##### Table of Contents



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, 2010
 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
    
    Name of each exchange on which registeredCommon Stock, par value $.02
per share
    
    Nasdaq Stock Market
  o þ
 o þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
   Common Stock, par value $.02 per share
    
    14,344,679(Class of Common Stock)
    
    Number of Shares




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##### 



TABLE OF CONTENTS
 PagePart IItem 1 Business
    
    
    3Item 1A Risk Factors
    
    
    7Item 1B Unresolved Staff Comments
    
    
    9Item 2 Properties
    
    
    9Item 3 Legal Proceedings
    
    
    9Item 4 (Removed and Reserved)
    
    
    10Part IIItem 5 Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    10Item 6 Selected Financial Data
    
    
    12Item 7 Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    
    13Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 8 Financial Statements and Supplementary Data
    
    
    18Item 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
    
    
    18Item 9A Controls and Procedures
    
    
    19Item 9B Other Information
    
    
    19Part IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    19Item 11 Executive Compensation
    
    
    20Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    20Item 13 Certain Relationships and Related Transactions, and Director
Independence
    
    
    20Item 14 Principal Accounting Fees and Services
    
    
    20Part IVItem 15 Exhibits, Financial Statement Schedules
    
    
    20Signatures
    
    
    23Index to Consolidated Financial Statements and Schedule
    
    
    F-1Exhibit 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
  Young America
   
    
    Smaller, more frequent and cost-effective production runs,
 
    
    Standardized engineering philosophy to improve quality and lower cost,
 
    
    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.
  Stanley Furniture
     Warehousing and Delivery
   4




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Raw Materials
   Competition
   Associates
  Trademarks
  Governmental Regulations
   5




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Forward-Looking Statements
  Available Information
   Investor@Stanleyfurniture.com
  6




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##### Table of Contents



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.
 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 supply of goods could be interrupted for a variety of reasons. A natural disaster or
other causes of physical damage to any one of our sourcing factories could interrupt
production for an extended period of time. 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, requiring us to find alternative sourcing arrangements at a higher cost,
or may force us 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.
  We may experience a decrease in revenues, as well as asset impairment or other charges, if our
strategy to transition Young America products to our domestic manufacturing is not successful.
   7




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We may not be able to maintain or to raise prices in response to inflation and increasing costs.
  We may not be able to sustain sales, earnings and liquidity levels due to economic downturns.
  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
  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.
  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.
  Future cost of compliance with environmental, safety and health regulations could reduce our
earnings.
   8




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Extended business interruption at our manufacturing facility could result in reduced sales.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
  Approximate
    
    
    OwnedFacility Size
    
    
    orLocation
    
    Primary Use
    
    
    (Square Feet)
    
    
    LeasedStanleytown, VA
    
    Warehouse and Corporate Headquarters
    
    
    
    950,000
    
    
    LeasedRobbinsville, NC
    
    Manufacturing/Warehouse
    
    
    562,100
    
    
    OwnedMartinsville, VA
    
    Warehouse
    
    
    300,000
    
    
    LeasedHigh Point, NC
    
    Showroom
    
    
    51,000
    
    
    Leased
 
 Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    (Removed and Reserved)
  9




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Executive Officers of the Registrant
  Name
    
    Age
    
    PositionGlenn Prillaman
    
    
    39
    
    
    President and Chief Executive OfficerMicah S. Goldstein
    
    
    40
    
    
    Chief Operating and Financial Officer
 Glenn Prillaman ®
 Micah S. Goldstein
 
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 STLY.
 2010
    
    
    2009Dividends
    
    
    
    
    
    
    
    
    
    
    DividendsHigh
    
    
    Low
    
    
    Paid
    
    
    High
    
    
    Low
    
    
    PaidFirst Quarter
    
    $
    11.12
    
    
    $
    7.50
    
    
    
    
    
    
    $
    8.59
    
    
    $
    6.50
    
    
    
    Second Quarter
    
    
    11.14
    
    
    
    4.01
    
    
    
    
    
    
    
    11.10
    
    
    
    7.08
    
    
    
    Third Quarter
    
    
    4.29
    
    
    
    3.35
    
    
    
    
    
    
    
    13.48
    
    
    
    9.69
    
    
    
    Fourth Quarter
    
    
    4.00
    
    
    
    2.98
    
    
    
    
    
    
    
    11.01
    
    
    
    7.13
    
    
    
    
   10




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Performance Graph
  
 (1)
    
    The graph shows the cumulative total return on $100 invested at the market close on
December 31, 2005, the last trading day in 2005, in common stock or the specified index,
including reinvestments of dividends.(2)
    
    Nasdaq Market Index as prepared by Morningstar, Inc.(3)
    
    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 18, 2011, Morningstar, Inc. reported that these two indexes consisted of Chromcraft
Revington, Inc., Ethan Allen Interiors, Inc., Flexsteel Industries, Inc., Furniture Brands
International, Inc., Hooker Furniture Corporation, Industrie Natuzzi, Keller Manufacturing
Company, Inc., Kimball International, Inc., Krauses Furniture Inc., La-Z-Boy, Inc., Luxor
Industrial, Mobile Presence Technologies Inc., Rowe Companies, Sunstates Corporation, 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
    
    
    2,093,654
    
    
    $
    8.91
    
    
    
    374,334
  11




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Item 6.
    
