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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
 For the fiscal year ended December 31, 2009
 Commission file number 0-14938
 STANLEY FURNITURE
COMPANY, INC.
  Delaware
    
    54-1272589(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1641 Fairystone Park Highway, Stanleytown, VA 24168
  (276) 627-2010
 Title of each class Common Stock, par value $.02 per share
    
    Name of each exchange on which registeredNasdaq Stock Market
  o þ
 o þ
 Yes þ No o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do
not check if a smaller reporting company)
 o þ
   Common Stock, par value $.02 per share
    
    10,332,179(Class of Common Stock)
    
    Number of Shares




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TABLE OF CONTENTS
 PagePart IItem 1 Business
    
    
    3Item 1A Risk Factors
    
    
    6Item 1B Unresolved Staff Comments
    
    
    8Item 2 Properties
    
    
    8Item 3 Legal Proceedings
    
    
    8Item 4 Submission of Matters to a Vote of Security Holders
    
    
    8Part IIItem 5 Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    9Item 6 Selected Financial Data
    
    
    11Item 7 Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    
    12Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 8 Financial Statements and Supplementary Data
    
    
    17Item 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
    
    
    17Item 9A Controls and Procedures
    
    
    17Item 9B Other Information
    
    
    17Part IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    18Item 11 Executive Compensation
    
    
    18Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    18Item 13 Certain Relationships and Related Transactions, and Director
Independence
    
    
    18Item 14 Principal Accounting Fees and Services
    
    
    18Part IVItem 15 Exhibits, Financial Statement Schedules
    
    
    19Signatures
    
    
    22Index to Consolidated Financial Statements and Schedule
    
    
    F-1Exhibit 4.4Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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Stanley Furniture Company, Inc.
 
 PART I
 
 Item 1.
    
    Business
 General
  Products and Styles
     Distribution
    3




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Manufacturing and Offshore Sourcing
  
    
    Smaller, more frequent and cost-effective production runs,
 
    
    Identification and elimination of manufacturing bottlenecks and waste,
 
    
    Use of cellular manufacturing in the production of components, and
 
    
    Improvement of our relationships with suppliers by establishing primary
suppliers.
      Raw Materials
   4




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Competition
 th Furniture/Today
 Associates
  Trademarks
  Governmental Regulations
  Forward-Looking Statements
   5




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Available Information
   Investor@Stanleyfurniture.com
 
 Item 1A.
    
    Risk Factors
 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 sales and earnings levels due to economic downturns.
  Business failures, or the loss, of large customers could result in a decrease in our future sales
and earnings.
  We may not be able to sustain current sales and earnings due to the actions and strength of our
competitors.
   6




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Our strategy to transition Young America Products (infant and youth furniture) to our domestic
manufacturing facilities has, and will in the near term, increase operating expenses. If we are
not successful in the implementation of this strategy, we may continue to experience significant
disruptions to our operations that may result in a decline in revenues in addition to a continued
increase in operating expenses.
  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.
 Our sourcing partners may not supply goods that meet our manufacturing, quality or safety
specifications, in a timely manner and at an acceptable price. We may reject goods that
do not meet our specifications and either manufacture internally or find alternative
sourcing arrangements at a higher cost, or may be forced to discontinue the product.
Also, delivery of goods from our foreign sourcing partners may be delayed for reasons not
typically encountered with domestic manufacturing or sourcing, such as shipment delays
caused by customs or labor issues.
 
    
    Changes in political, economic and social conditions, as well as laws and regulations, in
the countries from which we source products could adversely affect us.
 Foreign sourcing is subject to political and social instability in countries where our
sourcing partners are located. This could make it more difficult for us to service our
customers. Also, significant fluctuations of foreign exchange rates against the value of
the U.S. dollar could increase costs and decrease earnings. In addition, an outbreak of
the avian flu or similar epidemic in Asia or elsewhere may lower our sales and earnings
by disrupting our supply chain in the countries impacted.
 
    
    International trade policies of the United States and countries from which we source
products could adversely affect us.
 Imposition of trade sanctions relating to imports, taxes, import duties and other charges
on imports could increase our costs and decrease our earnings.
 Manufacturing realignment could result in a decrease in our earnings.
  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.
  We may not be able to maintain or to raise prices in response to inflation and increasing costs.
   7




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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 cost of compliance with environmental, safety and health regulations could reduce our
earnings.
  Extended business interruption at our manufacturing facilities could result in reduced sales.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
  Approximate
    
    
    OwnedFacility Size
    
    
    orLocation
    
    Primary Use
    
    
    (Square Feet)
    
    
    LeasedStanleytown, VA
    
    Manufacturing /Warehouse and Corporate Headquarters
    
    
    
    1,721,000
    
    
    OwnedRobbinsville, NC
    
    Manufacturing/Warehouse
    
    
    
    562,100
    
    
    OwnedMartinsville, VA
    
    Warehouse
    
    
    
    300,000
    
    
    OwnedHigh Point, NC
    
    Showroom
    
    
    
    51,000
    
    
    Leased
 
 Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
   8




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Executive Officers of the Registrant
  Name
    
    Age
    
    
    PositionAlbert L. Prillaman
    
    
    64
    
    
    ChairmanGlenn Prillaman
    
    
    38
    
    
    President and Chief Executive OfficerDouglas I. Payne
    
    
    52
    
    
    Executive Vice President  Finance and Administration and Secretary
 Albert L. Prillaman
 Glenn Prillaman ®
 Douglas I. Payne
 
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 STLY.
 2009
    
    
    2008Dividends
    
    
    
    
    
    
    
    
    
    
    DividendsHigh
    
    
    Low
    
    
    Paid
    
    
    High
    
    
    Low
    
    
    PaidFirst Quarter
    
    $
    8.59
    
    
    $
    6.50
    
    
    
    
    
    
    $
    14.90
    
    
    $
    9.39
    
    
    $
    .10Second Quarter
    
    
    11.10
    
    
    
    7.08
    
    
    
    
    
    
    
    12.93
    
    
    
    9.30
    
    
    
    .10Third Quarter
    
    
    13.48
    
    
    
    9.69
    
    
    
    
    
    
    
    11.14
    
    
    
    6.79
    
    
    
    .10Fourth Quarter
    
    
    11.01
    
    
    
    7.13
    
    
    
    
    
    
    
