UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2003

                         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: (276) 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. ( )

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2): Yes (x) No ( )

Aggregate market value of the voting and non-voting equity stock held by
non-affiliates of the Registrant based on the closing price on June 28, 2003:
$155 million

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of February 13, 2004:

   Common Stock, par value $.02 per share                  6,201,047
   --------------------------------------             ---------------------
          (Class of Common Stock)                       Number of Shares

Documents incorporated by reference: Portions of the Registrant's Proxy
Statement for its Annual Meeting of Stockholders scheduled for April 14, 2004
are incorporated by reference into Part III.



<PAGE>


                                TABLE OF CONTENTS


Part I                                                                    Page


      Item 1      Business..........................................        3
      Item 2      Properties........................................        7
      Item 3      Legal Proceedings.................................        7
      Item 4      Submission of Matters to a Vote of Security Holders       7



Part II


      Item 5      Market for Registrant's Common Equity and Related
                  Stockholder Matters...............................        9
      Item 6      Selected Financial Data...........................       10
      Item 7      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations...............       11
      Item 7A     Quantitative and Qualitative Disclosures about
                  Market Risks......................................       16
      Item 8      Consolidated Financial Statements and Supplementary
                  Data..............................................       16
      Item 9      Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure...............       16
      Item 9A     Controls and Procedures...........................       16


Part III


      Item 10     Directors and Executive Officers of the Company...       16
      Item 11     Executive Compensation............................       17
      Item 12     Security Ownership of Certain Beneficial Owners and
                  Management........................................       17
      Item 13     Certain Relationships and Related Transactions....       17
      Item 14     Principal Accountant Fees and Services............       17


Part IV

      Item 15     Exhibits, Financial Statement Schedule and Reports on
                  Form 8-K..........................................       17

      Signatures  ..................................................       21

      Index to Consolidated Financial Statements and Schedule.......      F-1

                                       2
<PAGE>


Stanley Furniture Company, Inc.

                                     PART I

Item 1.     Business

General

      Stanley Furniture Company, Inc. (the "Company" or "Stanley") is a leading
designer and manufacturer of residential wood 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. This
product depth and extensive style selection makes the Company a complete wood
furniture resource for retailers in its price range and allows the Company to
respond more quickly to shifting consumer preferences. The Company has
established a broad distribution network that includes independent furniture
stores, department stores and regional furniture chains. To provide its products
and support this broad distribution network, the Company has implemented a
blended operating strategy combining efficient and flexible manufacturing
processes with offshore sourcing of component parts and finished goods. The
Company emphasizes continuous improvement in its manufacturing and sourcing
processes to enable it to continue providing competitive advantages to its
customers, such as quick delivery, reduced inventory investment, high quality,
and value.

      In 2001, the Company began to expand its offshore sourcing as it began
implementing its blended operating strategy. The increased offshore sourcing
created excess capacity in the Company's manufacturing facilities and the
Company closed its former West End, North Carolina facility beginning in late
2001 and realigned production at its Lexington, North Carolina facility in 2003.

Products and Styles

      The Company's product lines cover all major design categories, and include
dining room, bedroom, home office, home entertainment, accent tables and youth
furniture marketed as Young America(R). Recently the Company began expanding its
Young America(R) offerings to include playroom, accent pieces for the bath and
infant furniture marketed as Young America Baby(TM). 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 wood
furniture resource in the upper-medium price range. 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.

      The Company provides 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
                                      ----------------

        Dining room...................................................     24
        Bedroom.......................................................     24
        Youth furniture (Young America(R))............................     22
        Home entertainment and accent tables..........................     20
        Home office...................................................     18

      These product lines cover all major design categories including European
traditional, contemporary/transitional, American traditional and country/casual
designs.

      The Company designs and develops new product styles each year to replace
discontinued items or styles and, if desired, to 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 prior to

                                       3

full-scale production. The Company consults with its marketing personnel, sales
representatives, and selected customers throughout this process and introduces
its new product styles primarily at the fall and spring international furniture
markets.

Distribution

      The Company has developed a broad domestic and international customer base
and sells its furniture through approximately 60 independent sales
representatives to independent furniture retailers, department stores and
regional furniture chains. Representative customers in alphabetical order
include, Carson Pirie Scott, Dillards, Federated Department Stores,
Furnitureland South, Jordan's, Marshall Fields, Nebraska Furniture Mart, Raymour
& Flanigan, Robb & Stucky and Rooms To Go Kids. The Company believes this broad
network reduces its exposure to regional recessions, and allows it to capitalize
on emerging channels of distribution. The Company offers tailored marketing
programs to address each channel of distribution.

     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, an eight-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 approximately 63,000 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.

     The Company sold to approximately 2,600 customers during 2003, and
approximately 4% of the Company's sales in 2003 were to international customers.
No single customer accounted for more than ten percent of the Company's sales in
2003. 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 and Offshore Sourcing

     The Company's manufacturing strategy combines offshore sourcing with
domestic manufacturing. The Company's domestic manufacturing operations
complement its product and distribution strategy by emphasizing continuous
improvement in quality and customer responsiveness while reducing costs. These
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 also integrates the sourcing of selected component parts and
finished items with its manufacturing operations to further enhance its product
and distribution strategy. The Company acquires selected finished items and
component parts from a limited number of offshore suppliers who can meet the
Company's quality specifications, production efficiency and scheduling
requirements. Approximately 20% of the Company's sales volume in 2003 came from
products sourced from six countries with China representing the largest volume.
Approximately 30% of 2004 sales is expected to come from sourced products.

      The Company operates manufacturing facilities in North Carolina and
Virginia consisting of an aggregate of approximately 3.2 million square feet.
The Company considers its present facilities to be generally modern,
well-equipped and well-maintained.

      The Company shipped customer orders within 15 days on average during 2003
with average finished goods inventory turns of 5.5. The Company schedules
production of its various styles based upon actual and anticipated orders. Since
the Company ships customer orders on average in 15 days, management believes
that the size of its backlog is not necessarily indicative of its long-term

                                       4

operations. The Company's backlog of unshipped orders was $19.6 million at
December 31, 2003 and $15.4 million at December 31, 2002.

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 and metals. The Company uses a
variety of species of lumber, including cherry, oak, ash, poplar, pine and
maple. The Company's five largest suppliers accounted for approximately 24% of
its purchases in 2003. 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 ranked 21st among the largest furniture manufacturers in North
America based on 2002 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. In
addition, competition has significantly increased from foreign manufacturers in
countries such as China which have lower production costs. The markets in which
the Company competes include a large number of relatively small manufacturers;
however, certain competitors of the Company have substantially greater sales
volumes and 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 sourcing strategy, 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, 2003, the Company employed approximately 2,500 associates.
None of the Company's associates are represented by a labor union. The Company
considers its relations with its associates to be good.

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
excellent quality and styling in the furniture industry. The Company owns a
number of trademarks, 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 safety, health and environmental regulations.




                                       5







Forward-Looking Statements

       Certain statements made in this report 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," "estimates," "expects,"
"may," "will," "should," or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy.
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 competition in the furniture industry including
competition from lower-cost foreign manufacturers, the Company's success in
implementing its blended strategy of expanded offshore sourcing and domestic
manufacturing, disruptions in offshore sourcing including those arising from
supply or distribution disruptions or changes in political or economic
conditions affecting the countries from which the Company obtains offshore
sourcing, international trade policies of the United States and countries from
which the Company obtains offshore sourcing, the cyclical nature of the
furniture industry, fluctuations in the price for lumber which is the most
significant raw material used by the Company, fluctuations in foreign freight
cost, credit exposure to customers, capital costs and general economic
conditions. Any forward looking statement speaks only as of the date of this
filing, and the Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new developments or
otherwise.

Available Information

         The Company files annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC"). These filings are available to the public over the Internet at the
SEC's web site at http://www.sec.gov. You may also read and copy any document
that the Company files at the SEC's public reference room located at 450 Fifth
Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room.

         The Company's principal Internet address is www.stanleyfurniture.com.
The Company makes available free of charge on www.stanleyfurniture.com its
annual, quarterly and current reports, and amendments to those reports, as soon
as reasonably practicable after the Company electronically files such material
with, or furnishes it to, the SEC.

         In addition, you may request a copy of these filings (excluding
exhibits) at no cost by writing, telephoning, faxing or e-mailing the Company at
the following address, telephone number, fax number or e-mail address:

               Stanley Furniture Company, Inc.
               1641 Fairystone Park Highway
               Stanleytown, Virginia 24168
               Attention: Mr. Douglas I. Payne
               Telephone: (276) 627-2000
               Fax 276-629-5114
               Or E-mail your request to: Investor@Stanleyfurniture.com



                                       6








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. 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. Production capacity and extent of utilization of the Company's
facilities are difficult to quantify with certainty because maximum capacity and
utilization varies periodically depending upon the product being manufactured,
the amount of component parts and finished items outsourced, and the utilization
of the labor force at the facility. In this context, the Company estimates that
its facilities operated at approximately 70-75% of capacity in 2003, principally
on a one shift basis. The Company believes available capacity at its facilities
together with the integration of selected imported component parts and finished
items will be adequate to expand production to meet anticipated product
requirements.