    Selected Financial Data
 Years Ended December 31,2010
    
    
    2009 (3)
    
    
    2008 (3)
    
    
    2007 (3)
    
    
    2006 (3)(in thousands, except per share data)Income Statement Data:Net sales
    
    $
    137,012
    
    
    $
    160,451
    
    
    $
    226,522
    
    
    $
    282,847
    
    
    $
    307,547Cost of sales (1)
    
    
    153,115
    
    
    
    158,695
    
    
    
    197,995
    
    
    
    240,932
    
    
    
    248,703Gross profit (loss)
    
    
    (16,103
    )
    
    
    1,756
    
    
    
    28,527
    
    
    
    41,915
    
    
    
    58,844Selling, general and administrative
expenses (2)
    
    
    20,625
    
    
    
    26,666
    
    
    
    32,375
    
    
    
    34,578
    
    
    
    36,115Goodwill impairment charge
    
    
    9,072Pension plan termination charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,605Operating income (loss)
    
    
    (45,800
    )
    
    
    (24,910
    )
    
    
    (3,848
    )
    
    
    732
    
    
    
    22,729Income from Continued Dumping and Subsidy
Offset Act, net
    
    
    1,556
    
    
    
    9,340
    
    
    
    11,485
    
    
    
    10,429
    
    
    
    4,419Other income, net
    
    
    25
    
    
    
    160
    
    
    
    308
    
    
    
    265
    
    
    
    297Interest expense, net
    
    
    3,534
    
    
    
    3,703
    
    
    
    3,211
    
    
    
    2,679
    
    
    
    1,710Income (loss) before income taxes
    
    
    (47,753
    )
    
    
    (19,113
    )
    
    
    4,734
    
    
    
    8,747
    
    
    
    25,735Income taxes (benefit)
    
    
    (3,963
    )
    
    
    (7,362
    )
    
    
    998
    
    
    
    2,845
    
    
    
    8,954Net income (loss)
    
    $
    (43,790
    )
    
    $
    (11,751
    )
    
    $
    3,736
    
    
    $
    5,902
    
    
    $
    16,781Basic Earnings (loss) Per Share:Net income (loss)
    
    $
    (4.11
    )
    
    $
    (1.14
    )
    
    $
    .36
    
    
    $
    .56
    
    
    $
    1.44Weighted average shares
    
    
    10,650
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,478
    
    
    
    11,649Diluted Earnings (loss) Per Share:Net income (loss)
    
    $
    (4.11
    )
    
    $
    (1.14
    )
    
    $
    .36
    
    
    $
    .55
    
    
    $
    1.41Weighted average shares
    
    
    10,650
    
    
    
    10,332
    
    
    
    10,332
    
    
    
    10,677
    
    
    
    11,924Cash dividends paid per share
    
    $
    
    
    
    $
    
    
    
    $
    .40
    
    
    $
    .40
    
    
    $
    .32Balance Sheet and Other Data:Cash
    
    $
    25,532
    
    
    $
    41,827
    
    
    $
    44,013
    
    
    $
    31,648
    
    
    $
    6,269Inventories
    
    
    25,695
    
    
    
    37,225
    
    
    
    47,344
    
    
    
    58,086
    
    
    
    59,364Working capital
    
    
    52,769
    
    
    
    87,277
    
    
    
    97,059
    
    
    
    91,852
    
    
    
    72,036Total assets
    
    
    88,396
    
    
    
    150,462
    
    
    
    165,871
    
    
    
    173,731
    
    
    
    162,678Long-term debt including
current maturities
    
    
    
    
    
    
    27,857
    
    
    
    29,286
    
    
    
    30,714
    
    
    
    8,571Stockholders equity
    
    
    61,795
    
    
    
    92,847
    
    
    
    103,108
    
    
    
    102,851
    
    
    
    109,647Capital expenditures
    
    $
    857
    
    
    $
    2,621
    
    
    $
    2,261
    
    
    $
    3,951
    
    
    $
    4,196Stock repurchases:Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    639
    
    
    
    1,423Total cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    13,557
    
    
    $
    33,576
 (1)
    
    Included in cost of sales in 2010 is $10.4 million for accelerated depreciation and
restructuring and related charges for the conversion of our Stanleytown manufacturing
facility to a warehouse and distribution center. Included in cost of sales in 2009 is $5.2
million 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 for the consolidation of two manufacturing facilities into one. Included in
cost of sales in 2007 is $3.6 million for the conversion of a manufacturing facility to a
warehouse operation.(2)
    
    Included in selling, general and administrative expenses in 2009 is $876 thousand and in
2008 is $1.4 million of restructuring charges.(3)
    
    Amounts reflect the reclassification of costs to warehouse and prepare goods for shipping
to customers from selling, general and administrative expenses to cost of sales to conform
to the 2010 presentation. These expenses amounted to $3.7 million in 2009, $4.1 million in
2008, $5.0 million in 2007 and $6.0 million in 2006. These reclassifications had no
affect on our reported net income or loss.  12




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operation
  Overview
   
    
    In late 2007, we consolidated production from our Martinsville, Virginia facility
into our Stanleytown, Virginia facility. In 2008, we converted the Martinsville
facility into a warehouse. This improved our asset utilization and production
efficiencies at the Stanleytown facility and lowered our costs by eliminating leased
warehouse space. The related pre-tax restructuring cost was $3.8 million ($3.6 million
in 2007 and $249,000 in 2008).
 
    
    In 2008, we consolidated two manufacturing facilities into one, eliminated certain
positions and offered a voluntary early retirement incentive. We incurred pre-tax
restructuring charges of $7.3 million ($7.1 million in 2008 and $216,000 in 2009)
related to these actions.
 
    
    In 2009, pre-tax restructuring charges of $6.1 million were incurred for three major
items. A warehouse consolidation represented about $2 million pre-tax. We ceased
operations at our former Lexington, North Carolina warehouse facility and this real
estate was sold in early 2010. We eliminated approximately 25% of our salaried
positions through a combination of early-retirement incentives and layoffs resulting in
about $2 million of pre-tax charges. The remainder of about $2 million pre-tax
restructuring expense was due to a write-down of inventories as a result of reducing
the number of items offered in our adult product line by discontinuing certain slow
moving items.
 
