<PAGE>
                                                 UNITED STATES
                                      SECURITIES AND EXCHANGE COMMISSION
                                            Washington, D.C.  20549
                                                   FORM 10-K
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE         
     SECURITIES EXCHANGE ACT OF 1934    [FEE REQUIRED]  

       For the fiscal year ended December 31, 1996
                                                      OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE     
       SECURITIES EXCHANGE ACT OF 1934    [NO FEE REQUIRED]  

For the transition period from              to             

                                        Commission file number 0-14938

                  STANLEY FURNITURE COMPANY, INC.           
                            (Exact name of Registrant as specified in its
Charter)

          Delaware                            54-1272589      
(State or other jurisdiction of             (I.R.S. Employer
incorporation or organization)           Identification Number)

1641 Fairystone Park Highway, Stanleytown, VA        24168  
  (Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code:  (540) 627-2000
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:

                                    Common Stock, par value $.02 per share
                                               (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports),and (2) has been subject to
such filing requirements for the past 90 days: Yes (X)    No ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.[ ]

Aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing price on January 27, 1997:  $60,782,714

Indicate the number of shares outstanding of each of the Registrant's classes
of common stock as of January 27, 1997:

Common Stock, par value $.02 per share                4,579,042   
       (Class of Common Stock)                    Number of Shares

Documents incorporated by reference:  Portions of the Registrant's Proxy
Statement for its Annual Meeting of Shareholders scheduled for April 24, 1997
are incorporated by reference into Part III.



<PAGE>
                                               TABLE OF CONTENTS


Part I                                                       Page


      Item 1      Business.............................        3
      Item 2      Properties...........................        9
      Item 3      Legal Proceedings....................        9
      Item 4      Submission of Matters to a Vote
                    of Security Holders................        9

Part II


      Item 5      Market for Registrant's Common Equity
                    and Related Stockholder Matters....       12
      Item 6      Selected Financial Data..............       13
      Item 7      Management's Discussion and Analysis
                    of Financial Condition and Results 
                    of Operations......................       15
      Item 8      Financial Statements and
                    Supplementary Data.................       18
      Item 9      Changes in and Disagreements with
                    Accountants on Accounting and 
                    Financial Disclosure...............       18

Part III

      Items 10 through 13..............................       19

Part IV

      Item 14     Exhibits, Financial Statement 
                    Schedule and Reports on Form 8-K...       19

      Signatures.......................................       25

      Index to Financial Statements and Schedule.......      F-1<PAGE>
<PAGE>  
                                  Stanley Furniture Company, Inc.

                                                    PART I

Item 1.     Business

General

     The Company is a leading designer and manufacturer of
residential furniture exclusively targeted at the upper-medium
price range.  The Company offers diversified product lines across
all major style and product categories within this price range. 
Its product depth and extensive style selections make the Company
a complete furniture resource for retailers in its price range and
allow the Company to respond more quickly to shifting consumer
preferences.  The Company has established a broad distribution
network in the United States that includes independent furniture
stores, department stores, and national and regional furniture
chains.  To produce its products and support its broad distribution
network, the Company has developed efficient and flexible
manufacturing processes that it believes are unique in the
furniture industry.  The Company emphasizes continuous improvement
in its manufacturing processes to enable it to continue providing
competitive advantages to its customers, such as quick delivery,
reduced inventory investment, high quality, and value. 

Business Strategy and Competitive Advantages

     The Company's goal is to offer the best products and value in
the upper-medium price range, and its business strategy is designed
to provide superior quality, responsive customer service, and quick
delivery.  The Company believes its business strategy gives it and
its customers competitive advantages.  The key elements of the
Company's business strategy include:

     Diversified Product Lines.    The Company's product lines
cover  all major design categories, and include bedroom, dining
room, youth bedroom (Young AmericaTM), living room tables,
entertainment centers, home office (The OfficeTM), and upholstery. 
The Company believes that the diversity of its product lines
enables it to anticipate and respond quickly to changing consumer
preferences and provides retailers a complete furniture resource in
the upper-medium price range.  The Company has recently expanded
its styles in youth and home office furniture to respond to growing
consumer demand for these products.  The Company intends to
continue expanding its product styles with particular emphasis on
upholstery, home office, and entertainment centers.  The Company
believes that its products represent good value and that the
quality and style of its furniture compare favorably with more
premium-priced products.  To emphasize this comparison the Company
uses the marketing theme, "We Just Look Expensive."


     Broad Distribution Network.  The Company has developed a
diverse and extensive customer base that provides the Company with
access to a variety of markets and flexibility to adapt to market
changes.  The Company believes this broad distribution network
reduces its exposure to regional recessions.  The Company sells its
furniture domestically through approximately 60 independent sales
representatives to independent furniture retailers and national and
regional chain stores.  Representative customers include Sears,
J.C. Penney, Homestead House, Huffman Koos, Robb & Stucky, Nebraska
Furniture Mart, Furnitureland South, and Haverty's.  In addition,
the Company has recently increased its emphasis on international
distribution.  Approximately 8% of the Company's sales in 1996 were
to international customers.  The Company has sold to over 3,600
customers during the past twelve months, and no single customer
accounted for more than ten percent of sales.  The Company intends
to continue to pursue all channels of distribution compatible with
its products and price range with particular emphasis on national
and regional chains and international outlets.  

     Efficient Manufacturing Operations.  The Company's operating
strategy is to continuously improve customer responsiveness,
quality, and operating efficiency.  The Company's manufacturing
processes, which support its product and distribution strategy,
focus on quick delivery while minimizing inventory levels and
improving quality by producing smaller, more frequent, and cost-
effective production runs.  As a result, the Company shipped
customer orders within 17.5 days on average during 1996 with
average finished goods inventory turns of 6.3.  The Company
believes its ability to deliver its products within these time
frames, while maintaining a high level of inventory turnover, is
superior to that of its competitors.  In addition, the Company
believes its quality performance consistently outperforms the
industry when measured by returns and allowances as reported by the
American Furniture Manufacturers Association.   Consistent with the
Company's philosophy of providing its customers with a competitive
advantage, the Company's quick delivery reduces its customers'
inventory investment and price markdowns, and the high quality of
the Company's products minimizes its customers' redelivery costs.


Products and Styles

     The Company's diverse product lines and styles provide
retailers a complete furniture resource for the purchase of upper-
medium priced furniture and enables the Company to respond quickly
to changing consumer preferences.








     The Company provides wood products in a variety of woods,
veneers, and finishes.  The number of styles by product line
currently marketed by the Company is set forth in the following
table:  

                                                  Number of Styles

   Bedroom.......................................         30
   Dining room...................................         28
   Youth bedroom (Young America)................         19
   Occasional:
      Living room tables.........................         28
      Entertainment centers......................         18
      Home office (The Office)..................          8


     These product lines cover all major design categories
including European traditional, contemporary/transitional,
eighteenth century, and country/nostalgia designs.

     The Company introduced upholstered furniture products in the
fall of 1994, allowing the Company to expand its product offerings
in the upper-medium price range.  The Company's entry into the
upholstery business takes advantage of its existing distribution
network without requiring a significant capital investment.  The
Company's upholstered products consist mainly of stationary sofas,
sleepers, love seats, and chairs.  Since initial introduction, the
Company has expanded its upholstered products and currently offers
a variety of frames and approximately 450 fabric selections.

     The Company designs and develops new product styles each year
to replace discontinued items or styles and, if desired, expand
product lines.  The Company's product design process begins with
marketing personnel identifying customer needs and conceptualizing
product ideas, which generally consist of a group of related
furniture pieces.  A variety of sketches are produced, usually by
Company designers, from which prototype furniture pieces are built.

     The Company's engineering department then prepares the
prototype for actual full-scale production.  The Company consults
with its marketing personnel, sales representatives, and selected
customers throughout this process and strives to introduce its new
product styles at the fall and spring international furniture
markets.


Distribution

     The Company has developed a varied and extensive customer base
that provides it with access to a variety of markets and the
flexibility to adapt to market changes.  The Company believes this
broad network reduces its exposure to regional recessions.  The
Company sells its furniture domestically through approximately 60
independent sales representatives to independent furniture
retailers and national and regional chain stores.  In marketing its
products to independent retailers, the Company utilizes a
promotional incentive sales program, the "Stanley Preferred
Retailer."  There are more than 500 Stanley Preferred Retailers,
which account for approximately half of the Company's sales.  This
program is designed to encourage independent retailers to commit
retail floor space to the Company's products.  The Stanley
Preferred Retailer program is designed to be flexible and is
adapted to the merchandising and marketing plans of retailers by
accommodating geographic, style, and promotional preferences.  To
participate, a retailer must commit a specified amount of floor
space to the Company's products and achieve specified sales
volumes.  In return the participating retailer receives product
discounts during promotional periods and merchandising materials,
among other incentives.

     The general marketing practice followed in the furniture
industry is to exhibit products at international and regional
furniture markets.  In the spring and fall of each year, a nine-day
furniture market is held in High Point, North Carolina, which is
attended by most buyers and is regarded by the industry as the
international market.  The Company utilizes 60,000 square feet of
showroom space at the High Point market to introduce new products,
increase sales of its existing products, and test ideas for future
products.

     No single customer accounted for more than ten percent of the
Company's sales in 1996.  No material part of the Company's
business is dependent upon a single customer, the loss of which
would have a material effect on the business of the Company.  The
loss of several of the Company's major customers could have a
material impact on the business of the Company.  