                                                    Approximate       Owned
                                                   Facility Size        or
Location                     Primary Use           (Square Feet)      Leased
--------                     -----------            -----------       ------
Stanleytown, VA            Manufacturing and
                           Corporate Headquarters    1,721,000         Owned
Martinsville, VA           Manufacturing               300,000         Owned
Lexington, NC              Manufacturing               635,000         Owned
Robbinsville, NC           Manufacturing               540,000         Owned
High Point, NC             Showroom                     63,000         Leased

Item 3.    Legal Proceedings

      In the normal course of business, the Company is involved in claims and
lawsuits none of which currently, in management's opinion, will have a material
adverse affect on the Company's consolidated financial statements.

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

      None.


















                                       7




Executive Officers of the Registrant

      The Company's executive officers and their ages as of January 1, 2004 are
as follows:

Name                            Age       Position
----                            ---       --------
Albert L. Prillaman...........  58        Chairman
Jeffrey R. Scheffer...........  48        President and Chief Executive Officer
Douglas I. Payne..............  45        Executive Vice President -Finance and
                                             Administration and Secretary
Philip D. Haney...............  49        Executive Vice President - Marketing/
                                             Sales - Stanley Collections
Robert A. Sitler, Jr..........  43        Senior Vice President - Operations
R. Glenn Prillaman............  32        Senior Vice President - Marketing/
                                             Sales - Young America(R)

     Albert L.  Prillaman  has been  Chairman  of the Board of  Directors  since
September 1988. Mr. Prillaman  served as Chief Executive  Officer of the Company
from December 1985 to December 2002. Mr. Prillaman also served as President from
1985 until April 2001.  Prior to 1985, Mr. Prillaman served as 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  Company since 1969.  Albert L.
Prillaman is the father of R. Glenn Prillaman.

     Jeffrey R. Scheffer has been Chief  Executive  Officer since December 2002.
Mr.  Scheffer  has been  President  since  April  2001.  He also served as Chief
Operating Officer from April 2001 to December 2002. Prior to his employment with
the Company,  Mr.  Scheffer  served as  President of American  Drew, a furniture
manufacturer, for five years.

     Douglas  I.  Payne  has  been   Executive  Vice  President  -  Finance  and
Administration  since April 2001.  Mr.  Payne  previously  held the  position of
Senior Vice President - Finance and  Administration  since December 1996. He was
Vice  President of Finance and Treasurer of the Company from  September  1993 to
December 1996. Prior to that time, Mr. Payne held various  financial  management
positions  since his  employment  by the  Company  in 1983.  Mr.  Payne has been
Secretary of the Company since 1988.

     Philip D. Haney has been  Executive  Vice  President  -  Marketing/Sales  -
Stanley Collections since August 2003. Mr. Haney previously held the position of
Executive  Vice  President - Marketing  and Sales  since his  employment  by the
company in October 2002.  Prior to his  employment  with the Company,  Mr. Haney
served as  President  of Karastan  Rug and Home from August 2002 to October 2002
and was Senior Vice  President,  Marketing  and Sales at  Karastan  from 1998 to
August 2002.

      Robert A. Sitler, Jr. has been Senior Vice President - Operations since
November 2003. Mr. Sitler previously held the position of Vice President -
Manufacturing Services since November 2001. Prior to that time, Mr. Sitler held
various management positions in credit, manufacturing, human resources, supply
management and global sourcing since his employment by the company in 1985.

     R. Glenn Prillaman has been Senior Vice President - Marketing/Sales - Young
America(R) since August 2003. Mr. Prillaman previously held the position of Vice
President - Product  Manager  since  January 2002.  Mr.  Prillaman  held various
management  positions  in product  development  for Young  America(R)  since his
return  to the  Company  in June  1999.  From  January  1996 to June  1999,  Mr.
Prillaman  was employed by various  golf course  management  companies  and golf
equipment manufacturers.  From September 1994 to January 1996, Mr. Prillaman was
employed  by the Company in product  development  and was an  independent  sales
representative for the Company from July 1993 to August 1994. R. Glenn Prillaman
is the son of Albert L. Prillaman.

                                       8

                                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, for the periods indicated, as reported by Nasdaq.

                                                                      Dividends
                                        High              Low           Paid
    2003
    First Quarter..............        $25.15           $18.26          $.05
    Second Quarter.............         27.42            20.69           .05
    Third Quarter..............         33.19            26.18           .05
    Fourth Quarter.............         33.08            29.50           .05



    2002
    First Quarter..............        $33.25           $23.29
    Second Quarter.............         36.82            26.44
    Third Quarter..............         27.05            17.70
    Fourth Quarter.............         26.20            19.75

As of February 13, 2004, there were approximately 1,800 beneficial stockholders.
Prior to 2003 the Company used all earnings to finance the growth and
development of its business and to repurchase its common stock. Accordingly no
cash dividends were paid through December 31, 2002. The Company's Board of
Directors initiated an annual dividend policy of $.20 per share in January 2003
and increased the annual dividend policy to $.40 per share in January 2004. The
Company's dividend policy is subject to review and revision by the Board of
Directors 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
and repurchase its common stock is restricted under certain loan covenants. See
Note 3 of the Notes to Consolidated Financial Statements.

                      Equity Compensation Plan Information

      The following table summarizes our equity compensation plans as of
December 31, 2003:
<TABLE>
<CAPTION>

                                   Number of shares to be    Weighted-average        Number of shares
                                   issued upon exercise      exercise price of       remaining available for
                                   of outstanding options,   outstanding options,    future issuance under
                                   warrants and rights       warrants, and rights    equity compensation plans
<S>                                       <C>                       <C>                  <C>
Equity compensation plans
  approved by stockholders                 719,000                   $25.68                241,000

Equity compensation plans
  not approved by stockholders(1)          100,000                   $27.88
                                           -------                   ------                --------

Total                                      819,000                   $25.95                241,000
                                           =======                   ======                =======

<FN>
(1) Represents a one time option grant to Jeffrey R. Scheffer, in connection
   with his employment as President and Chief Operating Officer of the Company
   in April 2001.
</FN>
</TABLE>
                                       9

<PAGE>
<TABLE>
<CAPTION>


Item 6.     Selected Financial Data
                                                        Years Ended December 31,
                                       -------------------------------------------------------
                                         2003        2002        2001       2000        1999
                                       --------    --------    --------   --------    --------
                                                (in thousands, except per share data)
Income Statement Data:
<S>                                   <C>         <C>           <C>      <C>         <C>
Net sales ..........................   $260,641    $239,485    $234,322   $283,092    $264,717
Cost of sales ......................    198,788     180,905     181,356    214,499     196,631
Restructuring and related charges(1)                  3,548       2,290
                                       --------    --------    --------   --------    --------
    Gross profit ...................     61,853      55,032      50,676     68,593      68,086
Selling, general and administrative
  expenses .........................     35,637      32,671      30,482     33,656      33,796
Unusual charge(2) ..................                              2,800
Restructuring and related charges(1)                                733
                                       --------    --------    --------   --------    --------
  Operating income .................     26,216      22,361      16,661     34,937      34,290
Other expense (income), net ........       (203)       (219)         47        (82)        388
Interest expense ...................      2,748       3,090       4,007      4,003       3,478
                                       --------    --------    --------   --------    --------
  Income before income taxes .......     23,671      19,490      12,607     31,016      30,424
Income taxes .......................      8,521       6,919       4,286     11,476      11,211
                                       --------    --------    --------   --------    --------
  Net income .......................   $ 15,150    $ 12,571    $  8,321   $ 19,540    $ 19,213
                                       ========    ========    ========   ========    ========

Basic Earnings Per Share:
Net income .........................   $   2.40    $   1.90    $   1.26   $   2.76    $   2.70
                                       ========    ========    ========   ========    ========
Weighted average shares ............      6,326       6,609       6,610      7,076       7,119
                                       ========    ========    ========   ========    ========

Diluted Earnings Per Share:
Net income .........................   $   2.34    $   1.85    $   1.21   $   2.63    $   2.47
                                       ========    ========    ========   ========    ========
Weighted average shares(3) .........      6,462       6,782       6,900      7,429       7,770
                                       ========    ========    ========   ========    ========

Cash dividends paid per share ......   $    .20
                                       ========

Balance Sheet and Other Data:
Cash ...............................   $  2,509    $  9,227    $  1,955   $  1,825    $  3,597
Inventories ........................     54,638      54,158      49,522     54,423      43,580
Working capital ....................     64,455      62,944      51,271     53,759      38,531
Total assets .......................    164,203     172,485     163,003    179,206     170,522
Long-term debt including
  current maturities ...............     22,700      29,614      37,053     52,169      38,404
Stockholders' equity(3) ............    102,558      99,687      87,294     79,477      79,573
Capital expenditures(4) ............      1,243       1,037       4,172      6,068      25,566
Stock repurchases:
  Shares ...........................        566         158          86        869         227
  Total cost .......................   $ 14,788    $  3,066    $  1,973   $ 19,754    $  4,708

<FN>
(1)   The Company recorded restructuring and related charges in 2002 of $3.6
      million (or $.34 per diluted share) and $3.0 million (or $.29 per diluted
      share) in 2001 for the closure of a manufacturing facility. See Note 8 of
      Notes to Consolidated Financial Statements.
(2)   In 2001, the Company recorded a $2.8 million (or $.26 per diluted share)
      charge to write off amounts due from a major customer. See Note 9 of Notes
      to Consolidated Financial Statements.
(3)   In 2002, the Company issued 49,000 shares to the Stanley Retirement Plan.
(4)   The 1999 capital expenditures were primarily for capacity expansion
      projects including a new facility.
</FN>
</TABLE>

                                       10

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 Consolidated Financial Statements and Notes thereto
contained elsewhere herein.