    11.15
    
    
    
    5.60
    
    
    
    .10
   9




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Performance Graph
   
 (1)
    
    The graph shows the cumulative total return on $100 invested at the market close on
December 31, 2004, the last trading day in 2004, in common stock or the specified index,
including reinvestments of dividends.(2)
    
    Nasdaq Market Index as prepared by Morningstar, Inc.(3)
    
    Nasdaq Non-Financial Stock Index as prepared by Morningstar, Inc.(4)
    
    Peer group Index as prepared by Morningstar, Inc. consists of SIC Code 2511 Wood
Household Furniture Index and SIC Code 2512 Wood Household Furniture, Upholstered. At
January 5, 2010, Morningstar Inc. reported that these two indexes consisted of Aarons,
Inc., Bassett Furniture Industries, Inc., Chromcraft Revington, Inc., Consolidated
Mercantile, Inc., Ethan Allen Interiors, Inc., Flexsteel Industries, Inc., Furniture Brands
International, Inc., Hooker Furniture Corporation, Industrie Natuzzi, Keller Manufacturing
Company, Inc., Kimball International, Inc., La-Z-Boy, Inc., Luxor Industrial, Rowe
Companies, Virco Manufacturing Corporation, and Stanley Furniture Company, Inc. Equity Compensation Plan Information
  Number of shares
    
    
    Weighted-average
    
    
    Number of sharesto be issued upon
    
    
    exercise price
    
    
    remaining availableexercise of
    
    
    of outstanding
    
    
    for future issuanceoutstanding options,
    
    
    options, warrants
    
    
    under equitywarrants and rights
    
    
    and rights
    
    
    compensation plansEquity compensation plans
approved by stockholders
    
    
    1,640,624
    
    
    $
    11.71
    
    
    
    812,364
  10




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Item 6.
    
    Selected Financial Data
 Years Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(in thousands, except per share data)Income Statement Data:Net sales
    
    $
    160,451
    
    
    $
    226,522
    
    
    $
    282,847
    
    
    $
    307,547
    
    
    $
    333,646Cost of sales (1)
    
    
    154,988
    
    
    
    193,929
    
    
    
    235,937
    
    
    
    242,679
    
    
    
    251,937Gross profit
    
    
    5,463
    
    
    
    32,593
    
    
    
    46,910
    
    
    
    64,868
    
    
    
    81,709Selling, general and administrative
expenses (2)
    
    
    30,373
    
    
    
    36,441
    
    
    
    39,573
    
    
    
    42,139
    
    
    
    44,267Pension plan termination charge (3)
    
    
    
    
    
    
    
    
    
    
    (6,605
    )Operating income (loss)
    
    
    (24,910
    )
    
    
    (3,848
    )
    
    
    732
    
    
    
    22,729
    
    
    
    37,442Income from Continued Dumping and Subsidy Offset Act, net
    
    
    9,340
    
    
    
    11,485
    
    
    
    10,429
    
    
    
    4,419Other income, net
    
    
    160
    
    
    
    308
    
    
    
    265
    
    
    
    297
    
    
    
    288Interest expense, net
    
    
    3,703
    
    
    
    3,211
    
    
    
    2,679
    
    
    
    1,710
    
    
    
    1,825Income (loss) before income taxes
    
    
    (19,113
    )
    
    
    4,734
    
    
    
    8,747
    
    
    
    25,735
    
    
    
    35,905Income taxes (benefit)
    
    
    (7,362
    )
    
    
    998
    
    
    
    2,845
    
    
    
    8,954
    
    
    
    12,674Net income (loss)
    
    $
    (11,751
    )
    
    $
    3,736
    
    
    $
    5,902
    
    
    $
    16,781
    
    
    $
    23,231Basic Earnings (loss) Per Share: (4)Net income (loss)
    
    $
    (1.14
    )
    
    $
    .36
    
    
    $
    .56
    
    
    $
    1.44
    
    
    $
    1.82Weighted average shares
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,478
    
    
    
    11,649
    
    
    
    12,766Diluted Earnings (loss) Per Share: (4)Net income (loss)
    
    $
    (1.14
    )
    
    $
    .36
    
    
    $
    .55
    
    
    $
    1.41
    
    
    $
    1.77Weighted average shares
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,677
    
    
    
    11,924
    
    
    
    13,154Cash dividends paid per share
    
    $
    
    
    
    $
    .40
    
    
    $
    .40
    
    
    $
    .32
    
    
    $
    .24Balance Sheet and Other Data:Cash
    
    $
    41,827
    
    
    $
    44,013
    
    
    $
    31,648
    
    
    $
    6,269
    
    
    $
    12,556Inventories
    
    
    37,225
    
    
    
    47,344
    
    
    
    58,086
    
    
    
    59,364
    
    
    
    69,961Working capital
    
    
    87,277
    
    
    
    97,059
    
    
    
    91,852
    
    
    
    72,036
    
    
    
    91,200Total assets
    
    
    150,462
    
    
    
    165,871
    
    
    
    173,731
    
    
    
    162,678
    
    
    
    190,488Long-term debt including
current maturities
    
    
    27,857
    
    
    
    29,286
    
    
    
    30,714
    
    
    
    8,571
    
    
    
    11,428Stockholders equity
    
    
    92,847
    
    
    
    103,108
    
    
    
    102,851
    
    
    
    109,647
    
    
    
    132,749Capital expenditures
    
    $
    2,621
    
    
    $
    2,261
    
    
    $
    3,951
    
    
    $
    4,196
    
    
    $
    4,986Stock repurchases:Shares (4)
    
    
    
    
    
    
    
    
    
    
    639
    
    
    
    1,423
    
    
    
    1,057Total cost
    
    
    
    
    
    
    
    
    
    $
    13,557
    
    
    $
    33,576
    
    
    $
    22,993
 (1)
    
    Included in cost of sales in 2009 is $5.2 million pre-tax ($3.2 million after-tax), or
$.31 per diluted share, for restructuring and related charges for a warehouse
consolidation, elimination of certain positions, and a write-down of inventories.
Included in cost of sales in 2008 is $5.9 million pre-tax ($4.6 million after-tax), or $.45
per diluted share, for the consolidation of two manufacturing facilities into one. Included
in cost of sales in 2007 is $3.6 million pre-tax ($2.4 million after-tax), or $.28 per
diluted share, for the conversion of a manufacturing facility to a warehouse operation.(2)
    