Manufacturing

     The Company's manufacturing operations complement its product
and distribution strategy by emphasizing continuous improvement in
quality and customer responsiveness while reducing costs.  The
Company's manufacturing processes produce smaller, more frequent
and cost effective runs.  The Company focuses on identifying and
eliminating manufacturing bottlenecks and waste, employing
statistical process control and, in turn, adjusting manufacturing
schedules on a daily basis, using cellular manufacturing in the
production of components, and improving its relationships with
suppliers by establishing primary supplier relationships.  In
addition, a key element of the Company's manufacturing processes is
to involve all Company personnel, from hourly associates to
management, in the improvement of the manufacturing processes by
encouraging and responding to ideas to improve quality and to
reduce manufacturing lead times.

     The Company operates manufacturing facilities in North
Carolina and Virginia consisting of an aggregate of more than three
million square feet. The Company considers its present equipment to
be generally modern, adequate and well maintained.

     The Company schedules production of its various styles based
upon actual and anticipated orders.  The Company's manufacturing
processes enable it to fill orders through manufacturing rather
than inventory.  Since the Company ships customer orders on average
in less than three weeks, management believes that the size of its
backlog is not necessarily indicative of its long-term operations. 
The Company's backlog of unshipped orders was $23.6 million and
$21.5 million at December 31, 1996 and 1995, respectively.
Raw Materials

     The principal materials used by the Company in manufacturing
its products include lumber, veneers, plywood, particle board,
hardware, glue, finishing materials, glass products, laminates,
fabrics, metals, frames, filling, and cushioning materials.  The
Company uses a variety of species of lumber, including cherry, oak,
ash, poplar, pine, maple, and mahogany.  The Company's five largest
suppliers accounted for approximately 24% of its purchases in 1996. 
The Company believes that its sources of supply for these materials
are adequate and that it is not dependent on any one supplier.

Competition

     The Company is the fifteenth largest out of more than 600
furniture manufacturers in North America based on 1995 sales,
according to Furniture/Today, a trade publication.  The furniture
industry  is  highly  competitive and  includes a large number of
foreign and domestic manufacturers, none of which dominates the
market.  The markets in which the Company competes include a large
number of relatively small manufacturers; however, certain
competitors of the Company have greater sales volumes and greater
financial resources than the Company.  Competitive factors in the
upper-medium price range include style, price, quality, delivery,
design, service, and durability.  The Company believes that its
manufacturing processes, its long-standing customer relationships
and customer responsiveness, its consistent support of existing
diverse product lines that are high quality and good value, and its
experienced management are competitive advantages.

Associates

     At December 31, 1996, the Company employed approximately 2,700
associates.  None of the Company's associates is represented by a
labor union.  The Company considers its relations with its
associates to be good.


Patents and Trademarks

     The trade names of the Company represent many years of
continued business, and the Company believes such names are well
recognized and associated with quality in the furniture industry. 
The Company owns a number of patents, trademarks, and licenses,
none of which is considered to be material to the Company.





Governmental Regulations

     The Company is subject to federal, state, and local laws and
regulations in the areas of safety, health, and environmental
pollution controls.  Compliance with these laws and regulations has
not in the past had any material effect on the Company's earnings,
capital expenditures, or competitive position; however, the effect
of such compliance in the future cannot be predicted.  Management
believes that the Company is in material compliance with applicable
federal, state, and local environmental regulations.

     Regulations issued in December 1995 under the Clean Air Act
Amendments of 1990 may require the Company to reformulate certain
furniture finishes or institute process changes to reduce emissions
of hazardous volatile organic compounds.  The furniture industry
and its suppliers are attempting to develop water-based and other
forms of complaint finishing materials to replace commonly-used
organic-based finishes that are a major source of regulated
emissions.  The Company cannot at this time estimate the impact of
these new standards on the Company's operations and future capital
expenditure requirements, or the cost of compliance.  


Forward-Looking Statements

     Certain statements made in this Annual Report on Form 10-K are
not based on historical facts, but are forward-looking statements. 
These statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should,"
or "anticipates" or the negative thereof or other variations
thereon or comparable terminology, or by discussions of strategy. 
See, e.g. "Business Strategy and Competitive Advantages."  These
statements reflect the Company's reasonable judgment with respect
to future events and are subject to risks and uncertainties that
could cause actual results to differ materially from those in the
forward-looking statements.  Such risks and uncertainties include
the cyclical nature of the furniture industry, fluctuations in the
price for lumber which is the most significant raw material used by
the Company, competition in the furniture industry, capital costs
and general economic conditions.







<PAGE>
Item 2.    Properties

     Set forth below is certain information with respect to the
Company's principal properties.  The Company believes that all
these properties are well maintained and in good condition.  The
Company believes its manufacturing facilities are being efficiently
utilized and that it could increase production at its facilities if
required by customer demand.  Each facility is focused on specific
product lines to optimize efficiency.  The Company estimates that
its facilities are presently operating at approximately 85% of
capacity, principally on a one-shift basis.  All Company plants are
equipped with automatic sprinkler systems and modern fire
protection equipment, which management believes are adequate.  All
facilities set forth below are active and operational.

                                          Approximate    Owned    
                                         Facility Size     or   
        Location         Primary Use     (Square Feet)  Leased

     Stanleytown, VA     Manufacturing      1,660,000   Owned 
                         and Corporate
                         Headquarters          61,000   Owned 
     West End, NC        Manufacturing        470,000   Owned 
     West End, NC        Lumber Yard                    Leased(1)
     Lexington, NC       Manufacturing        635,000   Owned 
     Robbinsville, NC    Manufacturing        540,000   Owned 
     High Point, NC      Showroom              60,000   Leased(2)
                   
(1)  Lease expires May 31, 2007.
(2)  Lease expires October 31, 1999.  Approximately 8,000 square feet is    
  
     subleased.

Item 3.    Legal Proceedings

     None.

Item 4.    Submission of Matters to a Vote of Security Holders

     None.














<PAGE>
Executive Officers of the Registrant

     The Company's executive officers and their ages as of December
31, 1996 are as follows:
                                  
                                                                  
        Name                Age          Position        
        
Albert L. Prillaman........  51    Chairman, President         
                                    and  Chief Executive
                                    Officer      
C. William Cubberley, Jr...  56    Senior Vice President-      
                                    Sales and Marketing
Bobby I. Hodges............  59    Senior Vice President-      
                                    Manufacturing
Douglas I. Payne...........  38    Senior Vice President-      
                                    Finance and 
                                    Administration,               
                                    Treasurer and Secretary
William A. Sibbick.........  40    Vice President-Product      
                                    Development and 
                                    Merchandising-Dining
                                    Room and Occasional
Joe G. Bost................  49    Vice President-Product         
                                    Development and 
                                    Merchandising-Upholstery
Kelly S. Cain..............  42    Vice President-Product      
                                    Development and
                                    Merchandising-Bedroom 
                                    and Youth
                                    
     Albert L. Prillaman has been President and Chief Executive
Officer of the Company since December 1985 and Chairman of the
Board of Directors since September 1988.  Prior thereto, Mr.
Prillaman had served as a Vice President of the Company and
President of the Stanley Furniture division of the Company's
predecessor since 1983, and in various executive and other
capacities with the Stanley Furniture division of the predecessors
of the Company since 1969.  Mr. Prillaman is a director of Main
Street Bank Group Incorporated.

     C. William Cubberley, Jr. has been Senior Vice President-Sales
and Marketing of the Company since April 1995.  He has been a Vice
President of the Company since December 1990 and Senior Vice
President-Sales and Marketing of the Stanley Furniture division
since October 1988.  Mr. Cubberley was Senior Vice President-Sales
of the Stanley Furniture division from January 1986 to
October 1988, when he became Senior Vice President - Sales and
Marketing of the Stanley Furniture division.

     Bobby I. Hodges has been Senior Vice President-Manufacturing
of the Company since April 1995.  He has been a Vice President
since June 1993.  He was Senior Vice President-Manufacturing of the
Stanley Furniture division from January 1986 until June 1993.  He
was Vice President-Manufacturing of the Stanley Furniture division
from December 1983 until January 1986.  Prior to that time, Mr.
Hodges was employed by the Company in various positions related to
manufacturing management.

     Douglas I. Payne has been Senior Vice President-Finance and
Administration since December 1996.  He was Vice President of
Finance and Treasurer of the Company since September 1993.  He was
Vice President-Treasurer of the Company from December 1989 to
September 1993, was Treasurer of the Company from June 1986 to
December 1989 and he was Assistant Treasurer of the Company from
August 1985 to June 1986.  Mr. Payne has been Secretary of the
Company since September 1988.

     William A. Sibbick has been Vice President-Product Development
and Merchandising-Dining Room and Occasional since December 1996. 
He was Vice President - Product Development and Merchandising from
April 1995 until December 1996.  He was Vice President - Product
Development from June 1993 until April 1995.  He was Vice
President-Senior Product Manager of the Stanley Furniture division
from January 1992 until June 1993.  Prior to that time, he had been
Vice President-Product Manager since his employment in March 1989.

     Joe G. Bost has been Vice President-Product Development and
Merchandising-Upholstery since December 1996.  He was Vice
President-Upholstery from April 1995 until December 1996.  He was
President of the Company's Norman's of Salisbury division since his
employment in January 1993 until April 1995.  Prior to joining the
Company, Mr. Bost was Senior Vice-President of Sales, Marketing,
Administration and Manufacturing of Hickorycraft, Inc., a
manufacturer of upholstery and occasional tables, a position he
held since 1987.

     Kelly S. Cain was elected Vice President-Product Development
and Merchandising for bedroom product lines in December 1996. 
Since July 1985, he held various management positions in sales and
marketing.
