Overview

      Over the past few years the residential wood furniture industry has
experienced a surge in low cost imported products, primarily from China. Imports
have grown dramatically in the past few years and according to industry sources
it is estimated that imports now account for approximately half of all
residential wood furniture sold in the United States.

      In response to this trend we continue to develop a blended strategy of
combining our domestic manufacturing capabilities with an expanding offshore
sourcing program and to realign manufacturing capacity. We are integrating
selected imported component parts and finished items in our product line to
lower costs, provide design flexibility and offer a better value to our
customers. Sourced products represented approximately 20% of our sales in 2003
and we anticipate this percentage to level off at approximately 30% of sales for
2004.

      The increase in offshore sourcing has created excess capacity in our
manufacturing facilities which has caused us to reduce and realign manufacturing
capacity. We closed a manufacturing facility in 2002 (our former West End, North
Carolina factory) and reduced operations at another manufacturing facility in
2003. We have realigned production so that each of our current manufacturing
facilities is focused on specific product lines of compatible products to
improve quality and lower production costs.

      These actions have reduced our manufacturing capacity by approximately 15%
to 20%. However, we operated at approximately 70% to 75% of this reduced
capacity in 2003. Near-term operating margins will continue to be negatively
impacted by low capacity utilization rates as the proportion of sourced goods is
expected to grow from approximately 20% of sales in 2003 to approximately 30% of
sales in 2004.

      We are reluctant to further reduce our manufacturing capacity at the
present time in order to provide protective capacity for improved demand and the
uncertainty of the outcome of the dumping investigation currently being
conducted by the U.S. Department of Commerce and the International Trade
Commission. If the investigation determines Chinese manufacturers are illegally
dumping wooden bedroom furniture into the U. S. market, tariffs will be applied
to future imports of wooden bedroom furniture from China. While we cannot
predict the outcome or quantify the potential impact, we believe a favorable
ruling on behalf of the petitioners will have a positive impact on our financial
performance since we source a smaller percentage of wooden bedroom furniture
from China than most of our competition.

      We will continue to evaluate our manufacturing capacity needs considering
increased offshore sourcing, current and anticipated demand for our products,
the outcome of the dumping investigation regarding wooden bedroom furniture
produced in China, overall market conditions and other factors we consider
relevant. Further capacity reductions could cause asset impairment or other
restructuring charges in the future.





                                       11







Results of Operations

      The following table sets forth the percentage relationship to net sales of
certain items included in the Consolidated Statements of Income:
<TABLE>
<CAPTION>
                                                  For the Years Ended
                                                      December 31,
                                               -------------------------
                                                2003      2002      2001
                                               -----     -----     -----
<S>                                           <C>       <C>       <C>
Net sales ..................................   100.0%    100.0%    100.0%
Cost of sales ..............................    76.3      75.5      77.4
Restructuring and related charges ..........               1.5       1.0
                                               -----     -----     -----
  Gross profit .............................    23.7      23.0      21.6
Selling, general and administrative expenses    13.6      13.6      13.0
Unusual charge .............................                         1.2
Restructuring and related charges ..........                          .3
                                               -----     -----     -----
  Operating income .........................    10.1       9.4       7.1
Other income, net ..........................      .1        .1
Interest expense ...........................     1.1       1.3       1.7
                                               -----     -----     -----
  Income before income taxes ...............     9.1       8.2       5.4
Income taxes ...............................     3.3       2.9       1.8
                                               -----     -----     -----
  Net income ...............................     5.8%      5.3%      3.6%
                                               =====     =====     =====
</TABLE>

2003 Compared to 2002

         Net sales increased $21.2 million, or 8.8%, in 2003 compared to 2002.
The increase was due primarily to higher unit volume. We believe this higher
unit volume is due to gains in market share resulting from our blended operating
strategy that has allowed us to offer improved product styling and value to our
customers. While industry sales trends improved in the second half of 2003, the
industry reported a sales decrease in 2003.

      Gross profit margin for 2003 increased to 23.7% from 23.0% in 2002. Lower
gross profit margin in 2002 was due primarily to restructuring and related
charges resulting from closing a factory to reduce our manufacturing capacity.
The gross profit margin for 2003 increased due to savings from sourcing
initiatives and the realignment of manufacturing capacity. These savings were
mostly offset by transition and start up costs from increased offshore sourcing,
lower production levels at our manufacturing facilities, and other inflationary
costs including wages and employee benefits.

      Selling, general and administrative expenses as a percentage of net sales
was 13.6% for both 2003 and 2002. Selling, general and administrative
expenditures increased $3.0 million in 2003 due primarily to higher sales,
expansion of our offshore sourcing program and increased marketing and product
development costs. These increases were partially offset by a $780,000 decrease
in bad debt expense. We recognized $760,000 of bad debt expense in 2002 compared
to a net reversal of $20,000 in 2003 due to a decrease in accounts receivable
from certain customers experiencing financial difficulties. We expect the trend
of higher sourcing costs and increases in certain marketing and product
development costs to continue in 2004.

      As a result of the above, operating income for 2003 increased to $26.2
million, or 10.1% as a percentage of net sales, from $22.4 million, or 9.4% as a
percentage of net sales, in 2002.

      Interest expense for 2003 decreased due primarily to lower average debt
levels.

      The Company's effective income tax rate for 2003 increased to 36.0% from
35.5% in 2002, due primarily to higher state income taxes resulting from the
phase-out of certain state tax credits.

                                       12

2002 Compared to 2001

      Net sales increased $5.2 million, or 2.2%, for 2002 compared to 2001. The
increase was due primarily to higher unit volume.

      Gross profit margin for 2002 increased to 23.0% from 21.6% in 2001. The
increase was due primarily to cost savings resulting from closing our former
West End, North Carolina facility, offshore sourcing initiatives and lower raw
material cost. This improvement was partially offset by increased restructuring
related charges, lower production levels and higher wage and employee benefit
expenses, primarily increased health care claims and pension expense.

      Selling, general and administrative expenses for 2002 as a percentage of
net sales increased to 13.6% from 13.0% for 2001. Selling, general and
administrative expenses increased $2.2 million compared to 2001 primarily as a
result of the reinstatement of management bonuses due to higher earnings, higher
selling expenses related to new product introductions and increased sales.

      An unusual charge of $2.8 million was recorded in 2001 to write off
amounts due from a major customer, which declared bankruptcy and closed its
stores.

      As a result of closing a facility to reduce our manufacturing capacity, we
recorded total restructuring and related charges of $6.5 million. In 2002, we
recorded restructuring and related charges, as a component of cost of sales, of
$3.5 million pretax, that included $1.7 million for accelerated depreciation and
$1.8 million for other exit costs, including plant operating inefficiencies and
severance cost. In 2001, we recorded restructuring and related charges of $3.0
million that included $2.0 million in accelerated depreciation and $1.0 million
for other exit costs. The restructuring accrual at December 31, 2002 of $450,000
consists of a lease obligation for real estate and severance cost.

      As a result of the above, operating income increased to $22.4 million from
$16.7 million in 2001.

      Interest expense for 2002 decreased due primarily to lower average debt
levels.

      The Company's effective income tax rate increased to 35.5% for 2002 from
34.0% in 2001. The lower 2001 percentage was due to lower state income taxes.

Financial Condition, Liquidity and Capital Resources

      Our sources of liquidity include cash on hand, cash from operations and
amounts available under a $25.0 million credit facility. These sources have been
adequate for day-to-day expenditures, debt payments, purchases of the Company's
stock, capital expenditures and payment of cash dividends to stockholders. We
expect these sources of liquidity to continue to be adequate for the future.

      Working capital has increased due to higher overall finished goods
inventory levels as the proportion of our sales from sourced products has
increased. To support our delivery performance, we maintain a higher inventory
level of sourced products compared to those we manufacture. This is partially
offset by lower raw material inventories. We expect this trend to continue in
2004.

      Capital expenditures for 2004 are anticipated to be approximately $2.0
million to $3.0 million for normal replacements and improvements. As both our
sales and the proportion of sourced goods increase we anticipate the need for
additional warehouse space. Near-term we anticipate leasing space to accommodate
our needs. However, should we decide to invest in our own facilities this could
increase our anticipated capital expenditures.

      During 2003, the Company purchased 566,000 shares of its stock in the open
market at an average price of $26.15. At December 31, 2003, approximately $10.2

                                       13

million remains authorized by our Board of Directors to repurchase shares of the
Company's common stock. Consequently, we may, from time to time, either directly
or through agents, repurchase our common stock in the open market, through
negotiated purchases or otherwise, at prices and on terms satisfactory to the
Company. Depending on market prices and other conditions relevant to the
Company, such purchases may be discontinued at any time. The Company's Board of
Directors initiated an annual dividend policy of $.20 per share in January 2003
and increased the annual dividend policy to $.40 per share in January 2004. The
aggregate payments for 2004 are expected to be approximately $2.5 million.