    Included in selling, general and administrative expenses in 2009 is $876 thousand
pre-tax ($539 thousand after-tax), or $.05 per diluted share, and 2008 is $1.4 million
pre-tax ($1.1 million after-tax), or $.11 per diluted share, of restructuring charges.(3)
    
    We terminated our defined benefit pension plan in 2007, resulting in a charge to
earnings of $6.6 million pre-tax ($4.5 million after-tax), or $.42 per diluted share.(4)
    
    Amounts have been adjusted to reflect the two-for-one stock split, distributed in the
form of a stock dividend, on June 6, 2005.  11




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operation
  Overview
         Results of Operations
 2009 Compared to 2008
   12




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2008 Compared to 2007
         13




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Financial Condition, Liquidity and Capital Resources
          14




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Payment due or commitment expirationLess Than
    
    
    
    
    
    
    
    
    
    
    OverTotal
    
    
    1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    5 yearsContractual cash obligations:Long-term debt
    
    $
    27,857
    
    
    $
    1,429
    
    
    $
    8,571
    
    
    $
    7,142
    
    
    $
    10,715Postretirement benefits other than pensions(1)
    
    
    3,353
    
    
    
    478
    
    
    
    841
    
    
    
    690
    
    
    
    1,344Fixed interest payment on long-term debt
    
    
    7,770
    
    
    
    1,831
    
    
    
    2,934
    
    
    
    1,923
    
    
    
    1,082Operating leases
    
    
    2,790
    
    
    
    683
    
    
    
    1,071
    
    
    
    883
    
    
    
    153Total contractual cash obligations
    
    $
    41,770
    
    
    $
    4,421
    
    
    $
    13,417
    
    
    $
    10,638
    
    
    $
    13,294Other commercial commitments:Letters of credit
    
    $
    1,566
    
    
    $
    1,566
 (1)
    
    The RP-2000 Mortality tables were used in estimating future benefit payments, and the
health care cost trend rate for determining payments is 9.5% for 2010 and gradually
declines to 5.5% in 2018 where it is assumed to remain constant for the remaining years.  Continued Dumping and Subsidy Offset Act (CDSOA)
     Critical Accounting Policies
   15




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Allowance for doubtful accounts
 Inventory valuation
 Deferred Taxes
  Long-lived assets
 Goodwill
    16




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Off-Balance Sheet Arrangements
  
 Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
  
 Item 8.
    
    Financial Statements and Supplementary Data
  
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A.
    
    Controls and Procedures
 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.
    
    Other Information
   17




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PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
      
 Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
  
 Item 14.
    
    Principal Accounting Fees and Services
   18




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PART IV
 
 Item 15.
    
    Exhibits, Financial Statement Schedules
 (a)
    
    Documents filed as a part of this Report:
 (1)
    
    The following consolidated financial statements are included in this report on Form 10-K:Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2009 and 2008Consolidated Statements of Income for each of the three years in the period ended December 31, 2009Consolidated Statements of Changes in Stockholders Equity for each of the three years in the period
ended December 31, 2009Consolidated Statements of Cash Flow for each of the three years in the period ended December 31, 2009Notes 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, 2009
 (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 3.1 to the Registrants
Form 8-K (Commission File No. 0-14938) filed February 3, 2010).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
    
    
    Amendment to Amended and Restated Note Purchase and Private Shelf Agreements dated as of October 12,
2007, among the Registrant, The Prudential Insurance Company of America (Prudential), Hartford Life
Insurance Company, Medica Health Plans, Pruco Life Insurance Company of New Jersey, Prudential
Retirement Insurance and Annuity Company, Mutual of Omaha Insurance Company. (incorporated by
Reference to Exhibit 4.1 to the Registrants Form 10-Q (Commission File No 0-17938) for the quarter
ended September 29, 2007).4.4
    
    
    Second Amendment to Note Purchase and Private Shelf Agreement dated as of December 30, 2008, among
the Registrant, The Prudential Life Insurance Company of America, Pruco Life Insurance Company of New
Jersey, Prudential Retirement Insurance and Annuity Company, Hartford Life Insurance Company, Mutual
of Omaha Insurance Company and Medica Health Plans. (1)4.5
    
    
    Third Amendment to Note Purchase and Private Shelf Agreement dated as of January 23, 2009, among the
Registrant, The Prudential Insurance Company of America, Pruco Life Insurance Company of New Jersey,
Prudential Retirement Insurance and Annuity Company, Hartford Life Insurance Company, Mutual of Omaha
Insurance Company and Medica Health Plans (incorporated by Reference to Exhibit 4.01 to the
Registrants Form 8-K (Commission File No. 0-14938) filed January 29, 2009).4.6
    
    
    Fourth Amendment to Note Purchase and Private Shelf Agreement dated as of December 18, 2009, among
the Registrant, The Prudential Insurance Company of America, and other holders of Notes named therein
(incorporated by Reference to Exhibit 9.01 to the Registrants Form 8-K (Commission File No. 0-14938)
filed December 22, 2009).
 
 (1)
    
    Filed Herewith  19




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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
    
    
    Employment Agreement dated as of December
31, 2008, between Douglas I. Payne and the
Registrant (incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K
(Commission File No. 0-14938) filed on
December 10,2008).(2)10.5
    
    
    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)10.6
    
    
    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)10.7
    
    
    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)10.8
    
    
    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)10.9
    
    
    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)10.10
    
    
    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)10.11
    
    
    Form of Indemnification Agreement between
the Registrant and each of its Directors
(incorporated by reference to Exhibit 10.1
to the Registrants Form 8-K (Commission
File No. 0-14938) filed on September 25,
2008).10.12
    
    
    Voluntary Separation Agreement and General
Release by and between Jeffrey R. Scheffer
and Stanley Furniture Company, Inc. dated
September 23, 2008 (incorporated by
reference to Exhibit 10.2 to the Registrants
Form 8-K (Commission File No. 0-14938) filed
on September 25, 2008).10.13
    
    

Change in Control Protection Agreement,
dated December 11, 2009, by and between
Stanley Furniture Company, Inc. and Glenn
Prillaman (incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K
(commission File No. 0-14938) filed on
December 14, 2009). (2)10.14
    
