code 2511                Wood Household Furniture Index as prepared by Hemscott, Inc. At January                19, 2007, Hemscott reported that the Wood Household Furniture Index                consisted of Bassett Furniture Industries, Inc., Ethan Allen Interiors                Inc. and Stanley Furniture Company. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)   | Nasdaq                Non-Financial Stock Index prepared for The Nasdaq Stock Market by                the                Center for Research in Securities Prices at the University of                Chicago. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)   | Peer                Group                Index as prepared by Hemscott, Inc. consists of SIC Code 2511 Wood                Household Furniture Index (detailed above) and SIC code 2512 Wood                Household Furniture, Upholstered. At January 19, 2007, Hemscott reported                that the Wood Household Furniture, Upholstered Index consisted of                Flexsteel Industries, Inc., Furniture Brands International, Hooker                Furniture Corp., La-Z-Boy, Inc. and Natuzzi, SPA ADS. We have selected                the                Peer Group Index because the SIC Code 2511 Woodhousehold Furniture                Index,                which we have previously used, now only includes two companies other                than                Stanley Furniture Company. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Issuer        Purchases of Equity Securities**

| Period |   |   Total                    number                    of Shares purchased |   | Averageprice                    paid                    Per                    share  |   | Total                    number                    ofshares                    purchasedas                    part of                    publiclyannounced                    plansor                    programs   |   | Maximum                    number (or approximate dollar value) of shares that may                    yet be                    purchasedunder                    the                    plans orprograms                    (a) |   |
|--------|--------|------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|                                                    |   |   |        |   |   |      |   |   |        |
|---------------------------------------------------------|--------|--------|-------------|--------|--------|-----------|--------|--------|-------------|
| October 1                    to November 4, 2006   |   |   | 185,900     |   | $      | 22.08     |   |   | 185,900     |   | $ | 33,788,874 |   |
| November 5                    to December 2, 2006  |   |   | 53,300      |   |   | 23.32     |   |   | 53,300      |   |   | 32,599,168 |   |
| December 3                    to December 31, 2006 |   |   |        |   |   |      |   |   |        |   |   | 32,599,168 |   |
|                                                    |   |   |        |   |   |      |   |   |        |   |   |   |   |
| **Total**                                               |   |   | **239,200** |   | **$**  | **22.13** |   |   | **239,200** |   |   |   |   |

| (a)   | On                July 17,                2006, we announced that our Board of Directors increased our stock                repurchase authorization to $50 million. Consequently, we may purchase                our                common stock, from time to time, either directly or through agents,                in the                open market, through negotiated purchases or otherwise, at prices                and on                terms satisfactory to us. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Equity        Compensation Plan Information**

|                                                                          |   | Number                        of                        Shares to                        be issued                        upon exercise                        of                        outstanding                        options, warrants                        and                        rights  |        | Weighted                        average exercise                        price of                        outstanding options,                        warrants And                        rights   |   | Number                        of                        shares remaining                        availablefor                        future                        issuance under                        equity                        compensation                        plans |   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity                        compensation plans                              |   |                                                                                                                                                                                                                                                                                                         |        |                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                            |   |
| approved                        by stockholders                               |   |                                                                                                                                                                                                                                                                                                         | 725,403     |                                                                                                                                                                                                       |   | $17.38                                                                                                                                                                                                                                                                          |   |   | 187,001 |   |
|                                                                          |   |                                                                                                                                                                                                                                                                                                         |        |                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                            |   |   |   |   |
| Equity                        compensation plans                              |   |                                                                                                                                                                                                                                                                                                         |        |                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                            |   |   |   |   |
| not                        approved by                        stockholders(1) |   |                                                                                                                                                                                                                                                                                                         | 200,000     |                                                                                                                                                                                                       |   |  13.94                                                                                                                                                                                                                                                                     |   |   |   |   |
| **Total**                                                                     |   |                                                                                                                                                                                                                                                                                                         | **925,403** |                                                                                                                                                                                                       |   | **$16.64**                                                                                                                                                                                                                                                                      |   |   | **187,001** |   |
|                                                                          |   |                                                                                                                                                                                                                                                                                                         |        |                                                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                            |   |   |   |   |

----

**Item        6.**

|                                                                                                               |   | Years                  Ended                  December 31,   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                                                               |   | **2006 **                                                    |   |  2005 |   |  2004 |   |  2003 |   |  2002 |   |
|                                                                                                               |   | (in                  thousands, except per share data)       |   |
| **Income                  Statement Data:**                                                                        |   |                                                              |   |   |   |   |   |   |   |   |   |
| Net                  sales                                                                                         | **$**  | **307,547**                                                       |   | $ | 333,646 |   | $ | 305,815 |   | $ | 265,263 |   | $ | 243,547 |   |
| Cost                  of sales                                                                                     |   | **242,679**                                                       |   |   | 251,937 |   |   | 230,174 |   |   | 203,410 |   |   | 184,967 |   |
| Restructuring                  and related charges(1)                                                              |   |                                                              |   |   |   |   |   |   |   |   |   |   |   | 3,548 |   |
| Gross                  profit                                                                                      |   | **64,868**                                                        |   |   | 81,709 |   |   | 75,641 |   |   | 61,853 |   |   | 55,032 |   |
| Selling,                  general and administrative                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| expenses                                                                                                           |   | **42,139**                                                        |   |   | 44,267 |   |   | 40,953 |   |   | 35,637 |   |   | 32,671 |   |
| Operating                  income                                                                             |   | **22,729**                                                        |   |   | 37,442 |   |   | 34,688 |   |   | 26,216 |   |   | 22,361 |   |
| Income                  from                  Continued Dumping and  Subsidy                  Offset Act, net |   | **4,419**                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  income,                  net                                                                |   | **297**                                                           |   |   | 288 |   |   | 188 |   |   | 203 |   |   | 219 |   |
| Interest                  expense, net                                                                             |   | **1,710**                                                         |   |   | 1,825 |   |   | 2,343 |   |   | 2,748 |   |   | 3,090 |   |
| Income                  before                  income taxes                                                       |   | **25,735**                                                        |   |   | 35,905 |   |   | 32,533 |   |   | 23,671 |   |   | 19,490 |   |
| Income                  taxes                                                                                      |   | **8,954**                                                         |   |   | 12,674 |   |   | 11,744 |   |   | 8,521 |   |   | 6,919 |   |
| Net                  income                                                                                        | **$**  | **16,781**                                                        |   | $ | 23,231 |   | $ | 20,789 |   | $ | 15,150 |   | $ | 12,571 |   |
|                                                                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                  Earnings Per Share:(2)**                                                                  |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                        | **$**  | **1.44**                                                          |   | $ | 1.82 |   | $ | 1.65 |   | $ | 1.20 |   | $ | .95 |   |
| Weighted                  average shares                                                                           |   | **11,649**                                                        |   |   | 12,766 |   |   | 12,574 |   |   | 12,651 |   |   | 13,218 |   |
|                                                                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  Earnings Per Share:(2)**                                                                |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                        | **$**  | **1.41**                                                          |   | $ | 1.77 |   | $ | 1.59 |   | $ | 1.17 |   | $ | .93 |   |
| Weighted                  average shares                                                                           |   | **11,924**                                                        |   |   | 13,154 |   |   | 13,099 |   |   | 12,923 |   |   | 13,564 |   |
|                                                                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  dividends paid per share (2) (3)                                                             | **$**  | **.32**                                                           |   | $ | .24 |   | $ | .20 |   | $ | .10 |   |   |   |   |
|                                                                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                  Sheet and Other Data:**                                                                 |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                                               | **$**  | **6,269**                                                         |   | $ | 12,556 |   | $ | 7,632 |   | $ | 2,509 |   | $ | 9,227 |   |
| Inventories                                                                                                        |   | **59,364**                                                        |   |   | 69,961 |   |   | 73,658 |   |   | 54,638 |   |   | 54,158 |   |
| Working                  capital                                                                                   |   | **72,036**                                                        |   |   | 91,200 |   |   | 88,567 |   |   | 64,455 |   |   | 62,944 |   |
| Total                  assets                                                                                      |   | **162,678**                                                       |   |   | 190,488 |   |   | 188,888 |   |   | 164,203 |   |   | 172,485 |   |
| Long-term                  debt including                                                                          |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| current                  maturities                                                                                |   | **8,571**                                                         |   |   | 11,428 |   |   | 15,685 |   |   | 22,700 |   |   | 29,614 |   |
| Stockholders’                  equity                                                                        |   | **109,647**                                                       |   |   | 132,749 |   |   | 127,265 |   |   | 102,558 |   |   | 99,687 |   |
| Capital                  expenditures                                                                              | **$**  | **4,196**                                                         |   | $ | 4,986 |   | $ | 1,718 |   | $ | 1,243 |   | $ | 1,037 |   |
| Stock                  repurchases:                                                                                |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                  (2)                                                                                        |   | **1,423**                                                         |   |   | 1,057 |   |   |   |   |   | 1,132 |   |   | 317 |   |
| Total                  cost                                                                                        | **$**  | **33,576**                                                        |   | $ | 22,993 |   |   |   |   | $ | 14,788 |   | $ | 3,066 |   |

| (1) | We                  recorded                  restructuring and related charges in 2002 of $3.5 million (or $.17                  per                  diluted share) for the closure of a manufacturing                  facility. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Amounts                  have                  been retroactively adjusted to reflect the two-for-one stock split,                  distributed in the form of a stock dividend, on June 6,                  2005. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | No dividends were paid                on                common stock prior to 2003. |
|-----|-------------------------------------------------------------------------------------|