     The  Company  generated  cash  from  operations  of $14.3  million  in 2003
compared to $16.1  million in 2002 and $19.8  million in 2001.  The  increase in
cash received  from  customers and cash paid to suppliers and employees for 2003
was due primarily to higher sales.  Higher tax payments in 2003 compared to 2002
resulted from timing of estimated tax payments and higher  income.  The decrease
in cash  generated  from  operations  for 2002 compared to 2001 is  attributable
primarily  to reduced  collections  from  customers  as a majority  of the sales
increase  occurred in the fourth  quarter of 2002 and was collected in the first
quarter  of 2003.  Offsetting  this  decrease  in 2002 was  lower  tax  payments
required  during 2002 as  overpayments  in 2001 were  applied to 2002.  The cash
generated from operations in 2003,  2002 and 2001 was used to repurchase  common
stock,  reduce  borrowings,  pay cash  dividends and fund capital  expenditures,
reflecting the Company's balanced strategy regarding its use of capital.

      Net cash used by investing activities was $1.3 million in 2003 compared to
$342,000 and $4.2 million in 2002 and 2001, respectively. The decline in capital
expenditures for both 2003 and 2002 compared to 2001 is due to the relocation of
a significant portion of the machinery and equipment from a previously closed
facility to other Company facilities and used in lieu of normal replacements.
The expenditures in 2003, 2002 and 2001 were primarily for plant and equipment
and other assets in the normal course of business. In 2002, the Company received
net proceeds of $695,000 from the sale of real estate at its former West End,
North Carolina facility.

      Net cash used by financing activities was $19.7 million, $8.5 million and
$15.4 million in 2003, 2002 and 2001, respectively. In 2003 and 2002, cash from
operations and proceeds from the exercise of stock options provided cash for
purchase and retirement of the Company's common stock and senior debt payments.
In 2003, these funds were also used to pay cash dividends. In 2001, cash from
operations and proceeds from the issuance of $10.0 million in senior notes
provided cash for reduction of borrowings under the revolving credit facility,
senior debt payments, capital expenditures and purchase and retirement of the
Company's common stock. In 2002, 85,914 shares of the Company's common stock
were surrendered by an executive officer to the Company in payment of a $2.6
million outstanding loan and accrued interest, relating to stock option
exercises in 2000.

      At December 31, 2003, long-term debt including current maturities was
$22.7 million. Debt service requirements are $7.0 million in 2004, $4.3 million
in 2005, $2.9 million in 2006 and $2.9 million in 2007. As of December 31, 2003,
approximately $25.0 million of additional borrowings were available under the
Company's revolving credit facility and cash on hand was $2.5 million.

The following table sets forth the Company's  contractual  cash  obligations and
other commercial commitments at December 31, 2003:
<TABLE>
<CAPTION>

                                          Payment due or commitment expiration
                                                   Less than                        Over
                                            Total    1 year   2-3 years 4-5 years  5 years

<S>                                       <C>       <C>       <C>       <C>       <C>
Contractual cash obligations:
   Long-term debt ......................   $22,700   $ 7,014   $ 7,114   $ 4,286   $ 4,286
   Operating leases ....................     1,125       774       294        57
                                           -------   -------   -------   -------   -------
      Total contractual cash obligations   $23,825   $ 7,788   $ 7,408   $ 4,343   $ 4,286
                                           =======   =======   =======   =======   =======
Other commercial commitments:
   Letters of credit ...................   $ 2,382   $ 2,382
                                           =======   =======
</TABLE>
                                       14
Critical Accounting Policies

      Management has chosen accounting policies that are necessary to accurately
and fairly report the Company's operational and financial position. Below are
the critical accounting policies that involve the most significant judgments and
estimates used in the preparation of the Company's consolidated financial
statements.

      Allowance for doubtful accounts - The Company maintains an allowance for
doubtful receivables for estimated losses resulting from the inability of trade
customers to make required payments. The Company provides an allowance for
specific customer accounts where collection is doubtful and also provides an
allowance for other accounts based on historical collection and write-off
experience. Judgment is critical because some customers have experienced
financial difficulties. As the financial condition of these customers change,
the level of such allowances will be reevaluated. During 2003, the credit
exposure related to certain customer accounts experiencing financial
difficulties declined resulting in a decrease in the allowance for doubtful
receivables.

      Inventory valuation - Inventory is valued at the lower of cost or market.
Cost for all inventories is determined using the first-in, first-out (FIFO)
method. The Company evaluates its inventory to determine excess or slow moving
items based on current order activity and projections of future demand. For
those items identified, the Company estimates its market value or net sales
value based on current trends. Those items having a net sales value less than
cost are written down to their net sales value. This process recognizes
projected inventory losses when they become evident rather than at the time they
are sold.

      Long-lived assets - Property and intangible assets are reviewed for
possible impairment when events indicate that the carrying amount of an asset
may not be recoverable. Assumptions and estimates used in the evaluation of
impairment may affect the carrying value of long-lived assets, which could
result in impairment charges in future periods. Depreciation and amortization
policies reflect judgments on the estimated useful lives of assets.

      Tax Contingencies - Tax contingencies are recorded to address potential
exposures involving tax positions the Company has taken that could be challenged
by taxing authorities. These potential exposures result from the varying
applications of statutes, rules, regulations and interpretations. The Company's
estimate of the value of its tax contingencies contains assumptions based on
past experiences and judgments about potential actions by taxing jurisdictions.
The ultimate resolution of these matters may be greater or less than the amount
that the Company has accrued.

      Pension costs - The Company's pension expense is developed from actuarial
valuations. Inherent in these valuations are key assumptions, including discount
rates and expected return on plan assets, which are usually updated on an annual
basis at the beginning of each year. The Company is required to consider current
market conditions, including changes in interest rates, in making these
assumptions. Changes in pension costs may occur in the future due to changes in
these assumptions. The key assumptions used in developing 2003 net pension costs
were 6.5% for both the discount rate and expected return on plan assets compared
to 7.25% and 7.50%, respectively, in 2002. As a result, net pension cost
increased $301,000, excluding the impact of settlement expense. In establishing
its expected return on plan assets assumption, the Company reviews asset
allocation considering plan maturity and develops return assumptions based on
different asset classes adjusting for plan operating expenses. Actual asset
over/under performance compared to expected returns will respectively
decrease/increase unrecognized loss. The change in the unrecognized loss will
change amortization cost in upcoming periods. A one percentage point change in
the expected return assumption in the current year would have resulted in a
change in pension expense of approximately $150,000. Net pension cost for 2004
is expected to increase slightly, primarily as a result of a reduction in the
discount rate from 6.5% to 6.0%.

                                       15

      The Company does not have transactions or relationships with "special
purpose" entities, and the Company does not have any off balance sheet financing
other than normal operating leases primarily for showroom and certain technology
equipment.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

      Because the Company's obligation under its revolving credit facility bears
interest at a variable rate, the Company is sensitive to changes in prevailing
interest rates. A one-percentage point fluctuation in market interest rates
would not have had a material impact on earnings in 2003.

Item 8.   Financial Statements and Supplementary Data

      The consolidated financial statements and schedule listed in Items
15(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.

Item 9a.  Controls and Procedures

(a)  Evaluation  of  disclosure  controls  and  procedures.  The  Company's
     principal  executive officer and principal financial officer have concluded
     that the  Company's  disclosure  controls  and  procedures  (as  defined in
     Exchange Act Rule  13a-14(c)),  based on their  evaluation of such controls
     and  procedures  conducted  as of the  end of the  period  covered  by this
     report,  are effective to ensure that information  required to be disclosed
     by the Company in the reports it files under the Securities Exchange Act of
     1934, as amended,  is recorded,  processed,  summarized and reported within
     the time  periods  specified in the rules and forms of the  Securities  and
     Exchange   Commission  and  that  such   information  is  accumulated   and
     communicated to the Company's management, including its principal executive
     officer and principal  financial  officer,  as  appropriate to allow timely
     decisions regarding required disclosure.

(b)  Changes in internal controls. There have been no significant changes in
     the   Company's   internal   controls  or  in  other   factors  that  could
     significantly   affect  these  controls  subsequent  to  the  date  of  the
     evaluation referred to above.

                                    PART III

Item 10.   Directors and Executive Officers of the Company

Information relating to the directors of the Company is set forth under the
caption "Election of Directors" of the Company's proxy statement (the "2004
Proxy Statement") for its annual meeting of shareholders scheduled for April 14,
2004. Such information is incorporated herein by reference.

Information relating to compliance with section 16(a) of the Exchange Act is set
forth under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" of the Company's 2004 Proxy Statement and is incorporated herein by
reference.

Information relating to the Board of Directors determinations concerning whether
a member of the Audit Committee of the Board is a "financial expert" as that
term is defined under Item 401(h) of Regulation S-K is set forth under the
caption "Board and Board Committee Information" of the Company's 2004 Proxy
Statement and is incorporated herein by reference.

                                       16

Information concerning the executive officers of the Company is included in Part
I of this report under the caption "Executive Officers of the Company."

The Company has adopted a code of ethics that applies to the Company's
associates, including the principal executive officer, principal financial
officer, principal accounting officer or controller, or person performing
similar functions. The Company's code of ethics is posted on its website at
www.stanleyfurniture.com.

Item 11.   Executive Compensation

Information relating to executive compensation for the Company is set forth
under the caption "Compensation of Executive Officers" of the Company's 2004
Proxy Statement. Such information is incorporated herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management

Information for the Company relating to this item is set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" of the
Company's 2004 Proxy Statement. Such information is incorporated herein by
reference.