    
    2008 Incentive Compensation Plan
(incorporated by reference to Exhibit A to
the Registrants Proxy Statement (Commission
File No. 0-14938) for the annual meeting of
stockholders held on April 15, 2008).
(2)
 
 (2)
    
    Management contract or compensatory plan  20




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##### Table of Contents



10.15
    
    
    Form of Stock Option Award under 2008
Incentive Plan (Officers) (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,
2008). (2)10.16
    
    
    Form of Stock Option Award under 2008
Incentive Plan (Directors) (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,
2008). (2)10.17
    
    

Form
of Separation Agreement and General Release between Stephen A.
Bullock and the Registrant (incorporated by reference to the
Registrants Form 8-K (Commission File No.
0-14938) filed on December 14,
2009). (2)21
    
    

List of Subsidiaries. (1)23
    
    

Consent of PricewaterhouseCoopers LLP. (1)31.1
    
    
    Certification by Glenn Prillaman, our Chief
Executive Officer, pursuant to Rule
13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended. (1)31.2
    
    
    Certification by Douglas I. Payne, our Chief
Financial Officer, pursuant to Rule
13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended. (1)32.1
    
    
    Certification by Glenn Prillaman, our Chief
Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of
2002. (1)32.2
    
    
    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  21




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##### Table of Contents



SIGNATURES
  STANLEY FURNITURE COMPANY, INC.February 5, 2010
    By:
    /s/ Glenn PrillamanGlenn PrillamanPresident and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Albert L. Prillaman
    
    Chairman and Director
    
    February 5, 2010(Albert L. Prillaman)/s/ Glenn Prillaman
    
    President and Chief Executive
Officer
    
    February 5, 2010(Glenn Prillaman)
    
    (Principal Executive Officer) and Director/s/ Douglas I. Payne
    
    Executive Vice President  Finance
and
    
    February 5, 2010(Douglas I. Payne)
    
    Administration and Secretary (Principal Financial and
Accounting Officer)/s/ Robert G. Culp, III
    
    Director
    
    February 5, 2010(Robert G. Culp, III)/s/ Michael P. Haley
    
    Director
    
    February 5, 2010(Michael P. Haley)/s/ Thomas L. Millner
    
    Director
    
    February 5, 2010(Thomas L. Millner)/s/ T. Scott McIlhenny, Jr.
    
    Director
    
    February 5, 2010(T. Scott McIlhenny, Jr.)
  22




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##### Table of Contents



Consolidated Financial Statements
    
    PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-3Consolidated Statements of Income for each of the three years in the period
ended December 31, 2009
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity for each of the
three years in the period ended December 31, 2009
    
    
    F-5Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 2009
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Financial Statement ScheduleSchedule II  Valuation and Qualifying Accounts for each of the three
years in the period ended December 31, 2009
    
    
    S-1
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
  Internal Control  Integrated Framework
   
  F-2




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 
   December 31,2009
    
    
    2008ASSETSCurrent assets:Cash
    
    $
    41,827
    
    
    $
    44,013Accounts receivable, less allowances of $1,747 and $1,644
    
    
    15,297
    
    
    
    21,873Inventories:Finished goods
    
    
    22,376
    
    
    
    36,803Work-in-process
    
    
    8,184
    
    
    
    3,493Raw materials
    
    
    6,665
    
    
    
    7,048Total inventories
    
    
    37,225
    
    
    
    47,344Prepaid expenses and other current assets
    
    
    4,898
    
    
    
    3,758Income tax receivable
    
    
    6,882Deferred income taxes
    
    
    3,433
    
    
    
    3,906Total current assets
    
    
    109,562
    
    
    
    120,894Property, plant and equipment, net
    
    
    31,375
    
    
    
    35,445Goodwill
    
    
    9,072
    
    
    
    9,072Other assets
    
    
    453
    
    
    
    460Total assets
    
    $
    150,462
    
    
    $
    165,871LIABILITIESCurrent liabilities:Current maturities of long-term debt
    
    $
    1,429
    
    
    $
    1,429Accounts payable
    
    
    11,633
    
    
    
    11,236Accrued salaries, wages and benefits
    
    
    6,597
    
    
    
    6,280Other accrued expenses
    
    
    2,626
    
    
    
    4,890Total current liabilities
    
    
    22,285
    
    
    
    23,835Long-term debt, exclusive of current maturities
    
    
    26,428
    
    
    
    27,857Deferred income taxes
    
    
    2,128
    
    
    
    2,778Other long-term liabilities
    
    
    6,774
    
    
    
    8,293Total liabilities
    
    
    57,615
    
    
    
    62,763Commitments and ContingenciesSTOCKHOLDERS EQUITYCommon stock, $0.02 par value, 25,000,000 shares authorized,
10,332,179 shares issued and outstanding
    
    
    207
    
    
    
    207Capital in excess of par value
    
    
    1,897
    
    
    
    1,058Retained earnings
    
    
    90,852
    
    
    
    102,603Accumulated other comprehensive loss
    
    
    (109
    )
    
    
    (760
    )Total stockholders equity
    
    
    92,847
    
    
    
    103,108Total liabilities and stockholders equity
    
    $
    150,462
    
    
    $
    165,871
 
  F-3




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 
   For the Years EndedDecember 31,2009
    
    
    2008
    
    
    2007Net sales
    
    $
    160,451
    
    
    $
    226,522
    
    
    $
    282,847Cost of sales
    
    
    154,988
    
    
    
    193,929
    
    
    
    235,937Gross profit
    
    
    5,463
    
    
    
    32,593
    
    
    
    46,910Selling, general and administrative expenses
    
    
    30,373
    
    
    
    36,441
    
    
    
    39,573Pension plan termination charge
    
    
    
    
    
    
    
    
    
    
    (6,605
    )Operating income (loss)
    
    
    (24,910
    )
    
    
    (3,848
    )
    
    
    732Income from Continued Dumping and Subsidy
Offset Act, net
    
    
    9,340
    
    
    
    11,485
    
    
    
    10,429Other income, net
    
    
    160
    
    
    
    308
    
    
    
    265Interest income
    
    
    45
    
    
    
    591
    
    
    
    556Interest expense
    
    
    3,748
    
    
    
    3,802
    
    
    
    3,235Income (loss) before income taxes
    
    
    (19,113
    )
    
    
    4,734
    
    
    