----

**Item        7.**

**Overview**

**Results        of        Operations**

|                                                                                                                          |   |  For                  the                  Years Ended |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                                                                                                          |   |  December                  31,                         |   |
|                                                                                                                          |   | **2006**                                                    |   | 2005 |   | 2004 |   |
| Net                  sales                                                                                                    |   | **100.0**                                                   | **%**  |   | 100.0 | % |   | 100.0 | % |
| Cost                  of                  sales                                                                               |   | **78.9**                                                    |   |   | 75.5 |   |   | 75.3 |   |
| Gross                  profit                                                                                                 |   | **21.1**                                                    |   |   | 24.5 |   |   | 24.7 |   |
| Selling,                  general and administrative expenses                                                                 |   | **13.7**                                                    |   |   | 13.3 |   |   | 13.4 |   |
| Operating                  income                                                                                             |   | **7.4**                                                     |   |   | 11.2 |   |   | 11.3 |   |
| Income                  from                  Continued Dumping and Subsidy Offset                  Act,                  net |   | **1.4**                                                     |   |   |   |   |   |   |   |
| Other                  income,                  net                                                                           |   | **.1**                                                      |   |   | .1 |   |   | .1 |   |
| Interest                  income                                                                                              |   | **.1**                                                      |   |   | .1 |   |   |   |   |
| Interest                  expense                                                                                             |   | **.6**                                                      |   |   | .6 |   |   | .8 |   |
| Income                  before                  income taxes                                                                  |   | **8.4**                                                     |   |   | 10.8 |   |   | 10.6 |   |
| Income                  taxes                                                                                                 |   | **2.9**                                                     |   |   | 3.8 |   |   | 3.8 |   |
| Net                  income                                                                                                   |   | **5.5**                                                     | **%**  |   | 7.0 | % |   | 6.8 | % |

----

----

**Financial        Condition, Liquidity and Capital Resources**

----

|                                                            |   |   Payment                  due                  or committment expiration |
|-----------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|
|                                                            |   |                                                                                |   | Less                  Than |   |   |   | Over |   |
|                                                            |   | **Total**                                                                           |   | 1                  year |   | 1-3                  years |   | 3-5                  years |   | 5                  years |   |
| Contractual                  cash obligations:                  |   |                                                                                |   |   |   |   |   |   |   |   |   |
| Long-term                  debt                                 |   | **$**                                                                               | **8,571** |   | $ | 2,857 |   | $ | 2,857 |   | $ | 2,857 |   |   |   |   |
| Postretirement                  benefits other than pensions(1) |   |                                                                                | **2,520** |   |   | 251 |   |   | 505 |   |   | 509 |   | $ | 1,255 |   |
| Fixed                  interest payment on long-term debt       |   |                                                                                | **1,345** |   |   | 552 |   |   | 595 |   |   | 198 |   |   |   |   |
| Operating                  leases                               |   |                                                                                | **1,860** |   |   | 773 |   |   | 1,087 |   |   |   |   |   |   |   |
| Total                  contractual cash obligations             |   | **$**                                                                               | **14,296** |   | $ | 4,433 |   | $ | 5,044 |   | $ | 3,564 |   | $ | 1,255 |   |
| Other                  commercial commitments:                  |   |                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Letters                  of                  credit             |   | **$**                                                                               | **3,523** |   | $ | 3,523 |   |   |   |   |   |   |   |   |   |   |

**Pension        Plan Termination**

**Continued        Dumping and Subsidy Offset Act**
**(CDSOA)**

----

**Critical        Accounting Policies**

**Allowance        for doubtful accounts **

**Inventory        valuation**

**Long-lived        assets**

**Tax        contingencies**

**Pension        costs**

**Self-Insurance**

**Tariffs        imposed on wooden bedroom furniture imported from China**

----

**New        Accounting Standards**

**Item        7A.**

**Item        8.**

**Item        9.**

**Item        9A.**

**Conclusion        Regarding the Effectiveness of Disclosure Controls and        Procedures**

----

**Management’s        Report on Internal Control Over Financial Reporting**

*Internal        Control-Integrated Framework*
*Internal        Control - Integrated Framework*

**Changes        in        Internal Controls over Financial Reporting**

**Item        9B.**

**PART        III**

**Item        10.**

**Item        11.**

**Item        12.**

----

**Item        13.**

**Item        14.**

**PART        IV**

**Item        15.**

| (1)    | The                  following consolidated financial statements are included in this                  report on                  Form 10-K:                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Report                  of                  Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Consolidated                  Balance Sheets as of December 31, 2006 and 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Consolidated                  Statements of Income for each of the three years in the period                  ended                  December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Consolidated                  Statements of Changes in Stockholders’ Equity for each of the three years                  in the period ended December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Consolidated                  Statements of Cash Flow for each of the three years in the period                  ended                  December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Notes                  to                  Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (2)    | Financial                  Statement Schedule:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Schedule                  II -                  Valuation and Qualifying Accounts for each of the three years in                  the                  period ended December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (b)    | Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1    | The                  Restated                  Certificate of Incorporation of the Registrant (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 10-Q (Commission File No. 0-14938) for the quarter ended                  September 27, 2003).                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1    | The                  Certificate of Incorporation and By-laws of the Registrant as currently                  in                  effect (incorporated by reference to Exhibits 3.1 and 3.2                  hereto).                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.2    | Amended                  and                  Restated Note Purchase and Private Shelf Agreement dated as of                  January 26,                  2007, among the Registrant, The Prudential Insurance Company of                  America,                  the other purchasers named therein and the affiliates of Prudential                  who                  became purchasers as defined therein (incorporated by reference                  to Exhibit                  4.1 to the Registrant’s Form 8-K (Commission File No 0-14938)                  filed February 1, 2007. |

| 4.3 | Certain                  instruments with respect to long-term debt of the Registrant and                  it’s                  consolidated subsidiaries are not filed herewith pursuant to Item                  601(b)(4)(iii) of Regulation S-K since the total amount of securities                  authorized under each such instrument does not exceed 10% of the                  total                  assets of the Registrant and its subsidiaries on a consolidated                  basis. The                  Registrant agrees to furnish a copy of any such instrument to the                  Securities and Exchange Commission upon                  request. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.1   | Supplemental                  Retirement Plan of Stanley Furniture Company, Inc., as restated                  effective                  January 1, 1993 (incorporated by reference to Exhibit 10.8 to the                  Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended                  December 31, 1993).(2)                                                                                                         |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.2   | First                  Amendment to Supplemental Retirement Plan of Stanley Furniture                  Company,                  Inc., effective December 31, 1995, adopted December 15, 1995 (incorporated                  by reference to Exhibit 10.7 to the Registrant’s Form 10-K (Commission                  File No. 0-14938) for the year ended December 31,                  1995).(2)                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.3   | Stanley                  Interiors Corporation Deferred Compensation Capital Enhancement                  Plan,                  effective January 1, 1986, as amended and restated effective August                  1,                  1987 (incorporated by reference to Exhibit 10.12 to the Registrant’s                  Registration Statement on Form S-1 (Commission File No. 0-14938),                  No.                  33-7300).(2) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.4   | 1994                  Stock                  Option Plan (incorporated by reference to Exhibit 10.18 to the                  Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended                  December 31, 1994).(2)                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.5   | Employment                  Agreement dated as of June 1, 1996, between Douglas I. Payne and                  the                  Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s                  Form 10-Q (Commission File No. 0-14938) for the quarter ended June                  30,                  1996).(2)                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.6   | Amendment                  No.                  1, dated as of October 1, 1996, to the Employment Agreement, dated                  as of                  January 1, 1991, between the Registrant and Albert L. Prillaman                  (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q                  (Commission File No. 0-14938) for the quarter ended September 29,                  1996).(2)                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.7   | 2000                  Incentive Compensation Plan (incorporated by reference to Exhibit                  A to the                  Registrant’s Proxy Statement (Commission File No. 0-14938) for the special                  meeting of stockholders held on August 24, 2000).(2)                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.8   | Amendment                  No.                  1 to The Stanley Furniture Company, Inc. 1994 Stock Option Plan                  dated as                  of July 1, 2000 (incorporated by reference to Exhibit 10.3 to the                  Registrant’s Form 10-Q (Commission File No. 0-14938) for the quarter ended                  September 30, 2000).(2)                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.9   | Employment                  Agreement made as of April 9, 2001 between Jeffrey R. Scheffer                  and the                  Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s                  Form 10-Q (Commission File No. 0-14938) for the quarter ended June                  30,                  2001).(2)                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.10  | Option                  Agreement, dated April 30, 2001, between the Registrant and Jeffrey                  R.                  Scheffer (incorporated by reference to Exhibit 10.1 to the Registrant’s                  Form 10-Q (Commission File No. 0-14938) for the quarter ended September                  29, 2001).(2)                                                                                                                     |