    
    In the second half of 2009, we began implementing a strategy to differentiate our
Young America product line that led us to move the production of those items we
purchased offshore to our domestic facilities. These items were primarily youth beds
and cribs. This transition began in late 2009 and our Young America nursery and youth
product line is now exclusively manufactured in our Robbinsville, North Carolina
facility, except for certain component SKUs of nominal value.
 
    
    We suspended cash dividend payments in 2009, providing annual cash savings of
approximately $4 million.
  
    
    From May through December 2010, we transitioned the majority of the manufacturing of
the Stanley Furniture product line from our Stanleytown, Virginia facility to several
strategic offshore vendors with whom we already had established working relationships.
We ceased manufacturing operations at the Stanleytown facility in December 2010. A
portion of this facility is now being used as a warehousing and distribution center for
the Stanley Furniture product line, and our corporate office.
 
    
    We have retained a domestic assembly and finish process at our Martinsville,
Virginia location to continue offering multiple finish options on certain items in the
Stanley Furniture product line. The Martinsville facility is also used for warehousing
and distribution.
 
    
    Youth bed and crib production along with certain machinery and equipment was moved
from our Stanleytown, Virginia facility to our Robbinsville, North Carolina facility in
the fourth quarter of 2010. In addition, to support this move and improve production
flow and efficiency we invested in some new equipment and relocated certain machinery
and equipment within our Robbinsville facility.
  13




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
    
    We received net proceeds of $1.0 million from the sale of our former Lexington,
North Carolina warehouse facility.
 
    
    We raised $12.0 million of gross proceeds from a successful rights offering and
issued 4 million new shares of common stock, in December 2010.
 
    
    We received $2.2 million of funds under the Continued Dumping and Subsidy Offset Act
of 2000 (CDSOA) in connection with the case involving wooden bedroom furniture imported
from China.
 
    
    We used $27.9 million to repay in full all outstanding debt under our note agreement
with Prudential Insurance Company of America and other lenders. We made a scheduled
principal payment of $1.4 million in May 2010; and no penalty pre-payments of $11.5
million and $15.0 million in May 2010 and December 2010, respectively.
 
    
    We received tax refunds of $8.4 million due to the carry back of operating losses to
prior years.
 
    
    We received $2.4 million of gross proceeds in December 2010 from the sale of the
Stanleytown, Virginia property and leased back a substantial portion of the facility
for a five year term with monthly rental payments of $40,000 starting January 1, 2011.
 
    
    We received $2.4 million of gross proceeds in December 2010 from the sale of the
Martinsville, Virginia property and leased back the facility on a rent free basis for
an initial one-year term, with a renewal option to rent for a second year. The
transaction has been accounted for as a financing arrangement.
 
    
    We received $2.3 million in December 2010 from the sale of certain machinery and
equipment resulting from the decision to cease manufacturing at our Stanleytown,
Virginia facility. We subsequently received an additional $1.4 million in January 2011
from the sale of this machinery and equipment and expect approximately $100,000 in
February 2011.
   14




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Results of Operations
 2010 Compared to 2009
         2009 Compared to 2008
    15




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Financial Condition, Liquidity and Capital Resources
       16




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Payment due or commitment expirationLess Than
    
    
    
    
    
    
    
    
    
    
    OverTotal
    
    
    1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    5 yearsContractual cash obligations:Postretirement benefits other than pensions(1)
    
    $
    3,614
    
    
    $
    394
    
    
    $
    705
    
    
    $
    612
    
    
    $
    1,903Operating leases
    
    
    4,507
    
    
    
    1,058
    
    
    
    1,888
    
    
    
    1,561Total contractual cash obligations
    
    $
    8,121
    
    
    $
    1,452
    
    
    $
    2,593
    
    
    $
    2,173
    
    
    $
    1,903Other commercial commitments:Letters of credit
    
    $
    1,552
    
    
    $
    1,552
 (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)
      17




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Critical Accounting Policies
  Allowance for doubtful accounts
 Inventory valuation
 Deferred Taxes
  Long-lived assets
 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
 
  18




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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
  
 PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
       19




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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
  
 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, 2010 and 2009Consolidated Statements of Income for each of the three years in the period ended December 31, 2010Consolidated Statements of Changes in Stockholders Equity for each of the three years in the period
ended December 31, 2010.Consolidated Statements of Cash Flow for each of the three years in the period ended December 31, 2010Notes 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, 2010.
 (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).
  20




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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).(1)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).(1)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).(1)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).(1)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).(1)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).(1)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).(1)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).(1)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).(1)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).(1)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
    
    
    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).(1)10.13
    
    
    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).(1)10.14
    
    
    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).(1)
 
 (1)
    
    Management contract or compensatory plan  21




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##### Table of Contents



10.15
    
    
    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).(1)10.16
    
    
    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).(1)10.17
    
    
    Change in Control Protection Agreement, dated
August 11, 2010, by and between the Registrant
and Micah Goldstein (incorporated by reference
to Exhibit 10.1 to the Registrants Form 8-K
(Commission File No. 0-14938) filed August 16,
2010).(1)10.18
    
    
    Amendment to the Change in Control Protection
Agreement dated September 10, 2010, by and
between the Registrant and Glenn Prillaman
(incorporated by reference to Exhibit 10.1 to
Registrants Form 8-K (Commission File No.
0-14938) filed September 16, 2010).(1)10.19
    