    8,747Income tax (benefit) expense
    
    
    (7,362
    )
    
    
    998
    
    
    
    2,845Net income (loss)
    
    $
    (11,751
    )
    
    $
    3,736
    
    
    $
    5,902Earnings (loss) per share:Basic
    
    $
    (1.14
    )
    
    $
    .36
    
    
    $
    .56Diluted
    
    $
    (1.14
    )
    
    $
    .36
    
    
    $
    .55Weighted average shares outstanding:Basic
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,478Diluted
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,677Cash dividends declared and paid
per common share
    
    $
    
    
    
    $
    .40
    
    
    $
    .40
 
  F-4




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 
    AccumulatedCapital in
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Excess of
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Par Value
    
    
    Earnings
    
    
    Loss
    
    
    TotalBalance at December 31, 2006
    
    
    10,929
    
    
    $
    219
    
    
    $
    59
    
    
    $
    114,189
    
    
    $
    (4,820
    )
    
    $
    109,647Cumulative effect of adoption of FIN48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21Adjusted balance, January 1, 2007
    
    
    10,929
    
    
    
    219
    
    
    
    59
    
    
    
    114,210
    
    
    
    (4,820
    )
    
    
    109,668Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,902
    
    
    
    
    
    
    
    5,902Prior service cost, net of deferred income tax benefit of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Actuarial loss, net of deferred income tax
benefit of $136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )
    
    
    (141
    )Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,759Termination of defined benefit pension
plan, net of deferred income tax benefit
of $2,488
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,017
    
    
    
    4,017Exercise of stock options
    
    
    43
    
    
    
    1
    
    
    
    531
    
    
    
    
    
    
    
    
    
    
    
    532Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    534
    
    
    
    
    
    
    
    
    
    
    
    534Tax benefit on exercise of stock options
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    92Purchase and retirement of stock
    
    
    (640
    )
    
    
    (13
    )
    
    
    (625
    )
    
    
    (12,919
    )
    
    
    
    
    
    
    (13,557
    )Dividends paid, $0.40 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,194
    )
    
    
    
    
    
    
    (4,194
    )Balance at December 31, 2007
    
    
    10,332
    
    
    
    207
    
    
    
    591
    
    
    
    102,999
    
    
    
    (946
    )
    
    
    102,851Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,736
    
    
    
    
    
    
    
    3,736Prior service cost, net of deferred income
tax benefit of $3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Actuarial gain, net of deferred income tax
expense of $118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    191
    
    
    
    191Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,922Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    467
    
    
    
    
    
    
    
    
    
    
    
    467Dividends paid, $0.40 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,132
    )
    
    
    
    
    
    
    (4,132
    )Balance at December 31, 2008
    
    
    10,332
    
    
    
    207
    
    
    
    1,058
    
    
    
    102,603
    
    
    
    (760
    )
    
    
    103,108Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,751
    )
    
    
    
    
    
    
    (11,751
    )Negative plan amendment, net of deferred
income tax benefit of $130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209
    
    
    
    209Prior service cost, net of deferred income
tax benefit of $326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    526
    
    
    
    526Actuarial loss, net of deferred income tax
expense of $138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84
    )
    
    
    (84
    )Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,100
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    
    
    
    
    839Balance at December 31, 2009
    
    
    10,332
    
    
    $
    207
    
    
    $
    1,897
    
    
    $
    90,852
    
    
    $
    (109
    )
    
    $
    92,847
 
  F-5




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC
 
   For the Years EndedDecember 31,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Cash received from customers
    
    $
    168,504
    
    
    $
    230,255
    
    
    $
    289,951Cash paid to suppliers and employees
    
    
    (171,349
    )
    
    
    (215,527
    )
    
    
    (269,795
    )Cash from Continued Dumping and Subsidy
Offset Act, net
    
    
    7,443
    
    
    
    10,828
    
    
    
    9,986Interest paid
    
    
    (3,664
    )
    
    
    (3,111
    )
    
    
    (2,359
    )Income taxes paid
    
    
    (2,120
    )
    
    
    (4,168
    )
    
    
    (4,775
    )Net cash (used) provided by operating activities
    
    
    (1,186
    )
    
    
    18,277
    
    
    
    23,008Cash flows from investing activities:Capital expenditures
    
    
    (2,621
    )
    
    
    (2,261
    )
    
    
    (3,951
    )Proceeds from sale of assets
    
    
    1,303Other, net
    
    
    
    
    
    
    360
    
    
    
    (20
    )Net cash used by investing activities
    
    
    (1,318
    )
    
    
    (1,901
    )
    
    
    (3,971
    )Cash flows from financing activities:Proceeds from senior notes
    
    
    
    
    
    
    
    
    
    
    25,000Purchase and retirement of common stock
    
    
    
    
    
    
    
    
    
    
    (13,557
    )Repayment of senior notes
    
    
    (1,429
    )
    
    
    (1,429
    )
    
    
    (2,857
    )Dividends paid
    
    
    
    
    
    
    (4,132
    )
    
    
    (4,194
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    532Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    32Proceeds from insurance policy loans
    
    
    1,747
    
    
    
    1,550
    
    
    
    1,386Net cash provided (used) by financing activities
    
    
    318
    
    
    
    (4,011
    )
    
    
    6,342Net (decrease) increase in cash
    
    
    (2,186
    )
    
    
    12,365
    
    
    
    25,379Cash at beginning of year
    
    
    44,013
    
    
    
    31,648
    
    
    
    6,269Cash at end of year
    
    $
    41,827
    
    
    $
    44,013
    
    
    $
    31,648Reconciliation of net (loss) income to net cash
(used) provided by operating activities:Net (loss) income
    
    $
    (11,751
    )
    
    $
    3,736
    
    
    $
    5,902Adjustments to reconcile net (loss) income to net cash
(used) provided by operating activities:Pension plan termination charge
    
    
    
    
    
    
    
    
    
    
    6,605Depreciation
    
    
    5,908
    
    
    
    8,805
    
    
    
    8,982Amortization
    
    
    86
    
    
    
    48
    
    
    
    72Inventory write-down
    
    
    2,077Deferred income taxes
    
    
    (177
    )
    
    
    (2,571
    )
    
    
    (4,083
    )Stock-based compensation
    
    
    839
    
    
    
    467
    
    
    
    534Other, net
    
    
    
    
    