| 10.11  | Second                  Amendment to Supplemental Retirement Plan of Stanley Furniture                  Company,                  Inc. effective January 1, 2002 (incorporated by reference to Exhibit                  10.33                  to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year                  ended December 31, 2002).(2)                         |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.12  | First                  Amendment, dated March 1, 2003, to the Employment Agreement, dated                  April                  9, 2001, between the Registrant and Jeffrey R. Scheffer (incorporated                  by                  reference to Exhibit 10.2 to the Registrant’s Form 10-Q (Commission File                  No. 0-14938) for the quarter ended March 29, 2003).(2) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.13  | Credit                  Agreement, dated August 29, 2003, between the Registrant and SouthTrust                  Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Form                  10-Q (Commission File No. 0-14938) for the quarter ended September                  27,                  2003).                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.14  | First                  Amendment, dated April 23, 2004, to the revolving credit facility                  dated                  August 29, 2003, between the registrant and SouthTrust Bank (incorporated                  by reference to Exhibit 10.1 to the Registrant’s Form 10-Q (Commission                  File No. 0-14938) for the quarter ended June 26, 2004).                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.15  | 2005                  Incentive Compensation Award, dated as of December 15, 2004, from                  the                  Registrant to Jeffrey R. Scheffer (incorporated by reference to                  Exhibit                  10.21 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the                  year ended December 31, 2004).(2)                          |
|   |
| 10.16  | 2005                  Incentive Compensation Award, dated as of December 15, 2004, from                  the                  Registrant to Douglas I. Payne (incorporated by reference to Exhibit                  10.22                  to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year                  ended December 31, 2004). (2)                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.17  | Form                  of Stock                  Option Award under 2000 Incentive Plan (ISO) (incorporated by reference                  to                  Exhibit 10.23 to the Registrant’s Form 10-K (Commission File No. 0-14938)                  for the year ended December 31, 2004). (2)                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.18  | Form                  of Stock                  Option Award under 2000 Incentive Plan (ISO/NSO) (incorporated                  by                  reference to Exhibit 10.24 to the Registrant’s Form 10-K (Commission File                  No. 0-14938) for the year ended December 31, 2004). (2)                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.19  | Form                  of Stock                  Option Award under 2000 Incentive Plan (Directors) (incorporated                  by                  reference to Exhibit 10.25 to the Registrant’s Form 10-K (Commission File                  No. 0-14938) for the year ended December 31, 2004). (2)                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.20  | Second                  Amendment dated June 15, 2005, 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 June 16, 2005).                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.21  | Non-Competition                  Agreement, dated as of December 14, 2005, between the Registrant                  and                  Albert L. Prillaman (incorporated by reference to Exhibit 10.1                  to the                  Registrant’s Form 8-K (Commission File No. 0-14938) filed on December 19,                  2005). (2)                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.22  | Third                  Amendment, dated July 14, 2006, 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 July 18, 2006).                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 21     | List                  of                  Subsidiaries(1)                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 23     | Consent                  of                  PricewaterhouseCoopers LLP(1)                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
| 31.1   | Certification                  by Jeffrey R. Scheffer, 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                  by Jeffrey R. Scheffer, 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                  by 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                                                                                                                                                                                                                                                                                                                                                                     |
| (2)    | Management                  contract or compensatory plan                                                                                                                                                                                                                                                                                                                                           |

----

**SIGNATURES**

|                                               |   | STANLEY                  FURNITURE COMPANY, INC.                        |
|----------------------------------------------------|--------|-------------------------------------------------------------------------|
|                                               |   |                                                                    |
| February                  5,                  2007 |   | By: /s/Jeffrey                  R.                  Scheffer       |
|                                               |   | Jeffrey                  R.                  Scheffer                   |
|                                               |   | Chairman                                                                |
|                                               |   | President                  and                  Chief Executive Officer |

| Signature                                                                                              |   | Title                                                                                                                                                                                |   | Date                                               |
|--------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|
|                                                                                                   |   |                                                                                                                                                                                 |   |                                               |
| /s/Jeffrey                  R. Scheffer(Jeffrey                  R.                  Scheffer)         |   | Chairman                  and                  President and Chief  Executive                  Officer(Principal                  Executive Officer)                            |   | February                  5,                  2007 |
|                                                                                                   |   |                                                                                                                                                                                 |   |                                               |
| /s/Douglas                  I. Payne(Douglas                  I.                  Payne)               |   | Executive                  Vice President - Finance and                  Administration and Secretary                  (Principal Financial and                  Accounting Officer) |   | February                  5,                  2007 |
|                                                                                                   |   |                                                                                                                                                                                 |   |                                               |
| /s/Robert                  G. Culp, III(Robert                  G.                  Culp, III)         |   | Director                                                                                                                                                                             |   | February                  5,                  2007 |
|                                                                                                   |   |                                                                                                                                                                                 |   |                                               |
| /s/Michael                  P. Haley(Michael                  P.                  Haley)               |   | Director                                                                                                                                                                             |   | February                  5,                  2007 |
|                                                                                                   |   |                                                                                                                                                                                 |   |                                               |
| /s/Thomas                  L. Millner(Thomas                  L.                  Millner)             |   | Director                                                                                                                                                                             |   | February                  5,                  2007 |
|                                                                                                   |   |                                                                                                                                                                                 |   |                                               |
| /s/T.                  Scott McIlhenny, Jr.(T.                  Scott                  McIlhenny, Jr.) |   | Director                                                                                                                                                                             |   | February                  5,                  2007 |
|                                                                                                   |   |                                                                                                                                                                                 |   |                                               |
| /s/Albert                  L. Prillaman(Albert                  L.                  Prillaman)         |   | Director                                                                                                                                                                             |   | February                  5,                  2007 |

----

| Consolidated                  Financial Statements                                                                 | Page   |
|--------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                               |   |
| Report                  of                  Independent Registered Public Accounting Firm                          | F2     |
|                                                                                                               |   |
| Consolidated                  Balance Sheets as of December 31, 2006 and 2005                                      | F4     |
|                                                                                                               |   |
| Consolidated                  Statements of Income for each of the three years in the                  period      |   |
| ended                  December 31, 2006                                                                      | F5     |
|                                                                                                               |   |
| Consolidated                  Statements of Changes in Stockholders’ Equity for each of                  the |   |
| three                  years                  in the period ended December 31, 2006                                | F6     |
|                                                                                                               |   |
| Consolidated                  Statements of Cash Flows for each of the three years in the                          |   |
| period                  ended                  December 31, 2006                                                   | F7     |
|                                                                                                               |   |
| Notes                  to                  Consolidated Financial Statements                                       | F8     |
|                                                                                                               |   |
|                                                                                                               |   |
| Financial                  Statement Schedule                                                                      |   |
|                                                                                                               |   |
| Schedule                  II -                  Valuation and Qualifying Accounts for each of the three            |   |
| years                  in the                  period ended December 31, 2006                                      | S1     |

----

**Report        of        Independent Registered Public Accounting Firm**

*Internal        Control - Integrated Framework*
*Internal        Control - Integrated Framework*