    
    Amendment to Employment Agreement dated
September 10, 2010, by and between the
Registrant and Douglas I. Payne (incorporated by
reference to Exhibit 10.2 to Registrants Form
8-K (Commission File No. 0-14938) filed
September 16, 2010).(1)21
    
    
    List of Subsidiaries. (2)23
    
    
    Consent of PricewaterhouseCoopers LLP. (2)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. (2)31.2
    
    
    Certification by Micah S. Goldstein, our
Chief Financial Officer, pursuant to Rule
13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended. (2)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.(2)32.2
    
    
    Certification by Micah S. Goldstein, 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.(2)
 
 (1)
    
    Management contract or compensatory plan(2)
    
    Filed Herewith  22




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##### Table of Contents



SIGNATURES
  STANLEY FURNITURE COMPANY, INC.February 3, 2011
    By:

/s/ Glenn PrillamanGlenn PrillamanPresident and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Michael P. Haley

(Michael P. Haley)
    
    Chairman and Director
    
    February 3, 2011/s/ Glenn Prillaman

(Glenn Prillaman)
    
    President and Chief
Executive Officer
(Principal Executive
Officer) and Director
    
    February 3, 2011/s/ Micah S. Goldstein

(Micah S. Goldstein)
    
    Chief Operating and
Financial Officer and
Secretary (Principal
Financial and Accounting
Officer)
    
    February 3, 2011/s/ Robert G. Culp, III

(Robert G. Culp, III)
    
    Director
    
    February 3, 2011/s/ Dominic P. Dascoli

(Dominic P. Dascoli)
    
    Director
    
    February 3, 2011/s/ Thomas L. Millner

(Thomas L. Millner)
    
    Director
    
    February 3, 2011/s/ T. Scott McIlhenny, Jr.

(T. Scott McIlhenny, Jr.)
    
    Director
    
    February 3, 2011/s/ Albert L. Prillaman

(Albert L. Prillaman)
    
    Director
    
    February 3, 2011
  23




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##### Table of Contents



PageConsolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-3Consolidated Statements of Income for each of the three years in the period
ended December 31, 2010
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity for each of the
three years in the period ended December 31, 2010
    
    
    F-5Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 2010
    
    
    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, 2010
    
    
    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 31,2010
    
    
    2009ASSETSCurrent assets:Cash
    
    $
    25,532
    
    
    $
    41,827Accounts receivable, less allowances of $1,240 and $1,747
    
    
    9,888
    
    
    
    15,297Inventories:Finished goods
    
    
    20,855
    
    
    
    22,376Work-in-process
    
    
    1,709
    
    
    
    8,184Raw materials
    
    
    3,131
    
    
    
    6,665Total inventories
    
    
    25,695
    
    
    
    37,225Prepaid expenses and other current assets
    
    
    5,883
    
    
    
    4,898Income tax receivable
    
    
    3,952
    
    
    
    6,882Deferred income taxes
    
    
    1,021
    
    
    
    3,433Total current assets
    
    
    71,971
    
    
    
    109,562Property, plant and equipment, net
    
    
    15,980
    
    
    
    31,375Goodwill
    
    
    
    
    
    
    9,072Other assets
    
    
    445
    
    
    
    453Total assets
    
    $
    88,396
    
    
    $
    150,462LIABILITIESCurrent liabilities:Current maturities of long-term debt
    
    
    
    
    
    $
    1,429Accounts payable
    
    $
    9,116
    
    
    
    11,633Accrued salaries, wages and benefits
    
    
    4,805
    
    
    
    6,597Other accrued expenses
    
    
    2,921
    
    
    
    2,626Lease related obligation
    
    
    2,360Total current liabilities
    
    
    19,202
    
    
    
    22,285Long-term debt, exclusive of current maturities
    
    
    
    
    
    
    26,428Deferred income taxes
    
    
    1,021
    
    
    
    2,128Other long-term liabilities
    
    
    6,378
    
    
    
    6,774Total liabilities
    
    
    26,601
    
    
    
    57,615Commitments and ContingenciesSTOCKHOLDERS EQUITYCommon stock, $0.02 par value, 25,000,000 shares authorized,
14,344,679 and 10,332,179 shares issued and outstanding,
respectively
    
    
    287
    
    
    
    207Capital in excess of par value
    
    
    14,433
    
    
    
    1,897Retained earnings
    
    
    47,062
    
    
    
    90,852Accumulated other comprehensive loss
    
    
    13
    
    
    
    (109
    )Total stockholders equity
    
    
    61,795
    
    
    
    92,847Total liabilities and stockholders equity
    
    $
    88,396
    
    
    $
    150,462
 
  F-3




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 
   For the Years EndedDecember 31,2010
    
    
    2009
    
    
    2008Net sales
    
    $
    137,012
    
    
    $
    160,451
    
    
    $
    226,522Cost of sales
    
    
    153,115
    
    
    
    158,695
    
    
    
    197,995Gross profit (loss)
    
    
    (16,103
    )
    
    
    1,756
    
    
    
    28,527Selling, general and administrative expenses
    
    
    20,625
    
    
    
    26,666
    
    
    
    32,375Goodwill impairment charge
    
    
    9,072Operating income (loss)
    
    
    (45,800
    )
    
    
    (24,910
    )
    
    
    (3,848
    )Income from Continued Dumping and Subsidy
Offset Act, net
    
    
    1,556
    
    
    
    9,340
    
    
    
    11,485Other income, net
    
    
    25
    
    
    
    160
    
    
    
    308Interest income
    
    
    3
    
    
    
    45
    
    
    
    591Interest expense
    
    
    3,537
    
    
    