    
    
    
    
    
    188Changes in assets and liabilities:Accounts receivable
    
    
    6,576
    
    
    
    3,520
    
    
    
    6,867Inventories
    
    
    8,042
    
    
    
    10,742
    
    
    
    1,278Prepaid expenses and other current assets
    
    
    (10,435
    )
    
    
    (2,041
    )
    
    
    (1,142
    )Accounts payable
    
    
    397
    
    
    
    (4,870
    )
    
    
    (1,783
    )Accrued salaries, wages and benefits
    
    
    1,580
    
    
    
    (525
    )
    
    
    (3,028
    )Other accrued expenses
    
    
    (2,875
    )
    
    
    904
    
    
    
    2,528Other assets
    
    
    66
    
    
    
    103
    
    
    
    88Other long-term liabilities
    
    
    (1,519
    )
    
    
    (41
    )Net cash (used) provided by operating activities
    
    $
    (1,186
    )
    
    $
    18,277
    
    
    $
    23,008
 
  F-6




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 
  Summary of Significant Accounting Policies
 Organization and Basis of Presentation
    Cash Equivalents
  Revenue Recognition
  Inventories
  Property, Plant and Equipment
  Income Taxes
   F-7




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Summary of Significant Accounting Policies (continued)
 Fair Value of Financial Instruments
  Earnings per Common Share
  Stock-Based Compensation
  Goodwill
    Tariffs imposed on wooden bedroom furniture imported from China
  Use of Estimates
   F-8




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Property, Plant and Equipment
 Depreciablelives
    
    
    (in thousands)(in years)
    
    
    2009
    
    
    2008Land and buildings
    
    
    20 to 50
    
    
    $
    33,900
    
    
    $
    39,862Machinery and equipment
    
    
    5 to 12
    
    
    
    63,403
    
    
    
    65,448Office furniture and equipment
    
    
    3 to 10
    
    
    
    1,284
    
    
    
    1,384Construction in progress
    
    
    
    
    
    
    670
    
    
    
    120Property, plant and equipment, at cost
    
    
    
    
    
    
    99,257
    
    
    
    106,814Less accumulated depreciation
    
    
    
    
    
    
    67,882
    
    
    
    71,369Property, plant and equipment, net
    
    
    
    
    
    $
    31,375
    
    
    $
    35,445
 Debt
 (in thousands)2009
    
    
    20086.73% Senior notes due through May 3, 2017
    
    $
    25,000
    
    
    $
    25,0006.94% Senior notes due through May 3, 2011
    
    
    2,857
    
    
    
    4,286Total
    
    
    27,857
    
    
    
    29,286Less current maturities
    
    
    1,429
    
    
    
    1,429Long-term debt, exclusive of current maturities
    
    $
    26,428
    
    
    $
    27,857
      F-9




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Income Taxes
  2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    (6,398
    )
    
    $
    3,163
    
    
    $
    5,730State
    
    
    (329
    )
    
    
    633
    
    
    
    1,072Total current
    
    
    (6,727
    )
    
    
    3,796
    
    
    
    6,802Deferred:Federal
    
    
    (569
    )
    
    
    (2,432
    )
    
    
    (3,439
    )State
    
    
    (66
    )
    
    
    (366
    )
    
    
    (517
    )Total deferred
    
    
    (635
    )
    
    
    (2,798
    )
    
    
    (3,957
    )Income tax expense (benefit)
    
    $
    (7,362
    )
    
    $
    998
    
    
    $
    2,845
  2009
    
    
    2008
    
    
    2007Federal statutory rate
    
    
    (35.0
    )%
    
    
    34.0
    %
    
    
    35.0
    %State tax, net of federal benefit
    
    
    (1.6
    )
    
    
    3.6
    
    
    
    4.9State tax credits and adjustments
    
    
    (.8
    )
    
    
    (2.8
    )Increase in cash surrender value
of life insurance policies
    
    
    (2.8
    )
    
    
    (9.6
    )
    
    
    (4.7
    )Deduction for qualified domestic
production activities
    
    
    
    
    
    
    (1.2
    )
    
    
    (.8
    )Tax-exempt interest income
    
    
    (.1
    )
    
    
    (3.7
    )
    
    
    (1.4
    )Increase to valuation allowance
    
    
    1.5Other, net
    
    
    .3
    
    
    
    .8
    
    
    
    (.5
    )Effective income tax rate
    
    
    (38.5
    )%
    
    
    21.1
    %
    
    
    32.5
    %
  2009
    
    
    2008Current deferred tax assets (liabilities):Accounts receivable
    
    $
    668
    
    
    $
    629Employee benefits
    
    
    2,247
    
    
    
    2,785Other accrued expenses
    
    
    541
    
    
    
    460Net operating loss carry forward
    
    
    165Gross current deferred tax asset
    
    
    3,621
    
    
    
    3,874Less valuation allowance
    
    
    188Net current deferred tax asset
    
    $
    3,433
    
    
    $
    3,874Noncurrent deferred tax liabilities (assets):Property, plant and equipment
    
    $
    4,851
    
    
    $
    5,124Employee benefits
    
    
    (2,288
    )
    
    
    (1,913
    )Other noncurrent assets
    
    
    (435
    )
    
    
    (433
    )Net noncurrent deferred tax liability
    
    $
    (2,128
    )
    
    $
    2,778
   F-10




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Income Taxes (continued)
  2009
    
    
    2008Unrecognized tax benefits balance at January 1
    
    $
    940
    
    
    $
    991Gross increases for tax positions of prior years
    
    
    
    
    
    
    39Gross decreases for tax positions of prior years
    
    
    (79
    )SettlementsLapse of statute of limitations
    
    
    (53
    )
    
    
    (90
    )Unrecognized tax benefits balance at December 31
    
    $
    808
    
    
    $
    940
   Stockholders Equity
    2009
    
    
    2008
    
    
    2007Weighted average shares outstanding
for basic calculation
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,478Dilutive effect of stock options
    
    
    
    
    
    
    
    
    
    
    199Weighted average shares outstanding
for diluted calculation
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,677
  Stock Based Compensation
   F-11




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Stock Based Compensation (continued)
  Expected price volatility
    