----

**STANLEY        FURNITURE COMPANY, INC.**

|                                                                                          |   | December 31,  |   |
|-----------------------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                                          |   |  **2006**          |   | 2005 |   |
| **ASSETS**                                                                                    |   |               |   |   |   |
| Current                  assets:                                                              |   |               |   |   |   |
| Cash                                                                                          | **$**  | **6,269**               |   | $ | 12,556 |   |
| Accounts                  receivable, less allowances of $1,554 and $1,566                    |   | **32,260**              |   |   | 36,957 |   |
| Inventories:                                                                                  |   |                    |   |   |   |   |
|  Finished                  goods                                                         |   | **45,172**              |   |   | 52,609 |   |
|  Work-in-process                                                                         |   | **5,183**               |   |   | 7,609 |   |
|  Raw                  materials                                                          |   | **9,009**               |   |   | 9,743 |   |
| Total                  inventories                                                            |   | **59,364**              |   |   | 69,961 |   |
|                                                                                          |   |                    |   |   |   |   |
| Prepaid                  expenses and other current assets                                    |   | **2,085**               |   |   | 1,435 |   |
| Deferred                  income taxes                                                        |   | **3,928**               |   |   | 2,462 |   |
| Total                  current                  assets                                        |   | **103,906**             |   |   | 123,371 |   |
|                                                                                          |   |                    |   |   |   |   |
| Property,                  plant and equipment, net                                           |   | **49,159**              |   |   | 50,744 |   |
| Goodwill                                                                                      |   | **9,072**               |   |   | 9,072 |   |
| Other                  assets                                                                 |   | **541**                 |   |   | 7,301 |   |
| Total                  assets                                                                 | **$**  | **162,678**             |   | $ | 190,488 |   |
|                                                                                          |   |                    |   |   |   |   |
| **LIABILITIES**                                                                               |   |                    |   |   |   |   |
| Current                  liabilities:                                                         |   |                    |   |   |   |   |
| Current                  maturities of long-term debt                                         | **$**  | **2,857**               |   | $ | 2,857 |   |
| Accounts                  payable                                                             |   | **17,789**              |   |   | 16,405 |   |
| Accrued                  salaries, wages and benefits                                         |   | **9,868**               |   |   | 11,144 |   |
| Other                  accrued                  expenses                                      |   | **1,356**               |   |   | 1,765 |   |
|  Total                  current liabilities                                              |   | **31,870**              |   |   | 32,171 |   |
|                                                                                          |   |                    |   |   |   |   |
| Long-term                  debt, exclusive of current maturities                              |   | **5,714**               |   |   | 8,571 |   |
| Deferred                  income taxes                                                        |   | **7,422**               |   |   | 10,164 |   |
| Other                  long-term liabilities                                                  |   | **8,025**               |   |   | 6,833 |   |
| Total                  liabilities                                                            |   | **53,031**              |   |   | 57,739 |   |
|                                                                                          |   |                    |   |   |   |   |
| Commitments                  and Contingencies                                                |   |                    |   |   |   |   |
|                                                                                          |   |                    |   |   |   |   |
| **STOCKHOLDERS’                  EQUITY**                                               |   |                    |   |   |   |   |
| Common                  stock,                  $.02 par value, 25,000,000 shares authorized, |   |                    |   |   |   |   |
| 10,928,610                  and 12,252,000 shares issued and outstanding                      |   | **219**                 |   |   | 245 |   |
| Capital                  in                  excess of par value                              |   | **59**                  |   |   |   |   |
| Retained                  earnings                                                            |   | **114,189**             |   |   | 132,682 |   |
| Accumulated                  other comprehensive loss                                         |   | **(4,820**              | **)**  |   | (178 | ) |
| Total                  stockholders’ equity                                             |   | **109,647**             |   |   | 132,749 |   |
| Total                  liabilities and stockholders’ equity                             | **$**  | **162,678**             |   | $ | 190,488 |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

|                                                                                                                            |   | December                    31, |        |
|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                                                                                            |   | **2006**                        |        | 2005 |   | 2004 |   |
| Net                    sales                                                                                                    |   | **$**                           | **307,547** |   | $ | 333,646 |   | $ | 305,815 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Cost                    of                    sales                                                                             |   |                            | **242,679** |   |   | 251,937 |   |   | 230,174 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Gross                    profit                                                                                                 |   |                            | **64,868**  |   |   | 81,709 |   |   | 75,641 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Selling,                    general and administrative expenses                                                                 |   |                            | **42,139**  |   |   | 44,267 |   |   | 40,953 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Operating                    Income                                                                                             |   |                            | **22,729**  |   |   | 37,442 |   |   | 34,688 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Income                    from                    Continued Dumping and Subsidy                       Offset Act, net |   |                            | **4,419**   |   |   |   |   |   |   |   |
| Other                    income,                    net                                                                         |   |                            | **297**     |   |   | 288 |   |   | 188 |   |
| Interest                    income                                                                                              |   |                            | **383**     |   |   | 358 |   |   | 43 |   |
| Interest                    expense                                                                                             |   |                            | **2,093**   |   |   | 2,183 |   |   | 2,386 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Income                    before                    income taxes                                                                |   |                            | **25,735**  |   |   | 35,905 |   |   | 32,533 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Income                    taxes                                                                                                 |   |                            | **8,954**   |   |   | 12,674 |   |   | 11,744 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Net                    income                                                                                                   |   | **$**                           | **16,781**  |   | $ | 23,231 |   | $ | 20,789 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Earnings                    per                    share:                                                                  |   |                            |        |   |   |   |   |   |   |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Basic                                                                                                                           |   | **$**                           | **1.44**    |   | $ | 1.82 |   | $ | 1.65 |   |
| Diluted                                                                                                                         |   | **$**                           | **1.41**    |   | $ | 1.77 |   | $ | 1.59 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Weighted                    average shares outstanding:                                                                         |   |                            |        |   |   |   |   |   |   |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Basic                                                                                                                           |   |                            | **11,649**  |   |   | 12,766 |   |   | 12,574 |   |
| Diluted                                                                                                                         |   |                            | **11,924**  |   |   | 13,154 |   |   | 13,099 |   |
|                                                                                                                            |   |                            |        |   |   |   |   |   |   |   |
| Cash                    dividends declared and paid                                                                             |   |                            |        |   |   |   |   |   |   |   |
| per                    common                    share                                                                          |   | **$**                           | **.32**     |   | $ | .24 |   | $ | .20 |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   | Accumulated  |   |   |        |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------|--------|--------|----------------------|--------|--------|-------------------------------------|--------|--------|----------------|--------|--------|---------------------|--------|--------|-------------------|--------|--------|-------------|--------|
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   | Capital                    in  |   |   | Stock     |   |   |                |   |   | Other        |   |   |        |   |
|                                                                                                                 |   |   | Common                  Stock     |   |   | Excess of  |   |   | Option                         |   |   | Retained  |   |   | Comprehensive  |   |   |              |   |
|                                                                                                                 |   |   | Shares                                           |   |   | Amount          |   |   | Par                    Value   |   |   | Loans     |   |   | Earnings       |   |   | Loss         |   |   | Total  |   |
| Balance                    at                    January 1, 2004                                                     |   |   | 12,402                                                |   | $      | 249                  |   | $      | 3,699                               |   | $      | (5             | )      | $      | 98,680              |   | $      | (65               | )      | $      | 102,558     |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Net                    income                                                                                   |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   | 20,789              |   |   |              |   |   | 20,789      |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Minimum                    pension liability, net of                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| deferred                    income tax benefit of                    $53                                        |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   | (86               | )      |   | (86         | )      |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Comprehensive                    income                                                                         |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   | 20,703      |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Exercise                    of                    stock options                                                 |   |   | 428                                                   |   |   | 8                    |   |   | 5,030                               |   |   |           |   |   |                |   |   |              |   |   | 5,038       |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Tax                    benefit on                    exercise of stock options                                  |   |   |                                                  |   |   |                 |   |   | 1,478                               |   |   |           |   |   |                |   |   |              |   |   | 1,478       |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Stock                    option                    loan payments                                                |   |   |                                                  |   |   |                 |   |   |                                |   |   | 5              |   |   |                |   |   |              |   |   | 5           |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Dividends                    paid, $0.20 per share                                                              |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   | (2,517              | )      |   |              |   |   | (2,517      | )      |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Balance                    at                    December 31, 2004                                              |   |   | 12,830                                                |   |   | 257                  |   |   | 10,207                              |   |   |           |   |   | 116,952             |   |   | (151              | )      |   | 127,265     |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
|  Net                    income                                                                             |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   | 23,231              |   |   |              |   |   | 23,231      |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Minimum                    pension liability, net of                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
|   deferred                    income tax                    benefit of $17                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   | (27               | )      |   | (27         | )      |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Comprehensive                    income                                                                              |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   | 23,204      |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Exercise                    of                    stock options                                                 |   |   | 469                                                   |   |   | 9                    |   |   | 6,353                               |   |   |           |   |   |                |   |   |              |   |   | 6,362       |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
|                        Stock awards                                                              |   |   | 10                                                    |   |   |                 |   |   | 244                                 |   |   |           |   |   |                |   |   |              |   |   | 244         |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
|                        Tax benefit on exercise of stock options                                  |   |   |                                                  |   |   |                 |   |   | 1,748                               |   |   |           |   |   |                |   |   |              |   |   | 1,748       |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Purchase                    and                    retirement of stock                                          |   |   | (1,057                                                | )      |   | (21                  | )      |   | (18,552                             | )      |   |           |   |   | (4,420              | )      |   |              |   |   | (22,993     | )      |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Dividends                    paid, $0.24 per share                                                              |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   | (3,081              | )      |   |              |   |   | (3,081      | )      |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| Balance                    at                    December 31, 2005                                                   |   |   | 12,252                                                |   |   | 245                  |   |   |                                |   |   |           |   |   | 132,682             |   |   | (178              | )      |   | 132,749     |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Net                    income**                                                                               |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   | **16,781**          |   |   |              |   |   | **16,781**  |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Minimum                    pension liability, net of deferred income tax benefit****of                    $2,361** |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   | **(3,812**        | **)**  |   | **(3,812**  | **)**  |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Comprehensive                    income**                                                                          |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   | **12,969**  |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Adjustment                    to initially apply SFAS No. 158, net of deferred income                    tax**     |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **                       benefit of $514**                                                            |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   | **(830**          | **)**  |   | **(830**    | **)**  |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Exercise                    of stock options**                                                                |   |   | **90**                                                |   |   | **2**                |   |   | **1,109**                           |   |   |           |   |   |                |   |   |              |   |   | **1,111**   |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Stock                    awards**                                                                             |   |   | **10**                                                |   |   |                 |   |   | **247**                             |   |   |           |   |   |                |   |   |              |   |   | **247**     |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **                       Stock-based compensation**                                              |   |   |                                                  |   |   |                 |   |   | **357**                             |   |   |           |   |   | **(30**             | **)**  |   |              |   |   | **327**     |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Tax                    benefit on exercise of stock options**                                                 |   |   |                                                  |   |   |                 |   |   | **386**                             |   |   |           |   |   |                |   |   |              |   |   | **386**     |   |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Purchase                    and retirement of stock**                                                         |   |   | **(1,423**                                            | **)**  |   | **(28**              | **)**  |   | **(2,040**                          | **)**  |   |           |   |   | **(31,508**         | **)**  |   |              |   |   | **(33,576** | **)**  |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Dividends                    paid, $0.32 per share**                                                          |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   | **(3,736**          | **)**  |   |              |   |   | **(3,736**  | **)**  |
|                                                                                                                 |   |   |                                                  |   |   |                 |   |   |                                |   |   |           |   |   |                |   |   |              |   |   |        |   |
| **Balance                    at December 31, 2006**                                                             |   |   | **10,929**                                            |   | **$**  | **219**              |   | **$**  | **59**                              |   |   |           |   | **$**  | **114,189**         |   | **$**  | **(4,820**        | **)**  | **$**  | **109,647** |   |