<PAGE>
                                                    PART II


Item 5.     Market for Registrant's Common Equity and Related     
            Stockholder Matters

     The Company's common stock is quoted on The Nasdaq Stock
Market ("Nasdaq") under the symbol STLY.  The table below sets
forth the high and low sales prices per share as reported by
Nasdaq.

                                             High       Low 
1996

First Quarter..........................     $10.75    $ 8.00
Second Quarter.........................      12.13     10.00
Third Quarter..........................      17.50     10.25
Fourth Quarter.........................      20.75     14.00

1995

First Quarter..........................     $ 9.50    $ 7.00
Second Quarter.........................       8.38      7.00
Third Quarter..........................       8.75      7.00
Fourth Quarter.........................       9.00      7.75


     The quotations reflect interdealer prices, without retail
mark-up, mark-down or commissions and may not necessarily represent
actual transactions.  As of January 27, 1997, there were
approximately 1,500 beneficial stockholders.  The Company currently
retains all earnings to finance the growth and development of its
business.  However, the Company will continue to evaluate its
dividend policy, and any future payments will depend upon the
financial condition, capital requirements, and earnings of the
Company, as well as other factors that the Board of Directors may
deem relevant.  The Company's ability to pay dividends with respect
to the Common Stock is restricted, under certain covenants in loan
agreements, to 50% of the Company's consolidated net earnings,
adjusted for any net cash proceeds received by the Company from the
sale of its stock and the amount of any payments for redemption,
purchase or other acquisition of its capital stock, subsequent to
January 1, 1994.  As of December 31, 1996, $8.3 million was
available for the payment of dividends under these restrictions.









<PAGE>
Item 6.     Selected Financial Data

                                         Years Ended December 31,          
<TABLE>                            1996     1995     1994     1993     1992 
                                     (in thousands, except per share data)
<S>                             <C>      <C>      <C>      <C>      <C>
Income Statement Data:
Net sales...................... $201,905 $174,179 $184,342 $167,091 $166,501
Cost of sales:
  From products sold...........  153,332  137,621  148,453  134,972  132,984
  Business interruption
    insurance (1)..............                              (5,036)        
      Gross profit.............   48,573   36,558   35,889   37,155   33,517
Selling, general and admin-
  istrative expenses...........   30,403   26,454   26,483   25,976   25,117
Unusual items, net(2)..........              (136)
Restructuring credit (3).......                                       (2,078)
    Operating income...........   18,170   10,240    9,406   11,179   10,478
Other expense, net.............      616      433      444    1,346      686
Gain on insurance settlement
  (4)..........................                     (2,379)  (2,186)
Interest expense...............    3,344    3,534    2,969    3,048    7,058
  Income from continuing
    operations before income
    taxes......................   14,210    6,273    8,372    8,971    2,734
Income taxes...................    5,470    2,384    3,256    3,691    1,053
  Income from continuing 
    operations................. $  8,740 $  3,889 $  5,116 $  5,280 $  1,681
Income from continuing
  operations per common share.. $   1.71 $    .82 $   1.08 $   1.39 $    .56 

Weighted average number of 
  shares, fully diluted(5).....    5,119    4,727    4,744    3,792    2,996

Supplementary Income From Con-
  tinuing Operations Per 
  Common Share Data:
  Before non-recurring gain(6). $   1.71 $    .82 $    .77 $   .90  $    .68
  Non-recurring gain on 
    insurance..................                        .31     .29          
    As reported................ $   1.71 $    .82 $   1.08 $  1.19  $    .68
Weighted average number of 
  shares, fully diluted(7).....    5,119    4,727    4,744   4,725     4,725

Balance Sheet Data:
Cash........................... $  8,126 $    298 $    301 $   200  $    649
Inventories....................   40,239   40,167   39,905  37,684    33,343 
Working capital................   46,225   42,422   42,912  40,833    34,650 

Total assets...................  141,510  134,551  124,519 124,859   114,302 
Long-term debt including 
  current maturities...........   39,350   41,067   33,395  32,647    48,582 

Common stockholders' equity
  (5) (8)......................   61,617   54,739   50,830  47,204    29,959 
</TABLE>
<PAGE>
Selected Financial Data (continued)

                                                                      
(1)   In 1993, the Company recorded $5.0 million of business interruption
insurance replacing the gross profit on lost sales due to the fire which
occurred in February 1993 at its Stanleytown, Virginia facility.  See Note 8
of the Notes to Financial Statements.

(2)   In 1995, the Company recognized a pretax credit of $1.1 million after
it was released from a lease obligation at its previously closed Waynesboro,
Virginia manufacturing facility.  Also included is a pretax charge for a
severance accrual.  See Note 4 of the Notes to Financial Statements.

(3)   In 1991, the Company recorded pretax charges in anticipation of the
closing of the Waynesboro, Virginia facility to eliminate excess capacity and
the transfer of certain product lines to other manufacturing facilities. 
Operating income for 1992 includes a restructuring credit of $2.1 million
from lower than anticipated costs of closing the Waynesboro facility.

(4)   In 1994, the Company recorded a pretax gain of $2.4 million as part of
the final insurance settlement.  Also, in 1993, a $2.2 million pretax gain
was recorded since insurance proceeds exceeded the book value of leasehold
improvements and equipment destroyed in the fire.  See Note 8 of the Notes to
Financial Statements.

(5)   In July 1993, the Company completed a public offering of 1,725,000
shares of common stock at $8.50 per share.  The net proceeds of $13.1 million
were used to reduce debt.  Primary per share information is the same as fully
diluted per share information, for all periods presented except for 1996. 
For this period, primary weighted average common shares were 4,945,000 and
primary income from continuing operations per common share before gain on
insurance settlement, net of income taxes was $1.77.

(6)   Income from continuing operations before insurance related gains was
$3.7 million in 1994 and $4.3 million in 1993.

(7)   The 1993 and 1992 periods include the effect of pro forma adjustments
for the July 1993 public offering of 1,725,000 shares of Common Stock,
assuming the 1993 public offering occurred at the beginning of each year.

(8)   No dividends have been paid on the Common Stock during any of the years
presented.








<PAGE>
Item 7.     Management's Discussion and Analysis of Financial     
            Condition and Results of Operations

     The following discussion should be read in conjunction with
the Selected Financial Data and the Financial Statements and Notes
thereto contained elsewhere herein.

Results of Operations

     The following table sets forth the percentage relationship to
net sales of certain items included in the Statements of Income:

                                               For the Years Ended
                                                 December 31,        
<TABLE>                                     1996       1995     1994
<S>                                        <C>        <C>      <C>
Net sales................................  100.0%     100.0%   100.0%
Cost of sales............................   75.9       79.0     80.5
  Gross profit...........................   24.1       21.0     19.5
Selling, general and administrative
  expenses...............................   15.1       15.2     14.4
Unusual items, net.......................               (.1)        
  Operating income.......................    9.0        5.9      5.1
Other expenses, net......................     .3         .3       .3
Gain on insurance settlement.............                       (1.3)
Interest expense.........................    1.7        2.0      1.6
  Income from continuing operations
  before income taxes....................    7.0        3.6      4.5
Income taxes.............................    2.7        1.4      1.7
  Income from continuing operations......    4.3%       2.2%     2.8%
</TABLE>
1996 Compared to 1995

     Net sales increased $27.7 million, or 15.9%, for the year
ended December 31, 1996 compared to 1995.  The increase was due
principally to higher unit volume.

     Gross profit margin for 1996 increased to 24.1% from 21.0% for
the comparable 1995 period.  The higher gross profit margin was due
primarily to stabilizing raw material costs, improved operating
efficiencies, and the leveraging of fixed costs due to increased
production levels.

     Selling, general and administrative expenses as a percentage
of net sales were 15.1% and 15.2% for 1996 and 1995, respectively. 
These expenses increased for the 1996 period due principally to (i)
higher selling cost resulting from increased sales and increased
merchandising expenses, (ii) increased compensation expense
pursuant to the Company's incentive compensation plan for key
employees, and (iii) increased provision for bad debts.    

     During the second quarter of 1995, the Company recognized an
unusual item consisting of the net effect of (i) an accrual
reversal as a result of being released from a lease obligation at
its previously closed Waynesboro, Virginia facility and (ii) a
charge for severance resulting from the resignation of a former
officer.

     As a result of the above, operating income for 1996 increased
to $18.2 million, or 9.0% of net sales, from $10.2 million, or 5.9%
of net sales, in 1995.

     The Company's effective income tax rate was 38.5% and 38.0%
for 1996 and 1995, respectively.

1995 Compared to 1994

     Net sales decreased $10.2 million, or 5.5%, from 1994 levels
due principally to lower unit volume, partially offset by the
additional volume from upholstered products and higher average
selling prices.

        Gross profit margin increased to 21.0% in 1995 from 19.5% in
1994.  The higher gross profit margin was due principally to
increased prices, a moderation in lumber cost increases, a more
favorable product mix and the favorable impact from the purchase of
the previously leased manufacturing facilities.  The increase in
gross profit was slightly offset by an increased overhead
absorption rate resulting from lower output levels in 1995.

        Selling, general and administrative expenses were
approximately the same for both years.  However, as a percentage of
net sales, these expenses increased to 15.2% in 1995 from 14.4% in
1994.  The higher percentage was due principally to lower net sales
and increased selling cost associated with new products.

        As a result of the above, operating income increased to $10.2 
million, or 5.9% of net sales, in 1995 from $9.4 million, or 5.1%
of net sales, in 1994.  

        Interest expense for 1995 increased due principally to higher
debt levels, resulting from the purchase of two previously leased
manufacturing facilities in June 1995 and also due to slightly
higher interest rates.