    
    42.97
    %Risk-free interest rate
    
    
    2.29
    %Weighted average expected life in years
    
    
    5.7Dividend yield
    
    
    3.0
    %Forfeiture rate
    
    
    15.21
    %
   Weighted-Average
    
    
    AggregateWeighted-
    
    
    Remaining
    
    
    IntrinsicAverage
    
    
    Contractual
    
    
    ValueNumber
    
    
    Exercise
    
    
    Term
    
    
    (inof shares
    
    
    Price
    
    
    (in years)
    
    
    thousands)Outstanding at December 31, 2006
    
    
    925,403
    
    
    $
    16.64
    
    
    
    5.8Lapsed
    
    
    (30,000
    )
    
    
    24.04Exercised
    
    
    (42,900
    )
    
    
    12.41Granted
    
    
    187,985
    
    
    
    11.79Outstanding at December 31, 2007
    
    
    1,040,448
    
    
    $
    15.73
    
    
    
    4.4Lapsed
    
    
    (374,500
    )
    
    
    15.77Granted
    
    
    535,808
    
    
    
    9.70Outstanding at December 31, 2008
    
    
    1,201,796
    
    
    $
    13.02
    
    
    
    8.9Lapsed
    
    
    (243,000
    )
    
    
    9.61Granted
    
    
    681,828
    
    
    
    8.64Outstanding at December 31, 2009
    
    
    1,640,624
    
    
    $
    11.71
    
    
    
    6.8
    
    
    $
    1,148Exercisable at December 31, 2009
    
    
    834,874
    
    
    $
    14.04
    
    
    
    4.8
    
    
    $
    158
   F-12




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Stock Based Compensation (continued)
  2009
    
    
    2008
    
    
    2007Average fair market value of options granted
(per share)
    
    $
    2.74
    
    
    $
    2.32
    
    
    $
    3.25Proceeds from stock options exercised
    
    
    
    
    
    
    
    
    
    
    532Tax benefits related to stock options exercised
    
    
    
    
    
    
    
    
    
    
    92Intrinsic value of stock options exercised
    
    
    
    
    
    
    
    
    
    
    246
 7. Employee Benefits Plans Defined Contribution Plan
  Supplemental Retirement Plan
   2009
    
    
    2008Supplemental
    
    
    SupplementalPlan
    
    
    PlanChange in benefit obligation:Beginning benefit obligation
    
    $
    1,879
    
    
    $
    1,921Interest cost
    
    
    110
    
    
    
    116Actuarial gain
    
    
    113
    
    
    
    3Benefits paid
    
    
    (177
    )
    
    
    (161
    )Ending benefit obligation
    
    
    1,925
    
    
    
    1,879Change in plan assets:Beginning fair value of plan assetsEmployer contributions
    
    
    177
    
    
    
    161Benefits paid
    
    
    (177
    )
    
    
    (161
    )Ending fair value of plan assetsFunded status
    
    $
    (1,925
    )
    
    $
    (1,879
    )Amount recognized in the
consolidated balance sheet:Current liabilities
    
    $
    (154
    )
    
    $
    (163
    )Non current liabilities
    
    
    (1,771
    )
    
    
    (1,716
    )Total
    
    $
    (1,925
    )
    
    $
    (1,879
    )
  F-13




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Employee Benefits Plans (continued)
  2009
    
    
    2008
    
    
    2007Interest cost
    
    $
    110
    
    
    $
    116
    
    
    $
    272Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    (188
    )Net amortization and deferral
    
    
    113
    
    
    
    3
    
    
    
    219Net cost
    
    
    223
    
    
    
    119
    
    
    
    303Settlement expense
    
    
    
    
    
    
    
    
    
    
    6,606Total expense
    
    $
    223
    
    
    $
    119
    
    
    $
    6,909
  2009
    
    
    2008
    
    
    2007Discount rate for funded status
    
    
    5.50
    %(a)
    
    
    6.25
    %(a)
    
    
    6.20
    %(a)Discount rate for pension cost
    
    
    6.25
    %
    
    
    6.20
    %
    
    
    5.75%/5.00
    %(b)Return on assets
 (a)
    
    Rate relates to the Supplemental Retirement Plan.(b)
    
    The 5.75% relates to the Supplemental Retirement Plan. The Stanley Retirement Plan
used a discount rate of 5.00%, which is the rate that was used at distribution.  Postretirement Benefits Other Than Pensions
  2009
    
    
    2008Change in benefit obligation:Beginning benefit obligation
    
    $
    2,908
    
    
    $
    2,954Service cost
    
    
    61
    
    
    
    73Interest cost
    
    
    177
    
    
    
    172Actuarial loss (gain)
    
    
    179
    
    
    
    (146
    )Negative plan amendment
    
    
    (1,254
    )Plan participants contributions
    
    
    232
    
    
    
    199Benefits paid
    
    
    (339
    )
    
    
    (344
    )Ending benefit obligation
    
    
    1,964
    
    
    
    2,908Change in plan assets:Beginning fair value of plan assetsEmployer contributions
    
    
    107
    
    
    
    144Plan participants contributions
    
    
    232
    
    
    
    199Benefits paid
    
    
    (339
    )
    
    
    (343
    )Ending fair value of plan assetsFunded status
    
    $
    (1,964
    )
    
    $
    (2,908
    )
  F-14




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Employee Benefits Plans (continued)
  Current liabilities
    
    $
    324
    
    
    $
    284Non current liabilities
    
    
    1,640
    
    
    
    2,624Total
    
    $
    1,964
    
    
    $
    2,908
  2009
    
    
    2008
    
    
    2007Service cost
    
    $
    61
    
    
    $
    73
    
    
    $
    79Interest cost
    
    
    177
    
    
    
    172
    
    
    
    172Amortization of transition obligation
    
    
    122
    
    
    
    122
    
    
    
    122Amortization of net actuarial loss
    
    
    23
    
    
    
    33
    
    
    
    39Curtailment gain
    
    
    (55
    )Net periodic postretirement benefit cost
    
    $
    328
    
    
    $
    400
    
    
    $
    412
  2009
    
    
    2008
    
    
    2007Discount rate for funded status
    
    
    4.75
    %
    
    
    6.25
    %
    
    
    6.05
    %Discount rate for postretirement benefit cost
    
    
    6.25
    %
    
    
    6.05
    %
    
    
    5.75
    %Health care cost assumed trend rate for next year
    
    
    9.50
    %
    
    
    6.00
    %
    
    
    8.00
    %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
    
    
    2018
    
    
    