----

**STANLEY        FURNITURE        COMPANY, INC**

|                                                                                   |   | For                    the Years                    Ended |         |
|----------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------------|
|                                                                                   |   | December                    31,                      |         |
|                                                                                   |   | **2006**                                                  |         | 2005 |   | 2004 |   |
| Cash                    flows                    from operating activities:            |   |                                                      |         |   |   |   |   |
| Cash                    received from                    customers                     |   | **$**                                                     | **316,145**  |   | $ | 333,233 |   | $ | 300,429 |   |
| Cash                    paid to suppliers and                    employees             |   |                                                      | **(268,787** | **)** |   | (287,559 | ) |   | (278,509 | ) |
| Interest                    paid, net                                                  |   |                                                      | **(1,651**   | **)** |   | (1,792 | ) |   | (2,387 | ) |
| Income                    taxes paid                                                   |   |                                                      | **(10,383**  | **)** |   | (11,080 | ) |   | (9,061 | ) |
| Net                    cash provided by operating                    activities        |   |                                                      | **35,324**   |   |   | 32,802 |   |   | 10,472 |   |
|                                                                                   |   |                                                      |         |   |   |   |   |   |   |   |
| Cash                    flows                    from investing activities:            |   |                                                      |         |   |   |   |   |   |   |   |
| Capital                    expenditures                                                |   |                                                      | **(4,196**   | **)** |   | (4,986 | ) |   | (1,718 | ) |
| Other,                    net                                                          |   |                                                      |         |   |   | (33 | ) |   | (135 | ) |
| Net                    cash used by investing                    activities            |   |                                                      | **(4,196**   | **)** |   | (5,019 | ) |   | (1,853 | ) |
|                                                                                   |   |                                                      |         |   |   |   |   |   |   |   |
| Cash                    flows                    from financing activities:            |   |                                                      |         |   |   |   |   |   |   |   |
| Purchase                    and retirement of common                    stock          |   |                                                      | **(33,576**  | **)** |   | (22,993 | ) |   |   |   |
| Repayment                    of senior notes                                           |   |                                                      | **(2,857**   | **)** |   | (4,257 | ) |   | (7,015 | ) |
| Dividends                    paid                                                      |   |                                                      | **(3,736**   | **)** |   | (3,081 | ) |   | (2,517 | ) |
| Proceeds                    from exercise of stock                    options          |   |                                                      | **1,111**    |   |   | 6,362 |   |   | 5,043 |   |
| Tax                    benefit                    from exercise of stock options  |   |                                                      | **402**      |   |   |   |   |   |   |   |
| Proceeds                    from insurance policy                    loans             |   |                                                      | **1,241**    |   |   | 1,110 |   |   | 993 |   |
| Net                    cash used by financing                    activities            |   |                                                      | **(37,415**  | **)** |   | (22,859 | ) |   | (3,496 | ) |
|                                                                                   |   |                                                      |         |   |   |   |   |   |   |   |
| Net                    increase                    (decrease) in cash                  |   |                                                      | **(6,287**   | **)** |   | 4,924 |   |   | 5,123 |   |
| Cash                    at                    beginning of year                        |   |                                                      | **12,556**   |   |   | 7,632 |   |   | 2,509 |   |
|                                                                                   |   |                                                      |         |   |   |   |   |   |   |   |
| Cash                    at end of year                                                 |   | **$**                                                     | **6,269**    |   | $ | 12,556 |   | $ | 7,632 |   |

| Net                  income                                                                      |   | **$**  | **16,781** |   | $      | 23,231 |   | $      | 20,789  |   |
|--------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|--------|--------|---------|--------|
| Adjustments                  to reconcile net income to net cash                                 |   |   |       |   |   |   |   |   |    |   |
| provided                  by operating                  activities:                              |   |   |       |   |   |   |   |   |    |   |
| Depreciation                                                                                     |   |   | **5,759**  |   |   | 5,582  |   |   | 5,524   |   |
| Amortization                                                                                     |   |   | **78**     |   |   | 88     |   |   | 98      |   |
| Deferred                  income taxes                                                           |   |   | **(1,331** | **)**  |   | (609   | )      |   | (1,324  | )      |
|                        Stock-based compensation                    |   |   | **327**    |   |   |   |   |   |    |   |
|                        Tax benefit from exercise of stock options  |   |   | **(402**   | **)**  |   |   |   |   |    |   |
| Other,                  net                                                                      |   |   | **23**     |   |   | 2      |   |   | (3      | )      |
| Changes                  in assets and                  liabilities:                             |   |   |       |   |   |   |   |   |    |   |
|  Accounts                  receivable                                                       |   |   | **4,697**  |   |   | (921   | )      |   | (5,916  | )      |
|  Inventories                                                                                |   |   | **10,597** |   |   | 3,697  |   |   | (19,020 | )      |
|  Prepaid                  expenses and other current                  assets                |   |   | **(600**   | **)**  |   | (1,415 | )      |   | 1,586   |   |
|  Accounts                  payable                                                          |   |   | **1,384**  |   |   | 349    |   |   | 5,461   |   |
|  Accrued                  salaries, wages and                  benefits                     |   |   | **(1,075** | **)**  |   | 815    |   |   | 1,062   |   |
|  Other                  accrued                  expenses                                   |   |   | **22**     |   |   | 1,641  |   |   | 470     |   |
|  Other                  assets                                                              |   |   | **379**    |   |   | 248    |   |   | 66      |   |
|  Other                  long-term                  liabilities                              |   |   | **(1,315** | **)**  |   | 94     |   |   | 1,679   |   |
| Net                  cash provided by operating                  activities                      |   | **$**  | **35,324** |   | $      | 32,802 |   | $      | 10,472  |   |
|                                                                                             |   |   |       |   |   |   |   |   |    |   |
| Supplemental                  disclosure of cash flow information:                               |   |   |       |   |   |   |   |   |    |   |
| Non-cash                  financing                  activities:                                 |   |   |       |   |   |   |   |   |    |   |
| Stock                  awards                                                                    |   | **$**  | **247**    |   | $      | 244    |   |   |    |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

**Summary        of        Significant Accounting Policies**

----

**STANLEY        FURNITURE COMPANY, INC.**

**Summary        of        Significant Accounting Policies (continued)**

**Property,        Plant and Equipment**

|                                                      |   | Depreciable                 |                      |                            |   |        |   |
|-----------------------------------------------------------|--------|-----------------------------|---------------------------|---------------------------------|--------|-------------|--------|
|                                                      |   | lives                       |                      | (in                  thousands) |   |
|                                                      |   | (in                  years) |                      | **2006**                        |   | 2005        |   |
| Land                  and                  buildings      |   |                        | 20                  to 50 |                            | **$**  | **40,887**  |   | $ | 39,894 |   |
| Machinery                  and                  equipment |   |                        | 5                  to 12  |                            |   | **79,051**  |   |   | 77,693 |   |
| Office                  furniture and equipment           |   |                        | 3                  to 10  |                            |   | **1,452**   |   |   | 1,452 |   |
| Construction                  in progress            |   |                        |                      |                            |   | **2,071**   |   |   | 464 |   |
| Property,                  plant and equipment, at cost   |   |                        |                      |                            |   | **123,461** |   |   | 119,503 |   |
| Less                  accumulated depreciation            |   |                        |                      |                            |   | **74,302**  |   |   | 68,759 |   |
| Property,                  plant and equipment, net       |   |                        |                      |                            | **$**  | **49,159**  |   | $ | 50,744 |   |