      The Company's effective tax rate in 1995 decreased to 38.0%
from 38.9% in 1994.  The lower tax rate in 1995 is principally due
to an increase in non-taxable income and increased benefits from
export sales.









Financial Condition, Liquidity and Capital Resources

     During August 1995, the Company amended its $25.0 million
revolving credit facility, extending its maturity date to August
1998.  The interest rate under the facility was reduced to prime
(8.25% on December 31, 1996) or, at the Company's option, the
reserve adjusted LIBOR plus 1.0% per annum.  In June 1995, the
Company issued a $10.0 million 7.57% senior note due 2005 in a
private placement of debt, and the proceeds were used to purchase
two previously leased manufacturing facilities.  In February 1994,
the Company completed the private placement of $30.0 million of
7.28% senior notes due 2004.  The proceeds from the senior notes
were used to repay an existing term note and a portion of the
revolving credit facility.
  
     At December 31, 1996, long-term debt including current
maturities was $39.4 million, and approximately $22.8 million of
additional borrowing capacity was available under the revolving
credit facility.  Annual debt service requirements are $725,000 in
1997, $5.1 million in both 1998 and 1999, $5.2 million in 2000 and
$5.3 million in 2001.  The Company believes that its financial
resources are adequate to support its capital needs and debt
service requirements.

Operating Cash Flows

     The Company generated cash from operations of $15.3 million in
1996 principally as a result of higher sales and improved margins. 
The Company used $7.5 million of the cash generated in 1996
primarily to fund capital expenditures, reduce borrowings and
repurchase common stock.  During 1995, cash generated from
operations of $6.6 million was used to reduce borrowings under the
revolving credit facility and to fund capital expenditures in the
normal course of business.  The increase in cash generated from
operations was due principally to lower tax payments of $1.0
million in 1995 compared to $4.5 million in 1994.  Tax payments
were higher in 1994 principally due to the timing of installment
payments for 1993, resulting from the utilization of net operating
losses carried forward from 1992.  Also, refunds attributed to 1994
reduced tax payments for 1995.  Cash generated from operations in
1995 also increased as a result of less cash paid to suppliers and
employees due to reduced production levels.  During 1994, cash
provided by operations of $4.1 million and net borrowings of $1.2
million were used to fund capital expenditures.

     Operating cash flows in 1994 include proceeds of $4.6 million
received from insurance in connection with the fire that occurred
in February 1993 at the Company's Stanleytown, Virginia facility. 
Cash paid to suppliers in 1994 included costs of $2.7 million
incurred in connection with the fire.  Excluding the effect of the
fire, cash was required in the 1994 period to support higher
accounts receivable requirements reflecting higher sales levels,
higher payments to suppliers and employees as a result of higher
production levels and higher tax payments as discussed above. 
These higher payments in the 1994 period were partially offset by
lower interest payments due principally to lower debt levels.  

Investing Activities

     Net cash used by investing activities was $4.0 million in 1996
compared to $14.7 million and $5.2 million in 1995 and 1994,
respectively.  In the 1995 period, proceeds from the issuance of
senior notes and additional borrowings from the revolving credit
facility were used to purchase two previously leased plant
facilities for $10.5 million.  The 1996 and 1994 expenditures, and
the remaining expenditures for 1995, were primarily for plant and
equipment and other assets in the normal course of business. 

Financing Activities

     Net cash used by financing activities was $3.5 million in 1996
compared to cash provided by financing activities of $8.1 million
and $1.2 million in 1995 and 1994, respectively.  In 1996, the
purchase of common stock and the reduction in borrowings was
financed by cash generated from operations.  The 1995 borrowings
provided cash for the purchase of the two previously leased plant
facilities and other capital expenditures.  Cash provided by
financing activities in the 1994 period was used to fund capital
expenditures.  

Discontinued Operations

     Beginning in 1991, the Company's Norman's of Salisbury fabric
division ("Norman's") was reflected as a discontinued operation. 
In 1994, the Company ceased operations at Norman's and liquidated
the division resulting in a $2.8 million ($4.5 million pretax)
additional loss provision.  In 1996, the Company was released from
a lease obligation resulting from the purchase and concurrent
resale of certain facilities at its former Norman's division.  This
obligation was accrued as part of the 1994 charge to discontinued
operations.  Accordingly, in 1996, the Company recorded an after
tax gain of $246,000, or $.05 per share, as a partial reversal of
this accrual.

Item 8.   Financial Statements and Supplementary Data

     The financial statements and schedule listed in Items 14(a)(1)
and (a)(2) hereof are incorporated herein by reference and are
filed as part of this report.

Item 9.   Changes in and Disagreements with Accountants on 
          Accounting and Financial Disclosure

          None.




<PAGE>
                                                   PART III

     In accordance with general instruction G(3) of Form 10-K, the
information called for by items 10, 11, 12, and 13 of Part III is
incorporated by reference to the Registrant's definitive Proxy
Statement for its Annual Meeting of Stockholders scheduled for
April 24, 1997, except for information concerning the executive
officers of the registrant which is included in Part I of this
report under the caption "Executive Officers of the Registrant."



                                                    PART IV


Item 14.  Exhibits, Financial Statement Schedule and Reports on   
          Form 8-K

(a)  Documents filed as a part of this Report:

(1)  The following financial statements are included in this      
     report on Form 10-K:

     Report of Independent Accountants

     Balance Sheets - as of December 31, 1996 and 1995

     Statements of Income - for each of the three years in the    
     period ended December 31, 1996

     Statements of Changes in Stockholders' Equity for each of the 
     three years in the period ended December 31, 1996

     Statements of Cash Flows - for each of the three years in the 
     period ended December 31, 1996

     Notes to Financial Statements

(2)  Financial Statement Schedule:

     Schedule II - Valuation of Qualifying Accounts - for each    
     of the three years in the period ended December 31, 1996

(b)  The following reports on Form 8-K were filed by the Registrant 
     during the last quarter of the period covered by this report:

     None.






(c)  Exhibits:

 2.1 Agreement and Plan of Merger dated as of July 24, 1992 by    
     and among the Registrant, Stanley Holding Corporation, Stanley 
     Acquisition Corporation, the ML-Lee Acquisition Fund         
     (Retirement Accounts) II, L.P., and the persons listed on    
     Schedules I and II thereto (incorporated by reference to     
     Exhibit 2.1 to the Registrant's Registration Statement on Form 
     S-4 No. 33-50050).

 3.1 The Certificate of Incorporation of the Registrant           
     (incorporated by reference to Exhibit 3.1 to the Registrant's 
     Registration Statement on Form S-1, No. 33-7300).

 3.2 The By-laws of the Registrant (incorporated by reference to  
     Exhibit 3.2 to the Registrant's Registration Statement on Form 
     S-1, No. 33-7300).

 3.3 Amendment adopted March 21, 1988 to the By-laws of the       
     Registrant (incorporated by reference to Exhibit 3.3 to the  
     Registrant's Form 10-K (Commission File No. 0-14938) for the 
     year ended December 31, 1987).

 3.4 Amendments adopted February 8, 1993 to the By-laws of the    
     Registrant (incorporated by reference to Exhibit 3.4 to the  
     Registrant's Registration Statement on Form S-1 No. 33-57432).

 3.5 Certificate of Stock Designation dated May 1, 1991 of the    
     Registrant as modified by an Amendment to Certificate of     
     Designation dated May 31, 1991 (incorporated by reference to 
     Exhibit 3.6 to the Registrant's Form 10-K for the year ended 
     December 31, 1991).

 3.6 Certificate of Merger dated as of November 9, 1992           
     (incorporated by reference to Exhibit 3.6 to the Registrant's 
     Statement on Form S-1 No. 33-57432).

 3.7 Certificate of Amendment dated June 30, 1993. (incorporated by 
     reference to Exhibit 3.7 to the Registrant's Form 10-K for the 
     year ended December 31, 1994).

 4.1 The Certificate of Incorporation and By-laws of the Registrant 
     as currently in effect (incorporated by reference to  Exhibits 
     3.1 through 3.7 hereto).

 4.2 Registration Rights Agreement dated as of November 9, 1992 by 
     and among the Registrant, ML-Lee Acquisition Fund, L.P., ML - 
     Lee Acquisition Fund II, L.P., ML-Lee Acquisition Fund       
     (Retirement Accounts) II, L.P., Lee Stockholders (as defined 
     therein) and Management Stockholders (as defined therein)    
     (incorporated by reference to Exhibit 4.3 to the Registrant's 
     Statement on Form S-1 No. 33-57432).

 4.3 Note Agreement dated February 15, 1994 between the Registrant 
     and the Prudential Insurance Company of America. (incorporated 
     by reference to Exhibit 4.6 to the Registrant's Form 10-K for 
     the year ended December 31, 1993).

 4.4 Letter Amendment, dated October 14, 1996, to Note Agreements, 
     dated February 15, 1994 and June 29, 1995, between the       
     Registrant and The Prudential Insurance Company of America   
     (incorporated by reference to Exhibit 4.1 to the Registrant's 
     Form 10-Q for the quarter ended September 29, 1996).

     Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments
evidencing long term debt less than 10% of the Registrant's total
assets have been omitted and will be furnished to the Securities
and Exchange Commission upon request.

10.1  Employment Agreement made as of January 1, 1991 between     
      Albert L. Prillaman and the Company (incorporated by        
      reference to Exhibit 10.1 to the Registrant's Form 10-K for 
      the year ended December 31, 1991).(2)

10.2  Lease dated February 23, 1987 between Stanley Interiors     
      Corporation and Southern Furniture Exposition Building, Inc. 
      d/b/a Southern Furniture Market Center (incorporated by     
      reference to Exhibit 10.10 to the Registrant's Form 10-K for 
      the year ended December 31, 1987).