    3,748
    
    
    
    3,802Income (loss) before income taxes
    
    
    (47,753
    )
    
    
    (19,113
    )
    
    
    4,734Income tax (benefit) expense
    
    
    (3,963
    )
    
    
    (7,362
    )
    
    
    998Net income (loss)
    
    $
    (43,790
    )
    
    $
    (11,751
    )
    
    $
    3,736Earnings (loss) per share:Basic
    
    $
    (4.11
    )
    
    $
    (1.14
    )
    
    $
    .36Diluted
    
    $
    (4.11
    )
    
    $
    (1.14
    )
    
    $
    .36Weighted average shares outstanding:Basic
    
    
    10,650
    
    
    
    10,332
    
    
    
    10,332Diluted
    
    
    10,650
    
    
    
    10,332
    
    
    
    10,332Cash dividends declared and paid
per common share
    
    $
    
    
    
    $
    
    
    
    $
    .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, 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 loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,100
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    
    
    
    
    839Balance at December 31, 2009
    
    
    10,332
    
    
    $
    207
    
    
    $
    1,897
    
    
    $
    90,852
    
    
    $
    (109
    )
    
    $
    92,847Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,790
    )
    
    
    
    
    
    
    (43,790
    )Prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57
    )
    
    
    (57
    )Actuarial gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179
    
    
    
    179Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,668
    )Exercise of stock options
    
    
    13
    
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    116Issuance of common stock
    
    
    4,000
    
    
    
    80
    
    
    
    11,717
    
    
    
    
    
    
    
    
    
    
    
    11,797Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    703
    
    
    
    
    
    
    
    
    
    
    
    703Balance at December 31, 2010
    
    
    14,345
    
    
    $
    287
    
    
    $
    14,433
    
    
    $
    47,062
    
    
    $
    13
    
    
    $
    61,795
 
  F-5




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC
 
   For the Years EndedDecember 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Cash received from customers
    
    $
    142,481
    
    
    $
    168,504
    
    
    $
    230,255Cash paid to suppliers and employees
    
    
    (158,560
    )
    
    
    (171,349
    )
    
    
    (215,527
    )Cash from Continued Dumping and Subsidy
Offset Act, net
    
    
    2,232
    
    
    
    7,443
    
    
    
    10,828Interest paid
    
    
    (3,750
    )
    
    
    (3,664
    )
    
    
    (3,111
    )Income tax refunds (payments)
    
    
    8,195
    
    
    
    (2,120
    )
    
    
    (4,168
    )Net cash (used) provided by operating activities
    
    
    (9,402
    )
    
    
    (1,186
    )
    
    
    18,277Cash flows from investing activities:Capital expenditures
    
    
    (857
    )
    
    
    (2,621
    )
    
    
    (2,261
    )Proceeds from sale of assets
    
    
    5,731
    
    
    
    1,303Other, net
    
    
    (28
    )
    
    
    
    
    
    
    360Net cash provided (used) by investing activities
    
    
    4,846
    
    
    
    (1,318
    )
    
    
    (1,901
    )Cash flows from financing activities:Repayment of senior notes
    
    
    (27,857
    )
    
    
    (1,429
    )
    
    
    (1,429
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    (4,132
    )Proceeds from lease related obligation
    
    
    2,360Proceeds from exercise of stock options
    
    
    116Proceeds from issuance of common stock
    
    
    11,797Proceeds from insurance policy loans
    
    
    1,845
    
    
    
    1,747
    
    
    
    1,550Net cash (used) provided by financing activities
    
    
    (11,739
    )
    
    
    318
    
    
    
    (4,011
    )Net (decrease) increase in cash
    
    
    (16,295
    )
    
    
    (2,186
    )
    
    
    12,365Cash at beginning of year
    
    
    41,827
    
    
    
    44,013
    
    
    
    31,648Cash at end of year
    
    $
    25,532
    
    
    $
    41,827
    
    
    $
    44,013Reconciliation of net (loss) income to net cash
(used) provided by operating activities:Net (loss) income
    
    $
    (43,790
    )
    
    $
    (11,751
    )
    
    $
    3,736Adjustments to reconcile net (loss) income to net cash
(used) provided by operating activities:Goodwill impairment charge
    
    
    9,072Depreciation
    
    
    9,357
    
    
    
    5,908
    
    
    
    8,805Amortization
    
    
    48
    
    
    
    86
    
    
    
    48Inventory write-down
    
    
    
    
    
    
    2,077Deferred income taxes
    
    
    1,305
    
    
    
    (177
    )
    
    
    (2,571
    )Stock-based compensation
    
    
    703
    
    
    
    839
    
    
    
    467Other, net
    
    
    657Changes in assets and liabilities:Accounts receivable
    
    
    5,409
    
    
    
    6,576
    
    
    
    3,520Inventories
    
    
    11,530
    
    
    
    8,042
    
    
    
    10,742Prepaid expenses and other current assets
    
    
    508
    
    
    
    (10,435
    )
    
    
    (2,041
    )Accounts payable
    
    
    (2,517
    )
    
    
    397
    
    
    
    (4,870
    )Accrued salaries, wages and benefits
    
    
    (1,667
    )
    
    
    1,580
    
    
    
    (525
    )Other accrued expenses
    
    
    292
    
    
    
    (2,875
    )
    
    
    904Other assets
    
    
    87
    
    
    
    66
    
    
    
    103Other long-term liabilities
    
    
    (396
    )
    
    
    (1,519
    )
    
    
    (41
    )Net cash (used) provided by operating activities
    
    $
    (9,402
    )
    
    $
    (1,186
    )
    
    $
    18,277
 
  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
  Fair Value of Financial Instruments
   F-7