Item 13.   Certain Relationships and Related Transactions

None

Item 14    Principal Accountant Fees and Services

Information for the Company relating to this item is set forth under the caption
"Independent Public Accountants" of the Company's 2004 Proxy Statement. Such
information is incorporated herein by reference.

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedule and Reports on Form 8-K
          --------------------------------------------------------------

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

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

      Report of Independent Auditors
      Consolidated Balance Sheets as of December 31, 2003 and 2002
      Consolidated Statements of Income for each of the three years in the
       period ended December 31, 2003
      Consolidated Statements of Changes in Stockholders' Equity for each of the
      three years in the period ended December 31, 2003 Consolidated Statements
      of Cash Flows for each of the three years in the period ended December 31,
      2003 Notes to Consolidated Financial Statements

(2) Financial Statement Schedule:

      Schedule II - Valuation and Qualifying Accounts for each of the three
years in the period ended December 31, 2003

(b)   The following reports on Form 8-K were filed by the Registrant during the
      last quarter of the period covered by this report: A report on Form 8-K
      was filed October 14, 2003 to announce the Board of Directors
      authorization of additional funds for its stock repurchase program and
      quarterly cash dividend.

                                       17

(c)   Exhibits:

3.1      The Restated  Certificate of Incorporation of the Registrant
         (incorporated by reference to Exhibit 3.1 to the Registrant's  Form
         10-K (Commission File No. 0-19938) for the year ended December 31,
         1998).

3.2      By-laws of the Registrant as amended  (incorporated by reference to
         Exhibit 3 to the  Registrant's  Form 10-Q (Commission File
         No. 0-14938) for the quarter ended September 27, 2003).

4.1      The Certificate of Incorporation  and By-laws of the Registrant as
         currently in effect  (incorporated by reference to Exhibits
         3.1 and 3.2 hereto).

4.2      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 (Commission File No. 0-14938)
         for the year ended December 31, 1993).

4.3      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 (Commission File No. 0-14938)
         for the quarter ended September 29, 1996).

4.4      Letter Amendment, dated June 16, 1997, 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 Statement on Form 8-K (Commission File
         No. 0-14938) filed July 9, 1997).

4.5      Note Purchase and Private Shelf Agreement, dated as of June 29, 1995,
         among the Company, The Prudential Insurance Company of America and the
         affiliates of Prudential who become Purchasers as defined therein
         (incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K
         (Commission File No. 0-14938) filed December 2, 1997).

4.6      Amendment, dated as of May 10, 1999, 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 (Commission File No. 0-14938) for the
         quarter ended June 26, 1999).

4.7      Private Shelf Agreement dated as of September 9, 1999, as amended as of
         April 26, 2001, among the Company, The Prudential Insurance Company of
         America and the affiliates of Prudential who became purchasers as
         defined therein (incorporated by reference to Exhibit 4.1 to the
         Registrant's Form 10Q (Commission File No 0-14938) for the quarter
         ended June 30, 2001).

      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 (Commission File No.
         0-14938) for the year ended December 31, 1991).(2)


(2) Management contract or compensatory plan

                                       18

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 (Commission File No. 0-14938) 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 (Commission
         File No. 0-14938) for the year ended December 31, 1987).

10.4     Supplemental  Retirement Plan of Stanley  Furniture  Company,  Inc.,
         as restated  effective  January 1, 1993  (incorporated by
         reference  to Exhibit  10.8 to the  Registrant's  Form 10-K
         (Commission  File No.  0-14938)  for the year ended  December 31,
         1993).(2)

10.5     First Amendment to Supplemental  Retirement Plan of Stanley Furniture
         Company,  Inc.,  effective  December 31, 1995,  adopted
         December 15, 1995  (incorporated by reference to Exhibit 10.7 to the
         Registrant's  Form 10-K (Commission File No. 0-14938) for
         the year ended December 31, 1995).(2)

10.6     Stanley Interiors Corporation Deferred Compensation Capital Enhancement
         Plan, effective January 1, 1986, as amended and restated effective
         August 1, 1987 (incorporated by reference to Exhibit 10.12 to the
         Registrant's Registration Statement on Form S-1(Commission File No.
         0-14938), No. 33-7300).(2)

10.7     1992 Stock Option Plan (incorporated by reference to Registrant's
         Registration Statement on Form S-8 No. 33-58396).(2)

10.8     1994 Stock Option  Plan.  (incorporated  by reference to Exhibit
         10.18 to the  Registrant's  Form 10-K  (Commission  File No.
         0-14938) for the year ended December 31, 1994).(2)

10.9     1994 Executive Loan Plan.  (incorporated  by reference to Exhibit
         10.19 to the  Registrant's  Form 10-K  (Commission  File No.
         0-14938) for the year ended December 31, 1994).(2)

10.10    Employment Agreement dated as of June 1, 1996, between Douglas I. Payne
         and the Registrant (incorporated by reference to Exhibit 10.1 to the
         Registrant's Form 10-Q (Commission File No. 0-14938) for the quarter
         ended June 30, 1996).(2)

10.11    Amendment  No. 1, dated as of October  1,  1996,  to the  Employment
         Agreement,  dated as of  January  1, 1991,  between  the
         Registrant and Albert L. Prillaman  (incorporated by reference to
         Exhibit 10.4 to the Registrant's  Form 10-Q (Commission File
         No. 0-14938) for the quarter ended September 29, 1996).(2)

10.12    2000 Incentive Compensation Plan (incorporate by reference to Exhibit
         A to the Registrant's Proxy Statement (Commission File No. 0-14938)
         for the special meeting of stockholders held on August 24, 2000). (2)

10.13    Amendment  No. 2 to The Stanley  Furniture  Company,  Inc.  1992 Stock
         Option Plan dated as of July 1, 2000  (incorporated  by
         reference to Exhibit 10.2 to the  Registrant's  Form 10-Q  (Commission
         File No.  0-14938) for the quarter ended  September 1,
         2000). (2)

10.14    Amendment  No. 1 to The Stanley  Furniture  Company,  Inc.  1994 Stock
         Option Plan dated as of July 1, 2000  (incorporated  by
         reference to Exhibit 10.3 to the  Registrant's  Form 10-Q  (Commission
         File No.  0-14938) for the quarter ended  September 1,
         2000).(2)


(2) Management contract or compensatory plan

                                       19

10.15    Employment Agreement made as of April 9, 2001 between Jeffrey R.
         Scheffer and the Registrant (incorporated by reference to Exhibit 10.1
         to the Registrant's Form 10-Q (Commission File No. 0-14938) for the
         quarter ended June 30, 2001). (2)

10.16    Option Agreement, dated April 30, 2001, between the Registrant and
         Jeffery R. Scheffer (incorporated by reference to Exhibit 10.1 to the
         Registrant's Form 10-Q (Commission File No. 0-14938) for the quarter
         ended September 29, 2001). (2)

10.17    Agreement, dated April 25, 2002, between Stanley Furniture Company,
         Inc. and Albert L. Prillaman (incorporated by reference to Exhibit
         99.2 to the Registrant's Form 8-K (Commission File No. 0-14938) filed
         on April 25, 2002). (2)

10.18    Second Amendment to Supplemental Retirement Plan of Stanley Furniture
         Company, Inc. effective January 1, 2002 (incorporated by reference to
         Exhibit 10.33 to the Registrant's Form 10-K (commission file No.
         0-14938) for the year ended December 31, 2002). (2)

10.19    Second Amendment, dated March 1, 2003, to the Employment Agreement,
         dated January 1, 1991, between the Registrant and Albert L. Prillaman
         (incorporated by reference to Exhibit 10.1 to the Registrant's Form
         10-Q (Commission File No. 0-14938) for the quarter ended March 29,
         2003). (2)

10.20    First Amendment, dated March 1, 2003, to the Employment Agreement,
         dated April 9, 2001, between the Registrant and Jeffrey R. Scheffer
         (incorporated by reference to Exhibit 10.2 to the Registrant's Form
         10-Q (Commission File No 0-14938) for the quarter ended March 29,
         2003). (2)

10.21    Credit Agreement, dated August 29, 2003, between the Registrant and
         SouthTrust Bank (incorporated by reference to Exhibit 10.1 to the
         Registrant's Form 10-Q (Commission File No. 0-14938) for the quarter
         ended September 27, 2003).

21       List of Subsidiaries(1)

23       Consent of PricewaterhouseCoopers LLP(1)

31.1     Certification by Jeffrey R. Scheffer,  Chief Executive Officer of the
         Company,  pursuant to 18 U.S.C. Section 1350, as adopted
         pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)

31.2     Certification by Douglas I. Payne, Chief Financial Officer of the
         Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002.(1)

32.1     Certification of Jeffrey R. Scheffer, Chief Executive Officer of the
         Company, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to
         section 906 of the Sarbanes-Oxley Act of 2002 (1)

32.2     Certification of Douglas I. Payne, Chief Financial Officer of the
         Company, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to
         section 906 of the Sarbanes-Oxley Act of 2002 (1)

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


                                       20




                                   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 20, 2004                       By:   /s/Jeffrey R. Scheffer
                                              ----------------------
                                              Jeffrey R. Scheffer
                                              President, and
                                              Chief Executive Officer

      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.
<TABLE>
<CAPTION>

         Signature                       Title                                          Date

<S>                                    <C>                                            <C>
/s/Albert L. Prillaman                   Chairman and Director                          February 20, 2004
--------------------------
(Albert L. Prillaman)

/s/Jeffrey R. Scheffer                   President and Chief Executive Officer          February 20, 2004
--------------------------
(Jeffrey R. Scheffer)                    and Director
                                         (Principal Executive Officer)

/s/Douglas I. Payne                      Executive Vice President - Finance             February 20, 2004
-------------------------
(Douglas I. Payne)                          and Administration and
                                            Secretary (Principal Financial
                                            and Accounting Officer)

/s/Robert G. Culp, III                   Director                                       February 20, 2004
----------------------------
(Robert G. Culp, III)

/s/Michael P. Haley                      Director                                       February 20, 2004
---------------------------
(Michael P. Haley)

                                         Director                                       February 20, 2004
---------------------------
(Thomas L. Millner)

/s/T. Scott McIlhenny, Jr.               Director                                       February 20, 2004
---------------------------
(T. Scott McIlhenny, Jr.)