**3.**
**Debt**

|                                                                               |   | (in                  thousands) |      |
|------------------------------------------------------------------------------------|--------|---------------------------------|-----------|
|                                                                               |   | **2006**                        |      | 2005 |   |
| 7.43%                  Senior                  notes due through November 18, 2007 |   | **$**                           | **1,428** |   | $ | 2,857 |   |
| 6.94%                  Senior                  notes due through May 3, 2011       |   |                            | **7,143** |   |   | 8,571 |   |
| Total                                                                              |   |                            | **8,571** |   |   | 11,428 |   |
| Less                  current                  maturities                          |   |                            | **2,857** |   |   | 2,857 |   |
| Long-term                  debt, exclusive of current maturities                   |   | **$**                           | **5,714** |   | $ | 8,571 |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

**Debt        (continued)**

**Income        Taxes**

|                            |   | **2006** |       | 2005   |   | 2004   |   |
|---------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Current:                        |   |     |       |   |   |   |   |
| Federal                         |   | **$**    | **9,440**  |   | $      | 12,198 |   | $ | 10,943 |   |
| State                           |   |     | **845**    |   |   | 1,101  |   |   | 1,005 |   |
| Total                  current  |   |     | **10,285** |   |   | 13,299 |   |   | 11,948 |   |
| Deferred:                  |   |     |       |   |   |   |   |   |   |   |
| Federal                         |   |     | **(1,158** | **)**  |   | (543   | )      |   | (177 | ) |
| State                           |   |     | **(174**   | **)**  |   | (82    | )      |   | (27 | ) |
| Total                  deferred |   |     | **(1,332** | **)**  |   | (625   | )      |   | (204 | ) |
| Income                  taxes   |   | **$**    | **8,954**  |   | $      | 12,674 |   | $ | 11,744 |   |

|                                                                |   | **2006** |     | 2005   |   | 2004   |   |
|---------------------------------------------------------------------|--------|----------|----------|--------|--------|--------|--------|
| Federal                  statutory rate                             |   |     | **35.0** | **%**  |   | 35.0   | %      |   | 35.0 | % |
| State                  tax,                  net of federal benefit |   |     | **3.0**  |   |   | 2.5    |   |   | 2.5 |   |
| State                  tax                  credits and adjustments |   |     | **(.8**  | **)**  |   | (.7    | )      |   | (1.0 | ) |
| Increase                  in                  cash surrender value  |   |     |     |   |   |   |   |   |   |   |
| of                  life                  insurance policies        |   |     | **(1.4** | **)**  |   | (.9    | )      |   | (.9 | ) |
| Deduction                  for                  qualified domestic  |   |     |     |   |   |   |   |   |   |   |
| production                  activities                              |   |     | **(.4**  | **)**  |   | (.5    | )      |   |   |   |
| Other,                  net                                         |   |     | **(.6**  | **)**  |   | (.1    | )      |   | .5 |   |
| Effective                  income tax rate                          |   |     | **34.8** | **%**  |   | 35.3   | %      |   | 36.1 | % |

|                                                             |   | **2006** |       | 2005   |   |
|------------------------------------------------------------------|--------|----------|------------|--------|--------|
| Current                  deferred tax assets (liabilities):      |   |     |       |   |   |   |   |
| Accounts                  receivable                             |   | **$**    | **594**    |   | $      | 599 |   |
| Employee                  benefits                               |   |     | **3,226**  |   |   | 1,732 |   |
| Other                  accrued                  expenses         |   |     | **108**    |   |   | 131 |   |
| Net                  current                  deferred tax asset |   | **$**    | **3,928**  |   | $      | 2,462 |   |
|                                                             |   |     |       |   |   |   |   |
| Noncurrent                  deferred tax liabilities (assets):   |   |     |       |   |   |   |   |
| Property,                  plant and equipment                   |   | **$**    | **9,334**  |   | $      | 9,937 |   |
| Employee                  benefits                               |   |     | **(1,912** | **)**  |   | 227 |   |
| Net                  noncurrent deferred tax liability           |   | **$**    | **7,422**  |   | $      | 10,164 |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

**Stockholders’        Equity**

|                                                      |   | **2006** |       | 2005   |   | 2004   |   |
|-----------------------------------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Weighted                  average shares outstanding      |   |     |       |   |   |   |   |
| for                  basic                  calculation   |   |     | **11,649** |   |   | 12,766 |   |   | 12,574 |   |
| Effect                  of                  stock options |   |     | **275**    |   |   | 388    |   |   | 525 |   |
| Weighted                  average shares outstanding      |   |     |       |   |   |   |   |   |   |   |
| for                  diluted                  calculation |   |     | **11,924** |   |   | 13,154 |   |   | 13,099 |   |

**Stock        Based        Compensation**

|                                                                                           |   | 2005  |   | 2004  |   |
|------------------------------------------------------------------------------------------------|--------|------------|--------|------------|--------|
| Net                  income as                  reported                                       |   | $          | 23,231 |       | $      | 20,789 |   |
| Deduct:                  Total                  stock-based compensation expense determined    |   |       |   |       |   |   |   |
| under                  fair                  value based method for all awards, net of related |   |       |   |       |   |   |   |
|                     tax effects                                                      |   |       | 628    |       |   | 1,801 |   |
| Pro                  forma net                  income                                         |   | $          | 22,603 |       | $      | 18,988 |   |
|                                                                                           |   |       |   |       |   |   |   |
| Earnings                  per                  share:                                          |   |       |   |       |   |   |   |
| Basic                  - as                  reported                                          |   | $          | 1.82   |       | $      | 1.65 |   |
| Basic                  - pro                  forma                                            |   | $          | 1.77   |       | $      | 1.51 |   |
|  Diluted                  - as                  reported                                  |   | $          | 1.77   |       | $      | 1.59 |   |
| Diluted                  - pro                  forma                                          |   | $          | 1.72   |       | $      | 1.47 |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

**Stock        Based        Compensation (continued)**

| Expected                  price volatility               |   |   | **34.66** | **%**  |
|----------------------------------------------------------|--------|--------|-----------|--------|
| Risk-free                  interest rate                 |   |   | **4.25**  | **%**  |
| Weighted                  average expected life in years |   |   | **5.46**  |   |
| Dividend                  yield                          |   |   | **1.36**  | **%**  |
| Forfeiture                  rate                         |   |   | **6.05**  | **%**  |

|                                                  |   | Number                  of                  shares |        | Weighted-AverageExercise                  Price |   | Weighted-Average                  Remaining Contractual Term (in                  years) |   | Aggregate                  Intrinsic Value(in                  thousands) |    |
|-------------------------------------------------------|--------|----------------------------------------------------|-------------|-------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|
| Outstanding                  at January 1, 2004       |   |                                               | 1,638,000   |                                            | $      | 12.98                                                                                    |   |                                                                      | 7.5     |   |   |   |   |
| Exercised                                             |   |                                               | (428,600    | )                                               |   | 11.76                                                                                    |   |                                                                      |    |   |   |   |   |
| Granted                                               |   |                                               | 8,000       |                                            |   | 19.50                                                                                    |   |                                                                      |    |   |   |   |   |
|                                                  |   |                                               |        |                                            |   |                                                                                     |   |                                                                      |    |   |   |   |   |
| Outstanding                  at December 31, 2004     |   |                                               | 1,217,400   |                                            |   | 13.45                                                                                    |   |                                                                      | 5.8     |   |   |   |   |
| Exercised                                             |   |                                               | (469,000    | )                                               |   | 13.57                                                                                    |   |                                                                      |    |   |   |   |   |
| Granted                                               |   |                                               | 106,728     |                                            |   | 24.09                                                                                    |   |                                                                      |    |   |   |   |   |
|                                                  |   |                                               |        |                                            |   |                                                                                     |   |                                                                      |    |   |   |   |   |
| Outstanding                  at December 31, 2005     |   |                                               | 855,128     |                                            |   | 14.71                                                                                    |   |                                                                      | 5.7     |   |   |   |   |
| **Lapsed**                                            |   |                                               | **(25,000** | **)**                                           |   | **18.05**                                                                                |   |                                                                      |    |   |   |   |   |
| **Exercised**                                         |   |                                               | **(90,000** | **)**                                           |   | **12.35**                                                                                |   |                                                                      |    |   |   |   |   |
| **Granted**                                           |   |                                               | **185,275** |                                            |   | **23.65**                                                                                |   |                                                                      |    |   |   |   |   |
| **Outstanding                  at December 31, 2006** |   |                                               | **925,403** |                                            | **$**  | **16.64**                                                                                |   |                                                                      | **5.8** |   | **$** | **5,108** |   |
|                                                  |   |                                               |        |                                            |   |                                                                                     |   |                                                                      |    |   |   |   |   |
| **Exercisable                  at December 31, 2006** |   |                                               | **706,803** |                                            | **$**  | **14.51**                                                                                |   |                                                                      | **4.6** |   | **$** | **5,108** |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