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##### Table of Contents



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




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Property, Plant and Equipment
 Depreciablelives
    
    (in thousands)(in years)
    
    2010
    
    
    2009Land and buildings
    
    20 to 50
    
    $
    19,096
    
    
    $
    33,900Machinery and equipment
    
    5 to 12
    
    
    24,780
    
    
    
    63,403Office furniture and equipment
    
    3 to 10
    
    
    1,168
    
    
    
    1,284Construction in progress
    
    
    
    
    1,139
    
    
    
    670Property, plant and equipment, at cost
    
    
    
    
    46,183
    
    
    
    99,257Less accumulated depreciation
    
    
    
    
    30,203
    
    
    
    67,882Property, plant and equipment, net
    
    
    
    $
    15,980
    
    
    $
    31,375
  Goodwill
   Debt
 (in thousands)2010
    
    
    20096.73% Senior notes due through May 3, 2017
    
    
    
    
    
    $
    25,0006.94% Senior notes due through May 3, 2011
    
    
    
    
    
    
    2,857Total
    
    
    
    
    
    
    27,857Less current maturities
    
    
    
    
    
    
    1,429Long-term debt, exclusive of current maturities
    
    
    
    
    
    $
    26,428
    F-9




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Lease-Related Obligation
  Income Taxes
  2010
    
    
    2009
    
    
    2008Current:Federal
    
    $
    (5,605
    )
    
    $
    (6,398
    )
    
    $
    3,163State
    
    
    27
    
    
    
    (329
    )
    
    
    633Total current
    
    
    (5,578
    )
    
    
    (6,727
    )
    
    
    3,796Deferred:Federal
    
    
    1,476
    
    
    
    (569
    )
    
    
    (2,432
    )State
    
    
    139
    
    
    
    (66
    )
    
    
    (366
    )Total deferred
    
    
    1,615
    
    
    
    (635
    )
    
    
    (2,798
    )Income tax expense (benefit)
    
    $
    (3,963
    )
    
    $
    (7,362
    )
    
    $
    998
  2010
    
    
    2009
    
    
    2008Federal statutory rate
    
    
    (35.0
    )%
    
    
    (35.0
    )%
    
    
    34.0
    %State tax, net of federal benefit
    
    
    (1.4
    )
    
    
    (1.6
    )
    
    
    3.6State tax credits and adjustments
    
    
    (.7
    )
    
    
    (.8
    )
    
    
    (2.8
    )Increase in cash surrender value
of life insurance policies
    
    
    (1.2
    )
    
    
    (2.8
    )
    
    
    (9.6
    )Deduction for qualified domestic
production activities
    
    
    
    
    
    
    
    
    
    
    (1.2
    )Tax-exempt interest income
    
    
    
    
    
    
    (.1
    )
    
    
    (3.7
    )Increase to valuation allowance
    
    
    23.3
    
    
    
    1.5Goodwill impairment
    
    
    6.7Other, net
    
    
    
    
    
    
    .3
    
    
    
    .8Effective income tax rate
    
    
    (8.3
    )%
    
    
    (38.5
    )%
    
    
    21.1
    %
  F-10




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Income Taxes (continued)
  2010
    
    
    2009Current deferred tax assets:Accounts receivable
    
    $
    474
    
    
    $
    668Employee benefits
    
    
    1,248
    
    
    
    2,247Other accrued expenses
    
    
    791
    
    
    
    541Financing obligation
    
    
    903Net operating loss carry forward
    
    
    
    
    
    
    165Gross current deferred tax asset
    
    
    3,416
    
    
    
    3,621Less valuation allowance
    
    
    (2,395
    )
    
    
    (188
    )Net current deferred tax asset
    
    $
    1,021
    
    
    $
    3,433Noncurrent deferred tax assets (liabilities)Property, plant and equipment
    
    $
    (4,944
    )
    
    $
    (4,851
    )Employee benefits
    
    
    3,004
    
    
    
    2,288Other noncurrent assets
    
    
    245
    
    
    
    435Net Operating Loss
    
    
    9,877Gross non-current deferred tax assets (liabilities)
    
    
    8,182
    
    
    
    (2,128
    )Less valuation allowance
    
    
    (9,203
    )Net noncurrent deferred tax assets (liabilities)
    
    $
    (1,021
    )
    
    $
    (2,128
    )
    2010
    
    
    2009Unrecognized tax benefits balance at January 1
    
    $
    808
    
    
    $
    940Gross increases for tax positions of prior years
    
    
    300Gross decreases for tax positions of prior years
    
    
    (386
    )
    
    
    (79
    )Lapse of statute of limitations
    
    
    
    
    
    
    (53
    )Unrecognized tax benefits balance at December 31
    
    $
    722
    
    
    $
    808
  F-11




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Income Taxes (continued)
   Stockholders Equity
    2010
    
    
    2009
    
    
    2008Weighted average shares outstanding
for basic calculation
    
    
    10,650
    
    
    
    10,332
    
    
    
    10,332Dilutive effect of stock optionsWeighted average shares outstanding
for diluted calculation
    
    
    10,650
    
    
    
    10,332
    
    
    
    10,332
  Stock Based Compensation
    F-12




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Stock Based Compensation (continued)
  2010
    
    
    2009
    
    
    2008Expected price volatility
    
    
    53.21
    %
    
    
    42.97
    %
    
    
    36.12
    %Risk-free interest rate
    
    
    2.30
    %
    
    
    2.29
    %
    
    
    3.07
    %Weighted average expected life in years
    
    
    5.6
    
    
    
    5.7
    
    
    
    5.6Dividend yield
    
    
    