    2010
    
    
    
    2010
    OtherSupplemental
    
    
    PostretirementPlan
    
    
    BenefitsNet loss
    
    $
    321
    
    
    $
    718Prior service credit
    
    
    
    
    
    
    (861
    )Total
    
    $
    321
    
    
    $
    (143
    )
  F-15




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Employee Benefits Plans (continued)
  OtherSupplemental
    
    
    PostretirementPlan
    
    
    BenefitsNet loss
    
    $
    11
    
    
    $
    61Prior service credit
    
    
    
    
    
    
    (154
    )Total
    
    $
    11
    
    
    $
    (93
    )
 Deferred Compensation
  Restructuring and Related Charges
   2009
    
    
    2008
    
    
    2007Accelerated depreciation and equipment relocation
    
    $
    1,613
    
    
    $
    4,319
    
    
    $
    3,422Severance and other termination cost
    
    
    1,889
    
    
    
    1,929
    
    
    
    163Inventory write-down
    
    
    2,077Other cost
    
    
    528
    
    
    
    1,051Total restructuring and related charges
    
    $
    6,107
    
    
    $
    7,299
    
    
    $
    3,585
  Cost of sales
    
    $
    5,231
    
    
    $
    5,860
    
    
    $
    3,585Selling, general and administrative expenses
    
    
    876
    
    
    
    1,439Total restructuring and related charges
    
    $
    6,107
    
    
    $
    7,299
    
    
    $
    3,585
  F-16




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Restructuring and Related Charges (continued)
  Severance and othertermination cost
    
    
    Other cost
    
    
    TotalAccrual January 1, 2009
    
    $
    1,446
    
    
    
    
    
    
    $
    1,446Charges to expense
    
    
    1,889
    
    
    $
    259
    
    
    
    2,148Cash Payments
    
    
    (2,265
    )
    
    
    (259
    )
    
    
    (2,524
    )Accrual December 31, 2009
    
    $
    1,070
    
    
    
    
    
    
    $
    1,070
  Income for Continued Dumping and Subsidy Offset Act (CDSOA)
  Commitments and Contingencies
    F-17




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Quarterly Results of Operations (Unaudited)
 (in thousands, except per share data)2009 Quarters:
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthNet Sales
    
    $
    39,764
    
    
    $
    42,326
    
    
    $
    38,455
    
    
    $
    39,906Gross profit
    
    
    4,742
    
    
    
    3,575
    
    
    
    (601
    )
    
    
    (2,253
    )Net income (loss)
    
    
    (2,376
    )(1)
    
    
    (3,023
    )
    
    
    (5,073
    )(2)
    
    
    (1,279
    )(3)(4)Net income (loss) per share:Basic
    
    $
    (.23
    )(1)
    
    $
    (.29
    )
    
    $
    (.49
    )(2)
    
    
    (.12)
    (3)(4)Diluted
    
    
    (.23
    )(1)
    
    
    (.29
    )
    
    
    (.49
    )(2)
    
    
    (.12)
    (3)(4)Dividend paid per share
 2008 Quarters:
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthNet Sales
    
    $
    62,534
    
    
    $
    59,148
    
    
    $
    54,483
    
    
    $
    50,357Gross profit
    
    
    10,820
    
    
    
    9,961
    
    
    
    4,991
    
    
    
    6,821Net income
(loss)
    
    
    1,049
    
    
    
    (68
    )
    
    
    (3,489
    )(5)
    
    
    6,246
    (4)(5)Net income
(loss) per share:Basic
    
    $
    .10
    
    
    $
    (.01
    )
    
    $
    (.33
    )(5)
    
    
    .60
    (4)(5)Diluted
    
    
    .10
    
    
    
    (.01
    )
    
    
    (.33
    )(5)
    
    
    .60
    (4)(5)Dividend paid per share
    
    
    .10
    
    
    
    .10
    
    
    
    .10
    
    
    
    .10
 (1)
    
    Includes after-tax restructuring and other charges of $99 thousand, or $.01 per share,
for the consolidation of manufacturing operations & other restructuring related charges.(2)
    
    Includes after-tax restructuring and other charges of $641 thousand, or $.06 per share,
for the consolidation of two warehouses.(3)
    
    Includes after-tax restructuring and other related charges of $3.0 million, or $.29 per
share, for the consolidation of two warehouses, and other downsizing initiatives
implemented in the fourth quarter of 2009.(4)
    
    Continued Dumping and Subsidy Offset Act receipts totaled $5.7 million after-tax, or
$.56 per share, and $9.1 million after-tax, or $.88 per share, for 2009 and 2008
respectively.(5)
    
    Includes after-tax restructuring charge of $2.8 million, or $.27 per share, for the
consolidation of manufacturing operations and other restructuring related charges.  F-18




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##### Table of Contents



Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EChargedBalance at
    
    
    (Credited)
    
    
    
    
    
    
    BalanceBeginning
    
    
    to Costs &
    
    
    
    
    
    
    at End ofDescriptions
    
    of Period
    
    
    Expenses
    
    
    Deductions
    
    
    Period2009Doubtful receivables
    
    $
    1,000
    
    
    $
    604
    
    
    $
    444
    (a)
    
    $
    1,160Discounts, returns, and allowances
    
    
    644
    
    
    
    (57
    )(b)
    
    
    
    
    
    
    587$
    1,644
    
    
    $
    547
    
    
    $
    444
    
    
    $
    1,7472008Doubtful receivables
    
    $
    825
    
    
    $
    756
    
    
    $
    581
    (a)
    
    $
    1,000Discounts,
returns, and allowances
    
    
    657
    
    
    
    (13
    )(b)
    
    
    
    
    
    
    644$
    1,482
    
    
    $
    743
    
    
    $
    581
    
    
    $
    1,6442007Doubtful receivables
    
    $
    715
    
    
    $
    480
    
    
    $
    370
    (a)
    
    $
    825Discounts,
returns, and allowances
    
    
    839
    
    
    
    (182
    )(b)
    
    
    
    
    
    
    657$
    1,554
    
    
    $
    298
    
    
    $
    370
    
    
    $
    1,482
 
 (a)
    
    Uncollectible receivables written-off, net of recoveries.(b)
    
    Represents net decrease in the reserve.  S-1