10.3  Lease dated June 30, 1987 between A. Allan McDonald, Virginia 
      Cary McDonald, C. R. McDonald, Dorothy V. McDonald, and     
      Lillian S. McDonald, as lessor, and Stanley Interiors       
      Corporation, as lessee (incorporated by reference to Exhibit 
      10.14 to the Registrant's Form 10-K for the year ended      
      December 31, 1987).

10.4  The Stanley Retirement Plan, as restated effective January 1, 
      1989, adopted April 20, 1995 (incorporated by reference to  
      Exhibit 10.4 to the Registrant's Form 10-K for the year ended 
      December 31, 1995).(2)

10.5  Amendment No. 1, The Stanley Retirement Plan, effective     
      December 31, 1995, adopted December 15, 1995 (incorporated by 
      reference to Exhibit 10.5 to the Registrant's Form 10-K for 
      the year ended December 31, 1995).(2)

10.6  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 for 
      the year ended December 31, 1993).(2)

                       
(2)   Management contract or compensatory plan




<PAGE>
10.7  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 for the year ended December 31, 
      1995).(2)

10.8  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, No. 33-7300).(2)

10.9  Stanley 401(k) Retirement Savings Plan, as amended and      
      restated effective January 1, 1996 (incorporated by reference 
      to Exhibit 10.9 to the Registrant's Form 10-K for the year  
      ended December 31, 1995).(2)

10.10 Management Agreement with Thomas H. Lee Company entered into 
      September 29, 1988 by and among the Registrant, as successor 
      to Interiors  Acquisition  Corporation, Stanley Holding     
      Corporation, Stanley Acquisition Corporation and  Thomas H. 
      Lee Company (incorporated by reference to Exhibit (c)(9) to 
      the  Registrant's  Rule 13e-3 Transaction Statement filed   
      October 14, 1988).

10.11 Employment Agreement made as of January 1, 1991 between     
      William Cubberley, Jr. and the Registrant (incorporated by  
      reference to Exhibit 10.42 to the Registrant's Form 10-K for 
      the year ended December 31, 1991).(2)

10.12 Split Dollar Insurance Agreement dated as of March 21, 1991 
      between Albert L. Prillaman and the Registrant (incorporated 
      by reference to Exhibit 10.43 to the Registrant's Form 10-K 
      for the year ended December 31, 1991).(2)

10.13 Second Amended and Restated Revolving Credit Facility and   
      Term Loan Agreement dated  February 15, 1994 (the "Second   
      Amended and Restated Credit Facility") between the          
      Registrant, National Canada Finance Corp., and the National 
      Bank of Canada (incorporated by reference to Registrant's   
      Form 10-K for the year ended December 31 1994).

10.14 First Amendment to Second Amended and Restated Credit       
      Facility dated as of August 21, 1995 (incorporated by       
      reference to Registrant's Form 10-K for the year ended    
      December 31, 1995).



              
(2)   Management contract or compensatory plan



<PAGE>
10.15 1992 Stock Option Plan (incorporated by reference to        
      Registrant's Registration Statement on Form S-8, No. 33-    
      58396).(2)

10.16 1994 Stock Option Plan. (incorporated by reference to Exhibit 
      10.18 to the Registrant's Form 10-K for the year ended      
      December 31, 1994).(2) 

10.17 1994 Executive Loan Plan. (incorporated by reference to     
      Exhibit 10.19 to the Registrant's Form 10-K for the year    
      ended December 31, 1994).(2)

10.18 Loan and Stock Purchase Agreement dated as of December 2,   
      1994 by Albert L. Prillaman. (incorporated by reference to  
      Exhibit 10.20 to the Registrant's Form 10-K for the year    
      ended December 31, 1994).(2)

10.19 Employment agreement dated as of June 1, 1996, between      
      Douglas I. Payne and the Registrant (incorporated by        
      reference to Exhibit 10.1 to the Registrant's Form 10-Q for 
      the quarter ended June 30, 1996).(2)

10.20 Amendment No. 1 to Employment Agreement between C. William  
      Cubberley, Jr. and the Registrant, dated as of June 1, 1996 
      (incorporated by reference to Exhibit 10.2 to the           
      Registrant's Form 10-Q for the quarter ended June 30,       
      1996).(2)
  
10.21 Amendment No. 1, dated as of October 1, 1996, to the        
      Employment Agreement, dated as of January 1, 1991, between  
      the Registrant and Albert L. Prillaman (incorporated by     
      reference to Exhibit 10.4 to the Registrant's Form 10-Q for 
      the quarter ended September 29, 1996).

10.22 Assignment and Transfer Agreement, dated as of October 8,   
      1996, between National Canada Finance Corp. and National Bank 
      of Canada relating to the Second Amended and Restated       
      Revolving Credit Facility (incorporated by reference to     
      Exhibit 10.1 to the Registrant's Form 10-Q for the quarter  
      ended September 29, 1996).

10.23 Second Amendment, dated as of October 14, 1996, to the Second 
      Amended and Restated Revolving Credit Facility (incorporated 
      by reference to Exhibit 10.2 to the Registrant's Form 10-Q  
      for the quarter ended September 29, 1996).   



               
(2)   Management contract or compensatory plan



<PAGE>
10.24 Amendment No. 1, dated as of November 1, 1996, between the  
      Registrant and the Thomas H. Lee Company to the Management  
      Agreement, dated September 29, 1988, among the Registrant's 
      predecessors and the Thomas H. Lee Company (incorporated by 
      reference to Exhibit 10.3 to the Registrant's Form 10-Q for 
      the quarter ended September 29, 1996).

10.25 Amendment No. 2, dated as of November 13, 1996, between the 
      Registrant and the Thomas H. Lee Company to the Management  
      Agreement, dated September 29, 1988, among the Registrant's 
      predecessors and the Thomas H. Lee Company (incorporated by 
      reference to Exhibit 99.2 to the Registrant's Registration  
      Statement on Form S-3 No. 333-14063).

10.26 Stock Purchase Agreement, dated as of November 13, 1996,    
      between the Registrant and the Selling Stockholders listed on 
      Schedule 1 thereto (incorporated by reference to Exhibit 99.1 
      to the Registrant's Registration Statement on Form S-3 No.  
      333-14063).  

10.27 First Amendment to Loan and Stock Pledge Agreement, dated   
      December 31, 1996, by Albert L. Prillaman.(1) 

11    Schedule of Computation of Earnings Per Share.(1)

21    Listing of Subsidiaries:

      Charter Stanley Foreign Sales Corporation, a United         
      States Virgin Islands Corporation.

23    Consent of Coopers & Lybrand L.L.P.(1)

27    Financial Data Schedule.(1)















                     
(1) Filed herewith
(2) Management contract or compensatory plan


<PAGE>
                                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        STANLEY FURNITURE COMPANY, INC.

February 7, 1997             By:  /s/Albert L. Prillaman      
                                   Albert L. Prillaman
                                   President, Chief Executive
                                   Officer, and Chairman of the   
                                   Board

     Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.

     Signature                   Title                 Date

/s/Albert L. Prillaman   President, Chief         February 7, 1997
(Albert L. Prillaman)    Executive Officer,
                         Chairman of the
                         Board, and Director
                         (Principal Executive
                         Officer)

/s/Douglas I. Payne      Senior Vice President    February 7, 1997
(Douglas I. Payne)       -Finance and
                         Administration,
                         Treasurer and 
                         Secretary (Principal 
                         Financial and 
                         Accounting Officer)

/s/David V. Harkins      Director                 February 7, 1997
(David V. Harkins) 


/s/C. Hunter Boll        Director                 February 7, 1997
(C. Hunter Boll)


/s/Edward J. Mack        Director                 February 7, 1997
(Edward J. Mack)






<PAGE>        
                                   STANLEY FURNITURE COMPANY, INC.          
                            ANNUAL REPORT ON FORM 10-K
                         INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
                               FOR THE YEAR ENDED DECEMBER 31, 1996



Financial Statements                                        Page

Report of Independent Accountants.........................  F- 2

Balance Sheets as of December 31, 1996 and 1995...........  F- 3

Statements of Income for each of the three years
  in the period ended December 31, 1996...................  F- 4

Statements of Changes in Stockholders' Equity for each
  of the three years in the period ended 
  December 31, 1996......................................   F- 5

Statements of Cash Flows for each of the three years
  in the period ended December 31, 1996...................  F- 6

Notes to Financial Statements.............................  F- 7
  

Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts for 
  each of the three years in the period ended 
  December 31, 1996.......................................  S- 1


















                                                      F-1




<PAGE>
To The Board of Directors and Stockholders Of
Stanley Furniture Company, Inc.


We have audited the financial statements and financial statement
schedule of Stanley Furniture Company, Inc. listed in the index on
page F-1.  These financial statements and financial statement
schedule are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stanley
Furniture Company, Inc. as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.  In addition, in our
opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information
required to be included therein.






                                                   Coopers & Lybrand L.L.P.