    
    
    
    3.0
    %
    
    
    4.28
    %Forfeiture rate
    
    
    14.27
    %
    
    
    15.21
    %
    
    
    12.01
    %
   Weighted-AverageRemaining
    
    
    AggregateWeighted-
    
    
    Contractual
    
    
    IntrinsicNumber
    
    
    Average
    
    
    Term
    
    
    Valueof shares
    
    
    Exercise Price
    
    
    (in years)
    
    
    (in thousands)Outstanding at December 31, 2007
    
    
    1,040,488
    
    
    $
    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
    
    
    
    6.8Exercised
    
    
(12,500
    )
    
    
    9.22Lapsed
    
    
    (70,000
    )
    
    
    9.43Expired
    
    
    (175,000
    )
    
    
    12.47Granted
    
    
    710,530
    
    
    
    3.40Outstanding at December 31, 2010
    
    
    2,093,654
    
    
    $
    8.91
    
    
    
    7.6Exercisable at December 31, 2010
    
    
    900,779
    
    
    $
    13.31
    
    
    
    5.6
   F-13




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Stock Based Compensation (continued)
  2010
    
    
    2009
    
    
    2008Average fair market value of options granted
(per share)
    
    $
    1.72
    
    
    $
    2.74
    
    
    $
    2.32Proceeds from stock options exercised
    
    $
    116Intrinsic value of stock options exercised
    
    $
    126
 Employee Benefits Plans
 Defined Contribution Plan
 
 Supplemental Retirement Plan
  2010
    
    
    2009Supplemental
    
    
    SupplementalPlan
    
    
    PlanChange in benefit obligation:Beginning benefit obligation
    
    $
    1,925
    
    
    $
    1,879Interest cost
    
    
    101
    
    
    
    110Actuarial gain
    
    
    94
    
    
    
    113Benefits paid
    
    
    (164
    )
    
    
    (177
    )Ending benefit obligation
    
    
    1,956
    
    
    
    1,925Change in plan assets:Beginning fair value of plan assetsEmployer contributions
    
    
    164
    
    
    
    177Benefits paid
    
    
    (164
    )
    
    
    (177
    )Ending fair value of plan assetsFunded status
    
    $
    (1,956
    )
    
    $
    (1,925
    )Amount recognized in
the consolidated balance sheet:Current liabilities
    
    $
    (162
    )
    
    $
    (154
    )Non current liabilities
    
    
    (1,794
    )
    
    
    (1,771
    )Total
    
    $
    (1,956
    )
    
    $
    (1,925
    )
  F-14




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Employee Benefits Plans (continued)
  2010
    
    
    2009
    
    
    2008Interest cost
    
    $
    101
    
    
    $
    110
    
    
    $
    116Net amortization and deferral
    
    
    94
    
    
    
    113
    
    
    
    3Total expense
    
    $
    195
    
    
    $
    223
    
    
    $
    119
  2010
    
    
    2009
    
    
    2008Discount rate for funded status
    
    
    4.90
    %
    
    
    5.50
    %
    
    
    6.25
    %Discount rate for pension cost
    
    
    5.50
    %
    
    
    6.25
    %
    
    
    6.20
    %
  Postretirement Benefits Other Than Pensions
 
 2010
    
    
    2009Change in benefit obligation:Beginning benefit obligation
    
    $
    1,964
    
    
    $
    2,908Service cost
    
    
    
    
    
    
    61Interest cost
    
    
    82
    
    
    
    177Actuarial loss (gain)
    
    
    (324
    )
    
    
    179Negative plan amendment
    
    
    (61
    )
    
    
    (1,254
    )Plan participants contributions
    
    
    239
    
    
    
    232Benefits paid
    
    
    (242
    )
    
    
    (339
    )Ending benefit obligation
    
    
    1,658
    
    
    
    1,964Change in plan assets:Beginning fair value of plan assetsEmployer contributions
    
    
    4
    
    
    
    107Plan participants contributions
    
    
    239
    
    
    
    232Benefits paid
    
    
    (243
    )
    
    
    (339
    )Ending fair value of plan assetsFunded status
    
    $
    (1,658
    )
    
    $
    (1,964
    )
  F-15




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Employee Benefits Plans (continued)
  Current liabilities
    
    $
    232
    
    
    $
    324Non current liabilities
    
    
    1,425
    
    
    
    1,640Total
    
    $
    1,657
    
    
    $
    1,964
  2010
    
    
    2009
    
    
    2008Service cost
    
    
    
    
    
    $
    61
    
    
    $
    73Interest cost
    
    $
    82
    
    
    
    177
    
    
    
    172Amortization of transition obligation
    
    
    (153
    )
    
    
    122
    
    
    
    122Amortization of net actuarial loss
    
    
    47
    
    
    
    23
    
    
    
    33Curtailment gain
    
    
    
    
    
    
    (55
    )Net periodic postretirement benefit cost
    
    $
    (24
    )
    
    $
    328
    
    
    $
    400
  2010
    
    
    2009
    
    
    2008Discount rate for funded status
    
    
    4.35
    %
    
    
    4.75
    %
    
    
    6.25
    %Discount rate for postretirement benefit cost
    
    
    4.75
    %
    
    
    6.25
    %
    
    
    6.05
    %Health care cost assumed trend rate for next year
    
    
    9.00
    %
    
    
    9.50
    %
    
    
    6.00
    %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
    
    
    
    2018
    
    
    
    2010
    OtherSupplemental
    
    
    PostretirementPlan
    
    
    BenefitsNet loss
    
    $
    403
    
    
    $
    347Prior service credit
    
    
    
    
    