</TABLE>



                                       21






<PAGE>








F5



<TABLE>
<CAPTION>

                         STANLEY FURNITURE COMPANY, INC.
                           ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2003
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE



Consolidated Financial Statements                                                              Page


<S>                                                                                          <C>
Report of Independent Auditors..........................................................        F-2

Consolidated Balance Sheets as of December 31, 2003 and 2002............................        F-3

Consolidated Statements of Income for each of the three years in the period
  ended December 31, 2003...............................................................        F-4

Consolidated Statements of Changes in Stockholders' Equity for each of the
  three years in the period ended December 31, 2003.....................................        F-5

Consolidated Statements of Cash Flows for each of the three years in the period
  ended December 31, 2003...............................................................        F-6

Notes to Consolidated 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, 2003.....................................        S-1

</TABLE>






                                       F1

<PAGE>


                   Report of Independent Auditors


To the Board of Directors and Stockholders of
Stanley Furniture Company, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Stanley Furniture
Company, Inc. and its subsidiaries at December 31, 2003 and December 31, 2002,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 10 to the consolidated financial statements, the Company
changed its accounting policy for goodwill amortization during 2002.




PricewaterhouseCoopers LLP
Greensboro, North Carolina
February 13, 2004









                                       F2
<PAGE>
<TABLE>
<CAPTION>


                         STANLEY FURNITURE COMPANY, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
                                                                         December 31,
                                                                      2003        2002
                                                                    --------    --------
ASSETS
Current assets:
<S>                                                                <C>         <C>
  Cash ..........................................................   $  2,509    $  9,227
  Accounts receivable, less allowances of $2,546 and $2,633 .....     30,120      27,832
  Inventories:
    Finished goods ..............................................     37,815      35,537
    Work-in-process .............................................      7,638       6,922
    Raw materials ...............................................      9,185      11,699
                                                                    --------    --------
      Total inventories .........................................     54,638      54,158

  Prepaid expenses and other current assets .....................      2,855       1,311
  Deferred income taxes .........................................      2,855       2,876
                                                                    --------    --------
    Total current assets ........................................     92,977      95,404

Property, plant and equipment, net ..............................     55,154      59,539
Goodwill ........................................................      9,072       9,072
Other assets ....................................................      7,000       8,470
                                                                    --------    --------
    Total assets ................................................   $164,203    $172,485
                                                                    ========    ========

LIABILITIES
Current liabilities:
  Current maturities of long-term debt ..........................   $  7,014    $  6,914
  Accounts payable ..............................................     10,595      13,386
  Accrued salaries, wages and benefits ..........................      9,511       9,781
  Other accrued expenses ........................................      1,402       2,379
                                                                    --------    --------
    Total current liabilities ...................................     28,522      32,460

Long-term debt, exclusive of current maturities .................     15,686      22,700
Deferred income taxes ...........................................     12,560      13,084
Other long-term liabilities .....................................      4,877       4,554
                                                                    --------    --------
  Total liabilities .............................................     61,645      72,798
                                                                    --------    --------

Commitments and Contingencies

STOCKHOLDERS' EQUITY
Common stock, $.02 par value, 10,000,000 shares authorized,
6,201,047 and 6,568,717 shares issued and outstanding ...........        124         131
Capital in excess of par value (net of stock option loans) ......      3,819      14,757
Retained earnings ...............................................     98,680      84,799
Accumulated other comprehensive loss ............................        (65)
                                                                    --------    --------
  Total stockholders' equity ....................................    102,558      99,687
                                                                    --------    --------
     Total liabilities and stockholders' equity .................   $164,203    $172,485
                                                                    ========    ========
</TABLE>
                   The accompanying notes are an integral part
                    of the consolidated financial statements.
                                       F3
<PAGE>

<TABLE>
<CAPTION>
                         STANLEY FURNITURE COMPANY, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except per share data)

                                                           For the Years Ended
                                                               December 31,
                                                     -------------------------------
                                                      2003        2002        2001
                                                     -------    --------    --------

<S>                                                <C>         <C>         <C>
Net sales .......................................   $260,641    $239,485    $234,322

Cost of sales ...................................    198,788     180,905     181,356
Restructuring and related charges (Note 8) ......                  3,548       2,290
                                                    --------    --------    --------

  Gross profit ..................................     61,853      55,032      50,676

Selling, general and administrative expenses ....     35,637      32,671      30,482
Unusual charge (Note 9) .........................                              2,800
Restructuring and related charges (Note 8) ......                                733
                                                    --------    --------    --------

  Operating income ..............................     26,216      22,361      16,661

Other expense (income), net .....................       (203)       (219)         47
Interest expense ................................      2,748       3,090       4,007
                                                    --------    --------    --------

  Income before income taxes ....................     23,671      19,490      12,607

Income taxes ....................................      8,521       6,919       4,286
                                                    --------    --------    --------

  Net income ....................................   $ 15,150    $ 12,571    $  8,321
                                                    ========    ========    ========

Earnings per share:

  Basic .........................................   $   2.40    $   1.90    $   1.26
                                                    ========    ========    ========
  Diluted .......................................   $   2.34    $   1.85    $   1.21
                                                    ========    ========    ========

Weighted average shares outstanding:

  Basic .........................................      6,326       6,609       6,610
                                                    ========    ========    ========
  Diluted .......................................      6,462       6,782       6,900
                                                    ========    ========    ========
</TABLE>







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

                                       F4
<PAGE>


<TABLE>
<CAPTION>
                         STANLEY FURNITURE COMPANY, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
        For each of the three years in the period ended December 31, 2003
                                 (in thousands)

                                                                                                Accumulated
                                                              Capital in     Stock                 Other
                                              Common Stock     Excess of    Option   Retained  Comprehensive
                                             Shares  Amount    Par Value     Loans   Earnings       Loss       Total
<S>                                          <C>       <C>      <C>      <C>        <C>        <C>         <C>
Balance at January 1, 2001..................  6,596    $132     $18,160    $(2,722)   $63,907               $  79,477

Net income..................................                                            8,321                   8,321

Purchase and retirement of stock............    (86)     (2)     (1,971)                                       (1,973)

Exercise of stock options...................    133       3         819        (16)                               806

Tax benefit on exercise of stock options....                        529                                           529

Stock option loan payments..................                                   134                                134
                                              -----    ----      ------     ------     ------      ------    --------

  Balance at December 31, 2001..............  6,643     133      17,537     (2,604)    72,228                  87,294

Net income..................................                                           12,571                  12,571

Purchase and retirement of stock............   (158)     (2)     (3,064)                                       (3,066)

Issuance of stock to Stanley Retirement Plan     49       1       1,179                                         1,180

Exercise of stock options...................    121       2       1,199        (72)                             1,129

Tax benefit on exercise of stock options....                        871                                           871

Stock option loan payments..................    (86)     (3)     (2,949)     2,660                               (292)
                                             -------   ----      -------    ------     ------      -----      -------

  Balance at December 31, 2002..............  6,569     131      14,773        (16)     84,799                 99,687

Net Income..................................                                            15,150                 15,150

Minimum pension liability, net of
    deferred income tax benefit of $40......                                                       $ (65)        (65)
                                                                                                              -------

   Comprehensive income.....................                                                                   15,085
                                                                                                              -------

Purchase and retirement of stock............   (566)    (11)    (14,769)                   (8)               (14,788)

Exercise of stock options...................    198       4       2,345                                         2,349

Tax benefit on exercise of stock options....                      1,475                                         1,475

Stock option loan payments..................                                     11                                11

Dividends paid, $0.20 per share.............                                            (1,261)                (1,261)
                                              -----    ----     -------        ----    -------     -----      --------
  Balance at December 31, 2003..............  6,201    $124     $ 3,824        $ (5)   $98,680     $ (65)     $102,558
                                              =====    ====     =======        =====   =======     ======     ========
</TABLE>


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

                                       F5
<PAGE>

<TABLE>
<CAPTION>

                         STANLEY FURNITURE COMPANY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

                                                             For the Years Ended
                                                                  December 31,
                                                    ------------------------------------
                                                       2003          2002        2001
                                                    ----------    ---------    ---------
Cash flows from operating activities:

<S>                                                 <C>          <C>          <C>
  Cash received from customers ...................   $ 258,589    $ 235,017    $ 241,273
  Cash paid to suppliers and employees ...........    (231,712)    (213,794)    (212,169)
  Interest paid ..................................      (2,793)      (3,155)      (4,011)
  Income taxes paid ..............................      (9,740)      (1,949)      (5,290)
                                                     ---------    ---------    ---------