Richmond, Virginia
January 24, 1997




                                                      F-2


<PAGE>      
                                  STANLEY FURNITURE COMPANY, INC.
                                                BALANCE SHEETS
                                       (in thousands, except share data)

                                                          December 31,      
<TABLE>                                                1996           1995  
<S>                                                  <C>            <C>
ASSETS
Current assets:
  Cash.............................................  $  8,126       $    298
  Accounts receivable, less allowances of 
    $1,945 and $1,157..............................    23,096         22,732
  Inventories:
    Finished goods.................................    20,953         22,391
    Work-in-process................................     6,142          5,368
    Raw materials..................................    13,144         12,408 
 
                                                       40,239         40,167 
  Prepaid expenses and other 
    current assets.................................       486            435 
 
  Deferred income taxes............................     1,886          2,420
    Total current assets...........................    73,833         66,052

Property, plant and equipment, at cost.............    80,737         78,399
  Less accumulated depreciation....................    28,024         24,168
                                                       52,713         54,231
Goodwill, less accumulated amortization
  of $2,688 and $2,352.............................    10,752         11,088
Other assets.......................................     4,212          3,180
                                                     $141,510       $134,551
LIABILITIES 
Current liabilities:
  Current maturities of long-term debt.............  $    725       $    650
  Accounts payable.................................    14,630         13,637
  Accrued salaries, wages and benefits.............     9,584          6,619
  Other accrued expenses...........................     2,669          2,724
    Total current liabilities......................    27,608         23,630

Long-term debt, exclusive of current maturities....    38,625         40,417
Deferred income taxes..............................    11,673         12,180
Other long-term liabilities........................     1,987          3,585
  Total liabilities................................    79,893         79,812

STOCKHOLDERS' EQUITY
Common stock, $.02 par value, 10,000,000 
  shares authorized, 4,579,042 and 
  4,726,578 shares issued and outstanding..........        91             94
Capital in excess of par value.....................    62,442         64,547
Deficit............................................      (916)        (9,902)
  Total stockholders' equity.......................    61,617         54,739
                                                     $141,510       $134,551
</TABLE>
                                  The accompanying notes are an integral part
                                         of the financial statements.

                                                      F-3
<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                             STATEMENTS OF INCOME
                                     (in thousands, except per share data)


                                             For the Years Ended
                                                 December 31,        
<TABLE>                                   1996       1995      1994
<S>                                     <C>        <C>       <C>
Net sales.........................      $201,905   $174,179  $184,342

Cost of sales.....................       153,332    137,621   148,453
  
  Gross profit....................        48,573     36,558    35,889

Selling, general and administrative
  expenses........................        30,403     26,454    26,483
Unusual items, net.................                    (136)          

  Operating income ................       18,170     10,240     9,406

Gain on insurance settlement.......                            (2,379)
Other expense, net.................          616        433       444 
Interest expense...................        3,344      3,534     2,969

  Income from continuing operations 
    before income taxes............       14,210      6,273     8,372

Income taxes.......................        5,470      2,384     3,256

Income from continuing operations..        8,740      3,889     5,116  

Discontinued operations, including
  provision for operating losses
  of $1,721 in 1994, net of income
  taxes............................          246               (2,758)
    Net income ....................     $  8,986   $  3,889  $  2,358

Primary earnings per share:
  Continuing operations............     $   1.77   $    .82  $   1.08
  Discontinued operations..........          .05                 (.58)
    Net income.....................     $   1.82   $    .82  $    .50
Weighted average number of shares..        4,945      4,727     4,744      

Fully diluted earnings per share:
  Continuing operations............     $   1.71   $    .82  $   1.08
  Discontinued operations..........          .05                 (.58)
    Net income.....................     $   1.76   $    .82  $    .50
Weighted average number of shares..        5,119      4,727     4,744
</TABLE>

                                 The accompanying notes are an integral part 
                                         of the financial statements. 

                                                      F-4
<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                               STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           For each of the three years in the period ended December 31, 1996
                                                (in thousands)

                                                         Adjust-
                                             Capital     ment for  
                                               in        Minimum
                            Common Stock    Excess of    Pension
                          Shares    Amount  Par Value   Liability  Deficit
<TABLE>
<S>                        <C>        <C>    <C>         <C>      <C>
Balance at January 1,
  1994.................    4,722      $94    $64,381     $(1,122) $(16,149)

Exercise of stock
  options..............        5                  66

Adjustment for minimum
  pension liability....                                    1,122
`
Compensation expense
  related to executive
  loan plan............                           80

Net income.............                                              2,358
  Balance at December 31,
    1994...............    4,727       94     64,527        -0-    (13,791)

Compensation expense 
  related to executive
  loan plan, net.......                           20

Net income.............                                              3,889
  Balance at December 31,
    1995...............    4,727       94     64,547        -0-     (9,902)

Purchase and retirement
  of common stock......     (150)      (3)    (2,265)

Compensation expense 
  related to executive
  loan plan............                          133

Other..................        2                  27

Net income.............                                              8,986
  Balance at December 31, 
    1996...............    4,579      $91    $62,442    $   -0-   $   (916)
</TABLE>  
                                  The accompanying notes are an integral part
                                         of the financial statements.

                                                     F-5 
<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                           STATEMENTS OF CASH FLOWS
                                                (in thousands)

                                                     For the Years Ended
                                                         December 31,       
  
<TABLE>                                       1996       1995       1994 
<S>                                          <C>        <C>        <C>
Cash flows from operating activities:

  Cash received from customers.............  $200,793   $175,189   $183,458
  Cash paid to suppliers and employees.....  (176,739)  (164,022)  (176,194)
  Interest paid............................    (3,483)    (3,535)    (2,464)
  Income taxes paid, net...................    (5,259)    (1,033)    (4,463) 
  Proceeds received on insurance coverage..                           4,625 

  Operating activities of discontinued
    operations.............................                            (867)

    Net cash provided by operating
      activities...........................    15,312      6,599      4,095 

Cash flows from investing activities:

  Capital expenditures.....................    (3,599)   (14,225)    (4,968)
  Purchase of other assets.................      (370)      (467)      (650)
  Proceeds from sale of assets.............        13         25        108
  Investing activities of discontinued
    operations.............................                              357 

    Net cash used by investing activities..    (3,956)    (14,667)    (5,153)

Cash flows from financing activities:

  Purchase and retirement of common stock..    (2,268)                      

  Issuance of senior notes.................               10,000     30,000
  Repayment of senior note.................      (650)                      

  Repayment of term note...................                          (16,569)
  Repayment of revolving credit 
    facility, net..........................      (914)     (2,320)   (12,685)
  Other, net...............................       304         385        413 

    Net cash (used) provided  by financing
      activities...........................    (3,528)     8,065      1,159

Net increase (decrease) in cash............     7,828         (3)       101 
Cash at beginning of year..................       298        301        200

  Cash at end of year......................  $  8,126   $    298   $    301
</TABLE>
                                  The accompanying notes are an integral part
                                         of the financial statements.
                                                      F-6<PAGE>
<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                         NOTES TO FINANCIAL STATEMENTS


 1.  Summary of Significant Accounting Policies

Organization and Basis of Presentation
     Stanley Furniture Company, Inc. (the "Company") is a leading
designer and manufacturer of furniture exclusively targeted at the
upper-medium price range of the residential market.

     The Company operates predominantly in one business segment. 
Substantially all revenues result from the sale of home
furnishings, primarily residential furniture products. 
Substantially all of the Company's trade accounts receivable are
due from retailers in this market, which consist of a large number
of entities with a broad geographical dispersion.

Inventories
     Inventories are valued at the lower of cost or market.  Cost
for all inventories is determined using the first-in, first-out
(FIFO) method.

Property, Plant and Equipment
     Depreciation of property, plant and equipment is computed
using the straight-line method based upon the estimated useful
lives.  Gains and losses related to dispositions and retirements
are included in income.  Maintenance and repairs are charged to
income as incurred; renewals and betterments are capitalized.

Capitalized Software Cost
     The Company amortizes certain purchased computer software
costs using the straight-line method over the economic lives of the
related products not to exceed five years. Unamortized cost at
December 31, 1996 and 1995 was $720,000 and $473,000, respectively.

Goodwill and Long-lived Assets
     Goodwill is being amortized on a straight-line basis over 40
years.  The Company continually evaluates the existence of
impairment of long-lived assets, including goodwill, on the basis
of whether it is fully recoverable from projected, undiscounted net
cash flows.

Income Taxes
     Deferred income taxes are determined based on the difference
between the financial statement and income tax bases of assets and
liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.  Deferred tax expense
represents the change in the deferred tax asset/liability balance. 
Income tax credits are reported as a reduction of federal income
tax expense in the year in which the credits are generated.

                                                      F-7

<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


 1.  Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments
     The fair value of the Company's long-term debt is estimated
using discounted cash flow analysis based on the incremental
borrowing rates currently available to the Company for loans with
similar terms and maturities, and at December 31, 1996, the fair
value approximated the carrying amount.  The fair value of trade
receivables, trade payables and letters of credit approximate the
carrying amount because of the short maturity of these instruments.

Pension Plans
     The Company's funding policy is to contribute to all qualified
plans annually an amount equal to the normal cost and a portion of
the unfunded liability but not to exceed the maximum amount that
can be deducted for federal income tax purposes.

Earnings Per Common Share
     Earnings per common share are based upon the weighted average
number of shares outstanding.  Outstanding stock options are
treated as common stock equivalents for purposes of computing
primary and fully diluted earnings per share.

Stock Options
     The Company applies Accounting Principles Board Opinion No. 25
in accounting for stock options and discloses the fair value of
options granted as permitted by Statement of Financial Accounting
Standards No. 123.

Use of Estimates
     The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes.  Actual results
could differ from those estimates.