    
    (768
    )Total
    
    $
    403
    
    
    $
    (421
    )
  F-16




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Employee Benefits Plans (continued)
  OtherSupplemental
    
    
    PostretirementPlan
    
    
    BenefitsNet loss
    
    $
    12
    
    
    $
    21Prior service credit
    
    
    
    
    
    
    (170
    )Total
    
    $
    12
    
    
    $
    (149
    )
 Deferred Compensation
  Restructuring and Related Charges
    2010
    
    
    2009
    
    
    2008Accelerated depreciation and equipment relocation
    
    $
    7,160
    
    
    $
    1,613
    
    
    $
    4,319Severance and other termination cost
    
    
    1,370
    
    
    
    1,889
    
    
    
    1,929Inventory write-down
    
    
    682
    
    
    
    2,077Other cost
    
    
    1,237
    
    
    
    528
    
    
    
    1,051Total restructuring and related charges
    
    $
    10,449
    
    
    $
    6,107
    
    
    $
    7,299
  Cost of sales
    
    $
    10,449
    
    
    $
    5,231
    
    
    $
    5,860Selling, general and administrative expenses
    
    
    
    
    
    
    876
    
    
    
    1,439Total restructuring and related charges
    
    $
    10,449
    
    
    $
    6,107
    
    
    $
    7,299
  F-17




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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
    
    
    
    
    
    
    
    1,070Charges
to expense
    
    
    1,370
    
    
    
    740
    
    
    
    2,110Cash
payments
    
    
    (1,201
    )
    
    
    (10
    )
    
    
    (1,211
    )Accrual
December 31, 2010
    
    $
    1,239
    
    
    $
    730
    
    
    $
    1,969
 
 Income for Continued Dumping and Subsidy Offset Act (CDSOA)
  Commitments and Contingencies
    F-18




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##### Table of Contents



STANLEY FURNITURE COMPANY, INC.
 Quarterly Results of Operations

(Unaudited)
  (in thousands, except per share data)2010 Quarters:
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthNet Sales
    
    $
    36,524
    
    
    $
    37,902
    
    
    $
    34,897
    
    
    $
    27,689Gross loss
    
    
    (3,039
    )
    
    
    (5,746
    )
    
    
    (1,297
    )
    
    
    (6,022
    )Net loss
    
    
    (19,073
    )(1)
    
    
    (11,459
    )(2)
    
    
    (4,934
    )(2)
    
    
    (8,324
    )(2)(5)Net loss per share:Basic
    
    $
    (1.85
    )
    
    $
    (1.11
    )
    
    $
    (.48
    )
    
    
    (.73
    )Diluted
    
    
    (1.85
    )
    
    
    (1.11
    )
    
    
    (.48
    )
    
    
    (.73
    )2009 Quarters:
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthNet Sales
    
    $
    39,764
    
    
    $
    42,326
    
    
    $
    38,455
    
    
    $
    39,906Gross profit (loss)
    
    
    3,850
    
    
    
    2,601
    
    
    
    (1,502
    )
    
    
    (3,193
    )Net loss
    
    
    (2,376
    )
    
    
    (3,023
    )
    
    
    (5,073
    )(3)
    
    
    (1,279
    )(4)(5)Net loss per share:Basic
    
    $
    (.23
    )
    
    $
    (.29
    )
    
    $
    (.49
    )
    
    
    (.12
    )Diluted
    
    
    (.23
    )
    
    
    (.29
    )
    
    
    (.49
    )
    
    
    (.12
    )
 (1)
    
    Includes a goodwill impairment charge of $9.1 million.(2)
    
    Includes restructuring and other charges for the conversion of a portion of our largest
manufacturing facility to a warehouse and distribution center. Second quarter includes
$3.2 million, third quarter includes $1.5 million, and fourth quarter includes $4.3
million.(3)
    
    Includes restructuring and other charges of $641 thousand, for the consolidation of two
warehouses.(4)
    
    Includes restructuring and other related charges of $3.0 million, for the consolidation
of two warehouses, and other downsizing initiatives implemented.(5)
    
    Continued Dumping and
Subsidy Offset Act receipts totaled $1.4 million and $5.7 million
for 2010 and 2009 respectively.  F-19




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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
    
    
    Period2010Doubtful receivables
    
    $
    1,160
    
    
    $
    29
    
    
    $
    289
    (a)
    
    $
    900Discounts, returns,
and allowances
    
    
    587
    
    
    
    (247
    )(b)
    
    
    
    
    
    
    340$
    1,747
    
    
    $
    218
    
    
    $
    289
    
    
    $
    1,240Valuation allowance for
deferred tax assets
    
    $
    188
    
    
    $
    11,410
    
    
    
    
    
    
    $
    11,5982009Doubtful receivables
    
    $
    1,000
    
    
    $
    604
    
    
    $
    444
    (a)
    
    $
    1,160Discounts, returns,
and allowances
    
    
    644
    
    
    
    (57
    )(b)
    
    
    
    
    
    
    587$
    1,644
    
    
    $
    547
    
    
    $
    444
    
    
    $
    1,747Valuation allowance for deferred
tax assets
    
    
    
    
    
    $
    188
    
    
    
    
    
    
    $
    1882008Doubtful receivables
    
    $
    825
    
    
    $
    756
    
    
    $
    581
    (a)
    
    $
    1,000Discounts, returns,
and allowances
    
    
    657
    
    
    
    (13
    )(b)
    
    
    
    
    
    
    644$
    1,482
    
    
    $
    743
    
    
    $
    581
    
    
    $
    1,644
 
 (a)
    
    Uncollectible receivables written-off, net of recoveries.(b)
    
    Represents net decrease in the reserve.  S-1