    Net cash provided by operating activities ....      14,344       16,119       19,803
                                                     ---------    ---------    ---------

Cash flows from investing activities:

  Capital expenditures ...........................      (1,243)      (1,037)      (4,172)
  Other ..........................................        (104)         695          (71)
                                                     ---------    ---------    ---------

    Net cash used by investing activities ........      (1,347)        (342)      (4,243)
                                                     ---------    ---------    ---------

Cash flows from financing activities:

  Purchase and retirement of common stock ........     (14,788)      (3,066)      (1,973)
  Issuance of senior notes .......................                                10,000
  Repayment of senior notes ......................      (6,914)      (6,839)      (6,715)
  Dividends paid .................................      (1,261)
  Repayment of revolving credit facility .........                     (600)     (18,401)
  Proceeds from exercise of stock options ........       2,360        1,205          940
  Proceeds from insurance policy loans ...........         888          795          719
                                                     ---------    ---------    ---------

    Net cash used by financing activities ........     (19,715)      (8,505)     (15,430)
                                                     ---------    ---------    ---------

Net increase (decrease) in cash ..................      (6,718)       7,272          130
Cash at beginning of year ........................       9,227        1,955        1,825
                                                     ---------    ---------    ---------

  Cash at end of year ............................   $   2,509    $   9,227    $   1,955
                                                     =========    =========    =========
</TABLE>




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


                                       F6
<PAGE>


                         STANLEY FURNITURE COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

Organization and Basis of Presentation
      The consolidated financial statements include Stanley Furniture Company,
Inc. (the "Company") and its wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated. The Company is a
leading designer and manufacturer of wood furniture exclusively targeted at the
upper-medium price range of the residential market.

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

Revenue Recognition
      Revenue is recognized at the time risks and rewards of ownership transfer
to the buyer.

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, 2003 and 2002 was $189,000
and $237,000, respectively.

Income Taxes
      Deferred income taxes are determined based on the difference between the
consolidated 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
income tax expense in the year in which the credits are generated.

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. At
December 31, 2003, the fair value is not materially different than its carrying
value. 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.

                                       F7

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

1.    Summary of Significant Accounting Policies (continued)

Earnings per Common Share
      Basic earnings per share is computed based on the average number of common
shares outstanding. Diluted earnings per share reflects the increase in average
common shares outstanding that would result from the assumed exercise of
outstanding stock options, calculated using the treasury stock method.

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. No stock-based
employee compensation cost is reflected in net income, as all options granted
under those plans had an exercise price equal to the market value of the common
stock at date of grant.

      The estimated per share weighted-average fair value of stock options
granted during 2003, 2002 and 2001 was $11.45, $14.36 and $14.70, respectively,
on the date of grant. A risk-free interest rate of 3.9%, 4.0% and 5.1% for 2003,
2002 and 2001, respectively, and a volatility rate of 40 to 50% with an expected
life of 8 to 10 years was assumed in estimating the fair value.

      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):

<TABLE>
<CAPTION>
                                              2003       2002       2001
                                            --------   --------   --------

<S>                                        <C>        <C>        <C>
Net income as reported ..................   $ 15,150   $ 12,571   $  8,321
Deduct:  Total stock-based employee
  compensation expense determined under
  fair value based method for all awards,
  net of related tax effects ............      1,618      1,783      1,940
                                            --------   --------   --------

  Pro forma net income ..................   $ 13,532   $ 10,788   $  6,381
                                            ========   ========   ========

Earnings per share:
  Basic - as reported ...................   $   2.40   $   1.90   $   1.26
                                            ========   ========   ========
  Basic - pro forma .....................   $   2.14   $   1.63   $   0.97
                                            ========   ========   ========

  Diluted - as reported .................   $   2.34   $   1.85   $   1.21
                                            ========   ========   ========
  Diluted - pro forma ...................   $   2.11   $   1.60   $   0.93
                                            ========   ========   ========
</TABLE>

Use of Estimates
      The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Changes in such estimates may affect amounts
reported in future periods.

<TABLE>
<CAPTION>

                                       F8

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

2.    Property, Plant and Equipment
                                         Depreciable
                                            lives        (in thousands)
                                          (in years)    2003       2002
                                           --------   --------   --------
<S>                                       <C>        <C>        <C>
Land and buildings .....................   20 to 50   $ 38,606   $ 38,237
Machinery and equipment ................   5 to 12      74,550     74,204
Office furniture and equipment .........   3 to 10       1,846      1,710
                                                      --------   --------
  Property, plant and equipment, at cost               115,002    114,151
Less accumulated depreciation ..........                59,848     54,612
                                                      --------   --------
  Property, plant and equipment, net ...              $ 55,154   $ 59,539
                                                      ========   ========

</TABLE>
<TABLE>
<CAPTION>
3.    Debt
                                                           (in thousands)
                                                           2003      2002
                                                         -------   -------
<S>                                                     <C>       <C>
7.28% Senior notes due through March 15, 2004 ........   $ 4,286   $ 8,571
7.57% Senior note due through June 30, 2005 ..........     2,700     3,900
7.43% Senior notes due through November 18, 2007 .....     5,714     7,143
6.94% Senior notes due through May 3, 2011 ...........    10,000    10,000
Revolving credit facility
                                                         -------   -------
  Total ..............................................    22,700    29,614
Less current maturities ..............................     7,014     6,914
                                                         -------   -------
  Long-term debt, exclusive of current maturities ....   $15,686   $22,700
                                                         =======   =======
</TABLE>


      During 2003, the Company entered into a new revolving credit agreement.
The new agreement provides for maximum borrowings of $25.0 million and matures
in August 2005. Interest is payable monthly at the reserve adjusted LIBOR plus
..50% per annum (1.62% on December 31, 2003) or, at the Company's option, prime
minus 1.0% (3.0% on December 31, 2003). The Company utilizes letters of credit
to collateralize certain insurance policies and inventory purchases. Outstanding
letters of credit at December 31, 2003, were $2.4 million. At December 31, 2003,
no borrowings were outstanding under the revolving credit facility.

      The above loan agreements require the Company to maintain certain
financial covenants. The Company's ability to pay dividends with respect to its
common stock and to repurchase its common stock is restricted to $25.0 million
plus 50% of the Company's consolidated net earnings, adjusted for net cash
proceeds received by the Company from the sale of its stock and the amount of
payments for redemption, purchase or other acquisition of its capital stock,
subsequent to January 1, 1999. At December 31, 2003, these covenants limit funds
available to pay dividends and repurchase the Company's common stock to $23.3
million.

      Annual principal requirements are $7.0 million in 2004, $4.3 million in
2005, $2.9 million in 2006, $2.9 million in 2007 and $1.4 million in 2008.



                                       F9
<TABLE>
<CAPTION>


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

4.    Income Taxes

      The provision for income taxes consists of (in thousands):

                            2003      2002     2001
                           ------    ------   ------
Current:
<S>                       <C>       <C>      <C>
  Federal ..............   $8,190    $4,515   $3,980
  State ................      794       294      554
                           ------    ------   ------
    Total current ......    8,984     4,809    4,534
                           ------    ------   ------
Deferred:
  Federal ..............     (400)    1,973     (228)
  State ................      (63)      137      (20)
                           ------    ------   ------
    Total deferred .....     (463)    2,110     (248)
                           ------    ------   ------
      Income taxes .....   $8,521    $6,919   $4,286
                           ======    ======   ======
</TABLE>
<TABLE>
<CAPTION>

      A reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate follows:
                                           2003     2002     2001
                                           ----     ----     ----
<S>                                       <C>      <C>      <C>
Federal statutory rate ...............     35.0%    35.0%    35.0%
State tax, net of federal benefit ....      2.6      2.8      2.1
State tax credits and adjustments ....     (1.0)    (1.6)    (2.7)
Goodwill .............................                         .9
Life insurance .......................     (1.0)    (1.1)    (1.5)
Other, net ...........................       .4       .4       .2
                                           ----     ----     ----
  Effective income tax rate ..........     36.0%    35.5%    34.0%
                                           ====     ====     ====
</TABLE>
<TABLE>
<CAPTION>

      The income tax effects of temporary differences that comprise deferred tax
assets and liabilities at December 31 follow (in thousands):
                                                   2003      2002
                                                 -------   -------
Current deferred tax assets (liabilities):
<S>                                             <C>       <C>
  Accounts receivable ........................   $   961   $ 1,007
  Employee benefits ..........................     1,847     1,721
  Other accrued expenses .....................        47       148
                                                 -------   -------
    Net current deferred tax asset ...........   $ 2,855   $ 2,876
                                                 =======   =======

Noncurrent deferred tax liabilities:
  Property, plant and equipment ..............   $11,799   $11,687
  Employee benefits ..........................       761     1,397
                                                 -------   -------
    Net noncurrent deferred tax liability ....   $12,560   $13,084
                                                 =======   =======
</TABLE>





                                      F10


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

 5.   Stockholders' Equity

        The Company used $14.8 million of cash to purchase 566,000 shares of its
stock on the open market at an average price of $26.15 in 2003. For the three
years ending December 31, 2003, the Company has used $19.8 million of cash to
purchase 810,000 shares of its common stock on the open market at an average
price of $24.50. At December 31, 2003, approximately $10.2 million remains under
the current Board of Directors authorization to repurchase shares of the
Company's common stock.