**Stock        Based        Compensation (continued)**

|                                                                                       |   | **2006**  |      | 2005  |   | 2004  |   |
|--------------------------------------------------------------------------------------------|--------|----------------|-----------|------------|--------|------------|--------|
| Average                  fair                  market value of options granted (per share) |   | **$**          | **9.89**  |       | $      | 9.32       |   | $ | 7.56 |   |
| Proceeds                  from                  stock options exercised                    |   |           | **1,111** |       |   | 6,362      |   |   | 5,043 |   |
| Tax                  benefits                  related to stock options exercised          |   |           | **386**   |       |   | 1,748      |   |   | 1,477 |   |
| Intrinsic                  value of stock options exercised                           |   |           | **1,046** |       |   | 4,730      |   |   | 3,863 |   |

**Employee        Benefits Plans**

|                                                  |   | **Pre                  SFAS****No.                  158** |   | **SFAS****No.                  158** |   | **Post                  SFAS****No.                  158** |   |
|-------------------------------------------------------|--------|-----------------------------------------------------------|--------|--------------------------------------|--------|------------------------------------------------------------|--------|
|                                                  |   | **Adoption**                                              |   | **Adjustment**                       |   | **Adoption**                                               |   |
| Assets:                                               |   |                                                      |   |                                 |   |                                                       |   |
| Deferred                  Income Taxes                |   |                                                      | 3,414  |                                 | $      | 514                                                        |   |   | 3,928 |   |
|                                                  |   |                                                      |   |                                 |   |                                                       |   |   |   |   |
| Liabilities:                                          |   |                                                      |   |                                 |   |                                                       |   |   |   |   |
| Accrued                  Salaries, Wages and Benefits |   |                                                      | 8,524  |                                 |   | 1,344                                                      |   |   | 9,868 |   |
|                                                  |   |                                                      |   |                                 |   |                                                       |   |   |   |   |
| Stockholder’s                  Equity:          |   |                                                      |   |                                 |   |                                                       |   |   |   |   |
| Accumulated                  other comprehensive loss |   |                                                      | 3,990  |                                 |   | 830                                                        |   |   | 4,820 |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

**Employee        Benefits Plans (continued)**

|                                                                    |   | ** 2006**       |       |  2005     |   |
|-------------------------------------------------------------------------|--------|----------------------|------------|----------------|--------|
|                                                                    |   |  **Stanley**    |       | **Supple-**    |   | Stanley |   | Supple- |   |
|                                                                    |   |  **Retirement** |       | **mental**     |   | Retirement |   | mental |   |
|                                                                    |   |  **Plan**  |       | **Plan**  |   | Plan  |   | Plan  |   |
| Change                  in                  benefit obligation:         |   |            |       |           |   |   |   |   |   |
| Beginning                  benefit obligation                           |   | **$**                | **14,197** |           | **$**  | **2,084** |   | $ | 15,602 |   | $ | 2,056 |   |
| Interest                  cost                                          |   |                 | **818**    |           |   | **110** |   |   | 828 |   |   | 111 |   |
| Actuarial                  loss                                         |   |                 | **2,479**  |           |   | **(57** | **)** |   | 709 |   |   | 48 |   |
| Benefits                  paid                                          |   |                 | **(2,429** | **)**          |   | **(158** | **)** |   | (2,942 | ) |   | (131 | ) |
| Ending                  benefit obligation                              |   |                 | **15,065** |           |   | **1,979** |   |   | 14,197 |   |   | 2,084 |   |
| Change                  in                  plan assets:                |   |                 |       |           |   |   |   |   |   |   |   |   |   |
| Beginning                  fair value of plan assets                    |   |                 | **15,254** |           |   |   |   |   | 15,766 |   |   |   |   |
| Actual                  return                  on plan assets          |   |                 | **1,089**  |           |   |   |   |   | 930 |   |   |   |   |
| Employer                  contributions                                 |   |                 |       |           |   | **158** |   |   | 1,500 |   |   | 131 |   |
| Benefits                  paid                                          |   |                 | **(2,429** | **)**          |   | **(158** | **)** |   | (2,942 | ) |   | (131 | ) |
|     Ending                fair value of plan assets |   |                 | **13,914** |           |   |   |   |   | 15,254 |   |   |   |   |
| Funded                  status                                          |   | **$**                | **(1,151** | **)**          | **$**  | **(1,979** | **)** |   | 1,057 |   |   | (2,084 | ) |
| Unrecognized                  loss (in 2005)                            |   |                 |       |           |   |   |   |   | 5,264 |   |   | 288 |   |
| Net                  Amount                  recognized (in 2005)       |   |                 |       |           |   |   |   | $ | 6,321 |   | $ | (1,796 | ) |

| Current                  liabilities                |   | **$**  | **(1,151** | **)**  | **$**  | **(159**                         | **)**       |   |   |   |   |            |   |
|-----------------------------------------------------|--------|--------|------------|--------|--------|----------------------------------|-------------|--------|--------|--------|--------|-----------------|--------|
|    Non-current                liabilities |   |   |       |   |   | **                 (1,820** | **)**  |   |   |   |   |            |   |
| Prepaid                  (accrued) benefit cost     |   |   |       |   |   |                             |        | $      | 6,321  |   | $      | (2,084          | )      |
| Accumulated                other comprehensive loss |   |   |       |   |   |                             |        |   |   |   |   |  288  |   |
| Total                                               |   | **$**  | **(1,151** | **)**  | **$**  | **(1,979**                       | **)**       | $      | 6,321  |   | $      | (1,796          | )      |

|                               |   | Target     |                                            | Percentage                  of                  Assets |   |
|-------------------------------|--------|------------|-------------------------------------------------|--------------------------------------------------------|--------|
|                          |   | Allocation |                                            | **2006**                                               |   | 2005 |   |
|                          |   |       |                                            |                                                   |   |   |   |
| Equity                        |   |       | **30                  to                  90%** |                                                   |   |   |   |   |                     60.3% |   |
| Fixed                  income |   |       | **30                  to                  60%** |                                                   |   | **                         86.0%** |   |   | 30.0 |   |
| Other                         |   |       | **3                  to                  25%**  |                                                   |   | **        14.0** |   |   |                    9.7 |   |
| Total                         |   |       |                                            |                                                   |   | **     100.0%** |   |   | 100.0% |

----

**STANLEY        FURNITURE COMPANY, INC.**

**Employee        Benefits Plans (continued)**

|                                            |   | **2006** |      | 2005   |   | 2004   |   |
|-------------------------------------------------|--------|----------|-----------|--------|--------|--------|--------|
| Interest                  cost                  |   | **$**    | **928**   |   | $      | 939    |   | $ | 973 |   |
| Expected                  return on plan assets |   |     | **(982**  | **)**  |   | (1,009 | )      |   | (967 | ) |
| Net                  amortization and deferral  |   |     | **500**   |   |   | 437    |   |   | 460 |   |
| Net                  cost                       |   |     | **446**   |   |   | 367    |   |   | 466 |   |
| Settlement                  expense             |   |     | **904**   |   |   | 985    |   |   | 372 |   |
| Total                  expense                  |   | **$**    | **1,350** |   | $      | 1,352  |   | $ | 838 |   |

|                                                              |   | **2006** |              | 2005   |   | 2004 |   |
|-------------------------------------------------------------------|--------|----------|-------------------|--------|--------|------|--------|
| Discount                  rate                  for funded status |   |     | **5.75%/5.00%(a** | **)**  |   | 5.50 | %      |   | 5.50 | % |
| Discount                  rate                  for pension cost  |   |     | **5.50%**         |   |   | 5.50 | %      |   | 6.00 | % |
| Return                  on                  assets                |   |     | **6.50%**         |   |   | 6.50 | %      |   | 6.50 | % |

| (a)   | The                5.75%                relates to the Supplemental Plan. The Stanley Retirement Plan used                a                discount rate of 5.00%, |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**STANLEY        FURNITURE COMPANY, INC.**

|                                                               |   | **2006** |       | 2005   |   |
|--------------------------------------------------------------------|--------|----------|------------|--------|--------|
| Change                  in                  benefit obligation:    |   |     |       |   |   |
| Beginning                  benefit obligation                      |   | **$**    | **3,298**  |   | $      | 3,111 |   |
| Service                  cost                                      |   |     | **71**     |   |   | 88 |   |
| Interest                  cost                                     |   |     | **155**    |   |   | 183 |   |
| Actuarial                  (gain) loss                             |   |     | **(299**   | **)**  |   | 160 |   |
| Plan                  participants’ contributions            |   |     | **170**    |   |   | 159 |   |
| Benefits                  paid                                     |   |     | **(435**   | **)**  |   | (403 | ) |
| Amendments                                                    |   |     | **(84**    | **)**  |   |   |   |
| Ending                  benefit obligation                         |   |     | **2,876**  |   |   | 3,298 |   |
| Change                  in                  plan assets:           |   |     |       |   |   |   |   |
| Beginning                  fair value of plan assets               |   |     |       |   |   |   |   |
| Employer                  contributions                            |   |     | **265**    |   |   | 244 |   |
| Plan                  participants’ contributions            |   |     | **170**    |   |   | 159 |   |
| Benefits                  paid                                     |   |     | **(435**   | **)**  |   | (403 | ) |
| Ending                  fair                  value of plan assets |   |     |       |   |   |   |   |
| Funded                  status                                     |   | **$**    | **(2,876** | **)**  | $      | (3,298 | ) |
| Unrecognized                  net loss                             |   |     |       |   |   | 962 |   |
| Unrecognized                  transition obligation                |   |     |       |   |   | 914 |   |
| Accrued                  benefit cost                              |   |     |       |   | $      | (1,422 | ) |