 2.  Property, Plant and Equipment at December 31 
                                     
                                       Depreciable
                                   lives         (in thousands)
                                       (in years)       1996      1995

     Land and buildings.............    20 to 50      $33,694   $33,594
     Machinery and equipment........     5 to 12       45,120    43,127
     Office furniture and equipment.     3 to 10        1,794     1,540
     Construction in progress.......                      129       138
                                                      $80,737   $78,399

                                                      F-8
<PAGE>

                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


 3.  Long-Term Debt at December 31
                                                        (in thousands)
<TABLE>                                                1996       1995
     <S>                                             <C>        <C>
     7.28% Senior notes due March 15, 2004.........  $30,000    $30,000
     7.57% Senior note due June 30, 2005...........    9,350     10,000
     Revolving credit facility.....................                 914
     Other.........................................                 153
         Total.....................................   39,350     41,067
     Less current maturities.......................      725        650
                                                     $38,625    $40,417
</TABLE>
     During August 1995, the Company amended its $25.0 million
revolving credit facility, extending its maturity date to August
1998.  The interest rate under the facility was reduced to prime
(8.25% on December 31, 1996) or, at the Company's option, the
reserve adjusted LIBOR plus 1.0% per annum.  As of December 31,
1996, approximately $22.8 million of additional borrowings were
available under the revolving credit facility. 

     The above loan agreements require the Company to maintain
certain financial covenants and limit funds available ($8.3 million
at December 31, 1996) to pay dividends and repurchase its common
stock.  

     Annual debt service requirements are $725,000 in 1997, $5.1
million in both 1998 and 1999, $5.2 million in 2000 and $5.3
million in 2001.

     The Company utilizes letters of credit to collateralize
certain insurance policies and inventory purchases.  Outstanding
letters of credit at December 31, 1996 were $2.2 million.

 4.  Unusual Items

     During 1995, the Company was released from a lease obligation
at its previously closed Waynesboro, Virginia manufacturing
facility.  Accordingly, the Company recognized a pretax credit of
$1.1 million related to the reversal of an accrual set up in 1991
for the closing of the facility.  Unusual items also included a
pretax charge for severance resulting from the resignation of a
former officer of the Company.


                                                       


                                                      F-9

<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 5.  Income Taxes

     The provision for income taxes on income from continuing
operations consists of (in thousands):
<TABLE>                                        1996     1995     1994
      <S>                                     <C>      <C>      <C>
      Current:
        Federal.........................      $5,217   $1,750   $2,314 
        State...........................         952      412      669
          Total current.................       6,169    2,162    2,983
      Deferred:
        Federal.........................        (567)     156      214 
        State...........................        (132)      66       59
            Total deferred..............        (699)     222      273
            Income taxes................      $5,470   $2,384   $3,256
</TABLE>
      A reconciliation of the difference between the federal
statutory income tax rate and the effective income tax rate on
income from continuing operations at December 31 follows:

<TABLE>                                        1996     1995     1994
      <S>                                      <C>      <C>      <C>
      Federal statutory rate..........         35.0%    35.0%    35.0% 
      State taxes, net of federal
        benefit.......................          3.8      5.0      5.0  
      Goodwill........................          0.8      1.9      1.4   
      Life insurance..................         (0.7)    (1.5)    (0.9)
      Tax savings from foreign sales
        corporation...................         (1.4)    (0.8)    (0.4)
      Tax credits.....................                  (0.2)    (0.8) 
      Other, net......................          1.0     (1.4)    (0.4)
        Effective income tax rate.....         38.5%    38.0%    38.9%
</TABLE>
     The income tax effects of temporary differences that comprise
deferred tax assets and liabilities at December 31 follow (in
thousands):
<TABLE>                                               1996      1995
      <S>                                            <C>       <C> 
      Current deferred tax assets (liabilities):
        Accounts receivable......................    $  618    $  379
        Inventory................................      (521)     (432)   
        Employee benefits........................     1,692     1,834     
        Other accrued expenses...................        97       639     
          Net current deferred tax asset.........    $1,886    $2,420     

      Noncurrent deferred tax (assets) liabilities:
        Inventory................................             $   500
        Property, plant and equipment............   $11,229    11,552
        Employee benefits........................       444       215 
        Restructuring costs......................                 (95)
        Other....................................                   8       
  
          Net noncurrent deferred tax liability..   $11,673   $12,180   
</TABLE>
                                                     F-10
<PAGE>

                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 6.  Stockholders' Equity, Stock Options, and Related Matters

     The Company's stock option plans provide for the granting of
stock options up to an aggregate of 700,000 shares of common stock
to key employees.  The exercise price may not be less than the fair
market value of the Company's common stock on the grant date.
Granted options vest 20% annually.

     At December 31, 1996 and 1995, options to purchase 385,443 and
263,023 shares, were exercisable with a weighted-average exercise
price of $9.66 and $9.59, respectively.  At December 31, 1996,
12,151 shares were available for grant.  Activity for the three
years ended December 31, 1996 follows:

                                              Number     Weighted-Average
                                            of shares     Exercise Price 
<TABLE>
     <S>                                     <C>               <C>
     Outstanding at January 1, 1994.......    668,317          $12.46 
       Exercised..........................     (5,112)          12.46
       Cancelled..........................   (602,834)          12.86
       Granted............................    609,629           10.00

     Outstanding at December 31, 1994.....    670,000            9.86
       Cancelled or lapsed................   (162,047)           9.84
       Granted............................    170,000            8.75

     Outstanding at December 31, 1995.....    677,953            9.59   
       Lapsed.............................    (15,216)           9.80       
  
       Exercised..........................     (2,500)           9.75
       Granted............................     20,000           14.78

     Outstanding at December 31, 1996.....    680,237          $ 9.74
</TABLE>
     The exercise price of options outstanding at December 31,
1996, ranged from $8.50 to $16.38 with a weighted-average remaining
contractual life of 8.2 years.

     The estimated per share weighted-average fair value of stock
options granted during 1996 and 1995 was $8.00 and $6.00,
respectively, on the date of grant.  A risk-free interest rate of
6.8% and 6.2% for 1996 and 1995, respectively, and a 50% volatility
rate with an expected life of 10 years for both 1996 and 1995, was
assumed in estimating the fair value.



                                                     F-11

<PAGE>                                     
                      STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6.  Stockholders' Equity, Stock Options, and Related Matters      
    (continued)

     The following table summarizes the pro forma effects assuming
compensation cost for such awards had been recorded based upon the
estimated fair value (in thousands, except per share data):

                                        1996                     1995       

                              As Reported  Pro Forma   As Reported  Pro Forma
<TABLE>
<S>                              <C>         <C>         <C>          <C>
Net Income..................     $8,986      $8,754      $3,889       $3,685
Primary earnings per share..     $ 1.82      $ 1.79      $  .82       $  .78
Fully diluted earnings per
  share.....................     $ 1.76      $ 1.72      $  .82       $  .78
</TABLE>
     During 1994, the Company entered into a contractual agreement
to issue 50,000 shares of common stock to the chief executive
officer at $10 per share (the market price on the date of the
agreement) in exchange for a non-recourse 7.6% note receivable. One
tenth of the prinicpal amount plus accrued interest is due each
December 31 until 1998 and the remaining principal is due January
2, 1999.  The Company agreed to forgive the accrued interest plus
one tenth of the initial principal amount each December 31, if the
executive remains employed by the Company.  During 1996, the
Company agreed to forgive the outstanding loan balance over the
remaining three years, subject to the executive's continued
employment.  Compensation expense was $308,000, $98,000 and
$160,000 for 1996, 1995 and 1994, respectively.

     In addition to its common stock, the Company's authorized
capital includes 1,000,000 shares of "blank check" preferred stock. 
None was outstanding during the three years ended December 31,
1996.  The Board of Directors is authorized to issue such stock in
series and to fix the designation, powers, preferences, rights,
limitations and restrictions with respect to any series of such
shares.  Such "blank check" preferred stock may rank prior to
common stock as to dividend rights, liquidation preferences or
both, may have full or limited voting rights and may be convertible
into shares of common stock.

     During 1996, a secondary offering of 1,000,000 shares of the
Company's common stock owned by the ML-Lee Acquisition Fund, L.P.
and certain affiliates of the Thomas H. Lee Company was completed. 
In connection with the offering, the Company incurred approximately
$325,000 of expenses.  The Company also purchased 150,000 shares of
its common stock, which were subject to the over-allotment option
from the secondary offering, for an aggregate consideration of $2.3
million.
                                                     F-12

<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 7.  Employee Benefit Plans

Defined Contribution Plan

     The Company maintains a defined contribution plan covering
substantially all of its employees.  Discretionary matching and
profit sharing contributions for 1996 totaled $856,000.  Prior to
1996, the Company made no contributions.

Pension Plans

     Benefits were accrued under the Company's pension plans
through 1995.  The Stanley Retirement Plan covers substantially all
employees hired prior to 1995.  The Supplemental Plan is unfunded
and covers certain key employees hired prior to 1989.  Stanley
Retirement Plan assets are invested in fixed income and equity
securities.  Benefits under both plans are based on average
compensation and service through 1995. The financial status of the
plans at December 31 follows (in thousands):


                                           1996                   1995      

                                     Stanley    Supple-    Stanley    Supple-
                                   Retirement   mental    Retirement  mental
                                      Plan       Plan       Plan       Plan 
<TABLE>
 <S>                              <C>         <C>       <C>        <C>
 Accumulated benefit obligation:
   Vested......................   $(14,334)   $  (990)  $(14,641)  $   (897)
   Nonvested...................     (1,636)               (1,127)       (97)
 Accumulated benefit obligation   $(15,970)   $  (990)  $(15,768)  $   (994)

 Projected benefit obligation..   $(15,970)   $  (990)  $(15,768)  $   (994)
 Plan assets at fair value.....     16,116                15,842           
 Plan assets more than 
   (less than) projected benefit
   obligation..................        146       (990)        74       (994)
 Unrecognized (gain) loss......      3,994        (62)     3,206            
   Prepaid (accrued) pension
     costs.....................   $  4,140    $(1,052)  $  3,280   $   (994)
</TABLE>







                                                     F-13

<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


7.  Employee Benefit Plans (continued)
     
     Components of net periodic pension cost follow (in thousands):

<TABLE>                                       1996       1995       1994
      <S>                                   <C>        <C>        <C>
      Service cost....................                 $  774     $  904  
      Interest cost...................      $1,295      1,256      1,315  
      Actual return on assets.........        (618)    (1,320)      (109) 
      Net amortization and deferral...         (55)       965       (589)
      Loss on curtailment.............                     31           
                                            $  622     $1,706     $1,521
</TABLE>
     The assumptions used as of December 31 to determine the plans'
financial status and pension cost were:

<TABLE>                                     1996       1995       1994
      <S>                                   <C>        <C>        <C>   
      Discount rate for funded status.....  7.75%      7.67%      9.00%
      Discount rate for pension cost......  7.67%      9.00%      7.75%
      Salary progression..................   N/A       5.00%      5.00%
      Return on assets....................  7.50%      7.75%      8.00%
</TABLE>
     A reduction in the discount rate of 0.25% would create an
additional minimum pension liability of $4.5 million and would
result in a charge to stockholders' equity of $2.7 million, net of
deferred taxes.


Postretirement Benefits Other Than Pensions

     The Company provides health care benefits to eligible retired
employees between the ages of 55 and 65 and provides life insurance
benefits to eligible retired employees from age 55 until death. 
Substantially all of the Company's employees are eligible for these
benefits after satisfying service and age provisions.  Employees
who elect benefits at retirement contribute to the cost of
coverage.  The plan is unfunded.  










                                                F-14          


<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7.  Employee Benefit Plans (continued)

     The plan's financial status at December 31 follows (in
thousands):
<TABLE>                                               1996         1995 
      <S>                                           <C>          <C>
      Retirees....................................  $(3,049)     $(4,875)
      Fully eligible active plan participants.....     (254)        (232)
      Other active plan participants..............     (300)        (714)
        Total accumulated postretirement
          benefit obligation......................   (3,603)      (5,821)
      Unrecognized net loss.......................      741        2,752
      Unrecognized transition obligation..........    2,084        2,272
        Net accrued postretirement benefit cost...   $ (778)     $  (797)
</TABLE>
     Components of net periodic postretirement benefit cost were  
(in thousands):
<TABLE>                                             1996       1995      1994
      <S>                                          <C>        <C>        <C>
      Service cost..............................   $   35     $  93      $ 74
      Interest cost.............................      274       510       242
      Amortization of transition obligation.....      130       134       359
      Amortization and deferral.................       33       182        21
                                                   $  472     $ 919      $696
</TABLE>
     The weighted-average discount rates used in determining the
actuarial present value of the projected benefit obligation were 
7.75%, 7.67% and 9.0% for 1996, 1995 and 1994, respectively.  The
rate of increase in future health care benefit cost used in
determining the obligation for 1996 was 10% gradually decreasing to 
5.5% beginning in 2003; for 1995 was 12% gradually decreasing to 6%
beginning in 2002; and, for 1994 was 15% gradually decreasing to 7%
beginning in 2005.

     Increasing the assumed health care cost trend rate by one
percentage point in each future year would increase the accumulated
postretirement benefit obligation at December 31, 1996 by $94,000
and the annual postretirement benefit cost by $12,000.

Deferred Compensation
     
     The Company has a deferred compensation plan, funded with life
insurance policies, which permits certain management employees to
defer portions of their compensation and earn a fixed rate of
return.  The accrued liabilities relating to this plan of $1.4
million at December 31, 1996 and 1995, are included in accrued
salaries, wages and benefits and other long-term liabilities.  The
cash surrender value, net of policy loans, is included in other
assets. 
                                                     F-15

<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)



 8.  Insurance Claim Accounting

     In February 1993, a fire at the Stanleytown, Virginia facility
damaged approximately 12% of the Company's total manufacturing
facilities.  The Company's insurance coverage provided for the 
complete  replacement of  the  damaged  building (which was
leased), equipment and inventory, and reimbursement for business
interruption losses. In 1994, the Company reached a final insurance
settlement and recorded a gain of $2.4 million.

 9.  Discontinued Operations

     Beginning in 1991, the Company's Norman's of Salisbury fabric
division ("Norman's") was reflected as a discontinued operation. 
In 1994, the Company ceased operations at Norman's and liquidated
the division resulting in a $2.8 million ($4.5 million pretax)
additional loss provision.  In 1996, the Company was released from
a lease obligation resulting from the purchase and concurrent
resale of certain facilities at its former Norman's division.  This
obligation was accrued as part of the 1994 charge to discontinued
operations.  Accordingly, in 1996, the Company recorded an after
tax gain of $246,000, or $.05 per share, as a partial reversal of
this accrual.

10.  Leases

     The Company leased a substantial portion of its facilities
under operating leases through June 1995, at which time the Company
purchased these facilities.  Rental expenses charged to operations
were $970,000, $1.4 million and $1.9 million in 1996, 1995 and
1994, respectively.  The Company continues to lease showroom space
and certain other equipment.  Future minimum lease payments, net of
subleases, are approximately as follows:  1997 - $762,000; 1998 -
$545,000; 1999 -$409,000; and thereafter - $12,000.

11.  Related Party Transactions

     At December 31, 1996, approximately 35% of the Company's
common stock is owned by the ML-Lee Acquisition Fund, L.P. (the
"Majority Stockholder") and certain affiliates of the Thomas H. Lee
Company.  The Company has entered into a management agreement with
an affiliate of its Majority Stockholder.  Fees paid pursuant to
this agreement amounted to $241,000 in 1996, and $250,000 in both
1995 and 1994.


                                                     F-16

<PAGE>

                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)



12.  Supplemental Cash Flow Information
                                                    (in thousands)
<TABLE>                                        1996      1995      1994
    <S>                                      <C>       <C>       <C>
    Net income.........................      $ 8,986   $ 3,889   $ 2,358  
    Adjustments to reconcile net income
      to net cash provided by operating 
      activities:
        Depreciation...................        4,774     4,503     3,996
        Amortization...................          426       416       425
        Other, net.....................          463       118       249
        Loss on disposal of fabric
          division.....................         (246)              2,758    
  
        Changes in assets and 
          liabilities:
          Accounts receivable..........         (364)    1,028    (1,011)
          Inventories..................          (72)     (262)   (2,221)
          Prepaid expenses and other 
            current assets.............       (1,347)   (1,030)     (892) 
          Insurance claim receivable...                            2,029 
          Operating assets of
            discontinued operations....                             (867)
          Accounts payable.............          993    (1,022)     (922)
          Accrued salaries, wages and         
            benefits...................        2,965      (500)      585 
          Other accrued expenses.......         (479)      137      (632)
          Deferred income taxes........         (134)      222       189
        Other assets...................           29        25        22 
        Other long-term liabilities....         (682)     (925)   (1,971)   
          Net cash provided by 
            operating activities.......      $15,312   $ 6,599   $ 4,095 
</TABLE>













                                                     F-17

<PAGE>
                                        STANLEY FURNITURE COMPANY, INC.
                                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


13.  Quarterly Results of Operations (Unaudited)

     The Company's unaudited quarterly results of operations were
as follows (in thousands, except per share data):


    
                                     First     Second    Third     Fourth
<TABLE>
     <S>                            <C>       <C>       <C>       <C>
     Fiscal 1996 Quarters:

     Net sales...................   $48,190   $47,282   $52,550   $53,882
     Gross profit................    10,769    11,087    12,778    13,939 
     Net income from continuing
       operations................     1,583     1,704     2,615     2,839 
     Net income from continuing
       operations per share,
       fully diluted.............       .33       .36       .52       .56

     Fiscal 1995 Quarters:

     Net sales...................   $44,989   $38,163   $44,706   $46,321
     Gross profit................     9,101     8,050     9,095    10,312 
     Net income..................       794       719       998     1,378 
     Net income per share,
       fully diluted.............       .17       .15       .21       .29 
</TABLE>

                                                                       


















                                                     F-18

<PAGE>

                                      STANLEY FURNITURE COMPANY, INC.
                              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
           For each of the Three Years in the Period Ended December 31, 1996
                                                (In thousands)



                                                                            
 
         Column A          Column B     Column C     Column D     Column E  
  
                                        Charged
                          Balance at   (Credited)                 Balance
                          Beginning    to Costs &                at End of
       Descriptions       of Period     Expenses    Deductions     Period   
<TABLE>  
<S>                        <C>           <C>           <C>         <C>  
1996
   Doubtful receivables... $  600        $  860        $128(a)     $1,332
   Discounts, returns,
     and allowances.......    557            56(b)                    613
                           $1,157        $  916        $128        $1,945

1995
   Doubtful receivables...  $ 528        $  302        $230(a)     $  600
   Discounts, returns,
     and allowances.......    405           152(b)                    557
                            $ 933        $  454        $230        $1,157  

1994
   Doubtful receivables...  $ 472        $  195        $139(a)     $  528
   Discounts, returns,
     and allowances.......    355            50 (b)                   405
                            $ 827        $  245        $139        $  933
</TABLE>


               
(a)  Uncollectible receivables written off, net of recoveries.
(b)  Represents net increase in required reserve.








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