| Current                  liabilities                      |   | **$**  | **251**   |   | $      | 467   |   |
|-----------------------------------------------------------|--------|--------|-----------|--------|--------|-------|--------|
| Non                  current                  liabilities |   |   | **2,625** |   |   | 955   |   |
| Total                                                     |   | **$**  | **2,876** |   | $      | 1,422 |   |

|                                                                       |   | **2006** |    | 2005   |   | 2004 |   |
|----------------------------------------------------------------------------|--------|----------|---------|--------|--------|------|--------|
| Service                  cost                                              |   | **$**    | **71**  |   | $      | 88   |   | $ | 67 |   |
| Interest                  cost                                             |   |     | **155** |   |   | 183  |   |   | 174 |   |
| Amortization                  of transition obligation                     |   |     | **122** |   |   | 130  |   |   | 130 |   |
| Amortization                  of net actuarial loss                        |   |     | **27**  |   |   | 66   |   |   | 40 |   |
| Net                  periodic                  postretirement benefit cost |   | **$**    | **375** |   | $      | 467  |   | $ | 411 |   |

|                                                                                   |   | **2006** |     | 2005   |   | 2004   |   |
|----------------------------------------------------------------------------------------|--------|----------|----------|--------|--------|--------|--------|
| Discount                  rate                  for funded status                      |   |     | **5.75** | **%**  |   | 5.50   | %      |   | 5.50 | % |
| Discount                  rate                  for postretirement benefit cost        |   |     | **5.50** | **%**  |   | 5.50   | %      |   | 6.00 | % |
| Health                  care                  cost assumed trend rate for next year    |   |     | **9.00** | **%**  |   | 9.50   | %      |   | 10.00 | % |
| Rate                  that the                  cost trend rate gradually declines to  |   |     | **5.50** | **%**  |   | 5.50   | %      |   | 5.50 | % |
| Year                  that the                  rate reaches the rate it is assumed to |   |     |     |   |   |   |   |   |   |   |
| remain                  at                                                             |   |     | **2010** |   |   | 2010   |   |   | 2010 |   |

----

**STANLEY        FURNITURE COMPANY, INC.**

|                                                 |   | StanleyRetirement                  Plan |   |  Supplemental                  Plan |   | Other                  Postretirement Benefits |   |
|------------------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------|--------|------------------------------------------------|--------|
| Net                  loss                            |   | $                                       | 6,238  |                                     | $      | 223                                            |   | $ | 636 |   |
| Prior                  service                  cost |   |                                    |   |                                     |   |                                           |   |   | (76 | ) |
| Net                  transition obligation           |   |                                    |   |                                     |   |                                           |   |   | 784 |   |
| Total                                                |   | $                                       | 6,238  |                                     | $      | 223                                            |   | $ | 1,344 |   |

|                                                 |   | StanleyRetirement                  Plan |   |  Supplemental                  Plan |   | Other                  Postretirement Benefits |   |
|------------------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------|--------|------------------------------------------------|--------|
| Net                  loss                            |   | $                                       | 130    |                                     | $      | 3                                              |   | $ | 22 |   |
| Prior                  service                  cost |   |                                    |   |                                     |   |                                           |   |   | (8 | ) |
| Net                  transition obligation           |   |                                    |   |                                     |   |                                           |   |   | 130 |   |
| Total                                                |   | $                                       | 130    |                                     | $      | 3                                              |   | $ | 144 |   |

**Income        from        Continued Dumping and Subsidy Offset Act**

**Commitments        and Contingencies**

----

**STANLEY        FURNITURE COMPANY, INC.**

**New        Accounting Standards**

**Quarterly        Results of Operations (Unaudited) **

| **2006                  Quarters:**                       |   | **First** |       | **Second** |   | **Third**  |   | **Fourth** |       |
|-----------------------------------------------------------|--------|-----------|------------|------------|--------|------------|--------|------------|------------|
| **Net                  Sales**                            |   | **$**     | **83,524** |       | **$**  | **77,476** |   | **$**      | **75,911** |   | **$** | **70,636** |   |
| **Gross                  profit**                         |   |      | **19,758** |       |   | **17,618** |   |       | **14,960** |   |   | **12,532** |   |
| **Net                  income**                           |   |      | **5,392**  |       |   | **3,937**  |   |       | **2,996**  |   |   | **4,456** | **(1)** |
| **Net                  income per share:**                |   |      |       |       |   |       |   |       |       |   |   |   |   |
| **Basic**                                                 |   | **$**     | **.44**    |       | **$**  | **.33**    |   | **$**      | **.26**    |   | **$** | **.41** | **(1)** |
| **Diluted**                                               |   |      | **.43**    |       |   | **.32**    |   |       | **.26**    |   |   | **.40** | **(1)** |
| **Dividend                  paid per share**              |   |      | **.08**    |       |   | **.08**    |   |       | **.08**    |   |   | **.08** |   |
|                                                      |   |      |       |       |   |       |   |       |       |   |   |   |   |
| 2005                  Quarters:                           |   |      |       |       |   |       |   |       |       |   |   |   |   |
| Net                  sales                                |   | $         | 82,950     |       | $      | 83,635     |   | $          | 85,615     |   | $ | 81,446 |   |
| Gross                  profit                             |   |      | 20,465     |       |   | 20,632     |   |       | 20,484     |   |   | 20,128 |   |
| Net                  income                               |   |      | 5,760      |       |   | 5,827      |   |       | 5,802      |   |   | 5,842 |   |
| Net                  income                  per share:   |   |      |       |       |   |       |   |       |       |   |   |   |   |
| Basic                                                     |   | $         | .45        |       | $      | .45        |   | $          | .45        |   | $ | .47 |   |
| Diluted                                                   |   |      | .43        |       |   | .44        |   |       | .44        |   |   | .46 |   |
| Dividend                  paid                  per share |   |      | .06        |       |   | .06        |   |       | .06        |   |   | .06 |   |

----

|                                                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |
|-----------------------------------------------------------------|--------|-----------------------------------|---------------|---------------------------------------------------------------------------|------------|---------------------------------|-----------|---------------------------------------------------------|------------|
|  Column                  A                                 |   |  Column                  B   |          |  Column                  C                  |       |  Column                  D |      |  Column                  E                         |       |
|                                                            |   |                              |          |        Charged     |       |                            |      |                                                    |       |
|                                                            |   |  Balance                  at |          |  (Credited)                                                          |       |                            |      |  Balance                                           |       |
|                                                            |   |  Beginning                   |          |  to                  Costs &                                     |       |                            |      |  at                  End                  of  |       |
|  Descriptions                                              |   |  of                  Period  |          |  Expenses                                                            |       |  Deductions                |      |  Period                                            |       |
| **2006**                                                        |   |                              |          |                                                                      |       |                            |      |                                                    |       |
| **Doubtful                  receivables**                       |   | **$**                             | **650**       |                                                                      | **$**      | **823**                         |      | **$**                                                   | **758**    | **(a)** | **$** | **715** |   |
| **Discounts,                  returns,**                        |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
|      **and                allowances** |   |                              | **916**  |                                                                      | ** ** | **                 (77)**  | **(b)**   | ** **                                              | ** ** | ** ** | ** ** | **839**  |   |
|                                                            |   | **$**                             | **1,566**     |                                                                      | **$**      | **746**                         |      | **$**                                                   | **758**    |   | **$** | **1,554** |   |
|                                                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
|                                                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
| 2005                                                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
| Doubtful                  receivables                           |   | $                                 | 1,050         |                                                                      | $          | (213                            | )         | $                                                       | 187        | (a) | $ | 650 |   |
| Discounts,                  returns,                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
|      and                allowances     |   |                              | 911      |                                                                      |       | 5                               |  (b) |                                                    |       |   |   | 916  |   |
|                                                  |   | $                                 | 1,961         |                                                                      | $          | (208                            | )         | $                                                       | 187        |   | $ | 1,566 |   |
|                                                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
| 2004                                                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
| Doubtful                  receivables                           |   | $                                 | 1,842         |                                                                      | $          | (334                            | )         | $                                                       | 458        | (a) | $ | 1,050 |   |
| Discounts,                  returns,                            |   |                              |          |                                                                      |       |                            |      |                                                    |       |   |   |   |   |
|      and                allowances     |   |                              | 704      |                                                                      |       | 207                        | (b)       |                                                    |       |   |   | 911  |   |
|                                                       |   | $                                 | 2,546         |                                                                      | $          | (127                            | )         | $                                                       | 458        |   | $ | 1,961 |   |