      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, 2003. 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.
<TABLE>
<CAPTION>

      Basic and diluted earnings per share are calculated using the following
share data (in thousands):

                                                2003    2002    2001
                                               -----   -----   -----
<S>                                            <C>    <C>     <C>
Weighted average shares outstanding
    for basic calculation ..................   6,326   6,609   6,610
Effect of stock options ....................     136     173     290
                                               -----   -----   -----
    Weighted average shares outstanding
         for diluted calculation ...........   6,462   6,782   6,900
                                               =====   =====   =====
</TABLE>

















                                      F11







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

6.  Employee Stock Plans

      The Company's stock option plans provide for the granting of stock options
up to an aggregate of 2,500,000 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 generally vest 20% annually. At
December 31, 2003, 241,000 shares were available for grant.
<TABLE>
<CAPTION>

      Activity for the three years ended December 31, 2002 follows:
                                            Number    Weighted-Average
                                          of shares    Exercise Price
<S>                                       <C>            <C>
Outstanding at January 1, 2001 ......      806,464        $ 15.56
  Lapsed ............................      (13,000)         26.03
  Exercised .........................     (132,952)          6.19
  Granted ...........................      550,000          27.88
                                         ---------

Outstanding at December 31, 2001 ....    1,210,512          22.07
  Lapsed ............................      (62,000)         26.18
  Exercised .........................     (120,756)          9.88
  Granted ...........................       45,000          26.48
                                         ---------

Outstanding at December 31, 2002 ....    1,072,756          20.73
  Lapsed ............................      (60,000)         26.33
  Exercised .........................     (197,756)         11.88
  Granted ...........................        4,000          21.90
                                         ---------
Outstanding at December 31, 2003 ....      819,000        $ 25.95
                                         =========
</TABLE>
<TABLE>
<CAPTION>

      Summarized information regarding stock options outstanding and exercisable
at December 31, 2003 follows:


                                               Outstanding                          Exercisable
                                   ----------------------------------          ----------------------
              Range of                           Average      Average                         Average
           Exercise Price            Shares       Life        Price             Shares         Price
           --------------          ---------     ------      --------          --------       -------
<S>          <C>                    <C>           <C>       <C>                 <C>         <C>
              Up to $20               38,000        3.3       $ 10.45             38,000      $ 10.45
             $20 to $27              316,000        7.2         24.62            244,000        24.75
             $27 to $36              465,000        8.0         28.12            281,000        28.12
                                     -------        ---       -------            -------      -------
                                     819,000        7.5        $25.95            563,000       $25.47
                                     =======        ===        ======            =======       ======
</TABLE>







                                      F12


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


7.  Employee Benefit Plans

Defined Contribution Plan

      The Company maintains a defined contribution plan covering substantially
all of its employees and makes discretionary matching and profit sharing
contributions. The total plan cost, including employer contributions, was $1.5
million in 2003, $1.4 million in 2002 and $1.5 million in 2001.

Pension Plans

      Benefits do not accrue under the Company's pension plans after 1995. The
financial status of the plans at December 31 follows (in thousands):
<TABLE>
<CAPTION>
                                                               2003                    2002
                                                       --------------------------------------------
                                                       Stanley      Supple-     Stanley    Supple-
                                                      Retirement     mental   Retirement   mental
                                                         Plan        Plan        Plan       Plan
                                                       --------    --------    --------   ---------
Change in benefit obligation:
<S>                                                  <C>          <C>         <C>         <C>
   Beginning benefit obligation ....................   $ 14,915    $  1,750    $ 14,722    $  1,499
   Interest cost ...................................        917         112       1,042         110
   Actuarial loss (gain) ...........................        332         111       1,692         202
   Benefits paid ...................................     (1,957)        (82)     (3,126)        (61)
   Settlement cost .................................        364                     585
                                                       --------    --------    --------    --------
       Ending benefit obligation ...................     14,571       1,891      14,915       1,750
                                                       --------    --------    --------    --------
Change in plan assets:
   Beginning fair value of plan assets .............     14,949                  15,423
   Actual return on plan assets ....................      2,125                  (1,598)
   Employer contributions ..........................                     82       4,250          61
   Benefits paid ...................................     (1,957)        (82)     (3,126)        (61)
                                                       --------    --------    --------    --------
       Ending fair value of plan assets ............     15,117                  14,949
                                                       --------    --------    --------    --------
Funded status ......................................        546      (1,891)         34      (1,750)
Unrecognized loss (gain) ...........................      5,938         105       7,658
                                                       --------    --------    --------    --------
    Net amount recognized ..........................   $  6,484    $ (1,786)   $  7,692    $ (1,750)
                                                       ========    ========    ========    ========

Amount recognized in the consolidated balance sheet:
   Prepaid (accrued) benefit cost ..................   $  6,484    $ (1,891)   $  7,692    $ (1,750)
   Accumulated other comprehensive loss ............                    105
                                                       --------    --------    --------    --------
       Net amount recognized .......................   $  6,484    $ (1,786)   $  7,692    $ (1,750)
                                                       ========    ========    ========    ========
</TABLE>

      The Company made contributions totaling $4.3 million to the Stanley
Retirement Plan during 2002. The 2002 contributions included $1.2 million in
Company stock. No contributions were made in 2003.



                                      F13


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


7.  Employee Benefit Plans (continued)

      The Company maintains an investment policy for the management of the
assets of The Stanley Retirement Plan. The objective of this policy is to build
a structured portfolio designed to achieve the most desirable balance between
investment return and asset protection by investing in equities of high quality
companies and in high quality fixed income securities which are broadly balanced
and represent all market sectors. The investment structure provides the
necessary liquidity for payment of retirement benefits. The target allocation
and the actual allocation for assets of The Stanley Retirement Plan at December
31, 2003 and December 31, 2002, the measurement date, are as follows:

<TABLE>
<CAPTION>
                                                           Target
                                                         Allocation           Percentage of Assets
                                                                                2003          2002
                                                                                ----          ----
<S>                                                        <C>                 <C>           <C>
         Equity.................................           30 to 90%            54.6%         43.5%
         Fixed income...........................           30 to 60%            35.0          23.7
         Other..................................           3 to 25%             10.4          32.8
                                                                              ------        ------
            Total                                                              100.0%        100.0%
                                                                               =====         =====
</TABLE>

      At December 31, 2003 and 2002, the Stanley Retirement Plan assets included
Company stock with a fair value of $1.1 million and $1.2 million, respectively.

      The benefit obligation of the Supplemental Plan, a nonqualified plan,
exceeded the accrued benefit cost at December 31, 2003. The net accrued benefit
cost of the Supplemental Plan includes a minimum pension liability of $105,000
at year-end 2003.

      Components of pension cost follow (in thousands):

<TABLE>
<CAPTION>
                                                            2003              2002             2001
                                                            ----              ----             ----
<S>                                                        <C>              <C>               <C>
         Interest cost..........................           $1,028           $ 1,152           $ 1,195
         Expected return on plan assets.........             (958)           (1,117)           (1,247)
         Net amortization and deferral..........              573               307                45
                                                           ------           -------           -------
            Net (credit) cost...................              643               342                (7)
         Settlement expense.....................              682             1,674               468
                                                           ------           -------           -------
            Total expense.......................           $1,325           $ 2,016           $   461
                                                           ======           =======           =======
</TABLE>

      The assumptions used to determine the plans' financial status and pension
cost were:
<TABLE>
<CAPTION>

                                                                2003              2002              2001
                                                                ----              ----              ----
<S>                                                            <C>               <C>               <C>
         Discount rate for funded status.............           6.00%             6.50%             7.25%
         Discount rate for pension cost..............           6.50%             7.25%             7.60%
         Return on assets............................           6.50%             7.50%             7.50%
</TABLE>




                                      F14

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

7.  Employee Benefit Plans (continued)

      The Company's pension expense is developed from actuarial valuations.
Inherent in these valuations are key assumptions, including discount rates and
expected return on plan assets, which are reviewed and updated on an annual
basis at the beginning of each year. The Company is required to consider current
market conditions, including changes in interest rates, in making assumptions.
In establishing its expected return on assets assumption, the Company reviews
asset allocation considering plan maturity and develops return assumptions based
on different asset classes adjusting for plan operating expenses. The return
assumptions are established after reviewing historical returns of broader market
indexes, as well as historical performance of the investments of The Stanley
Retirement Plan.

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. The plan's financial status at
December 31, the measurement date, follows (in thousands):
<TABLE>
<CAPTION>
                                                                                 2003              2002
                                                                               -------           -------
<S>                                                                            <C>              <C>
      Change in benefit obligation:
           Beginning benefit obligation................................         $ 3,137          $ 3,026
           Service cost................................................              58               48
           Interest cost...............................................             187              211
           Actuarial loss..............................................              78              276
           Plan participants' contributions............................             171              187
           Benefits paid...............................................            (398)            (611)
                                                                               --------          -------
               Ending benefit obligation...............................           3,233            3,137
                                                                               --------          -------
         Change in plan assets:
           Beginning fair value of plan assets.........................
           Employer contributions......................................             227              424
           Plan participants' contributions............................             171              187
           Benefits paid...............................................            (398)            (611)
                                                                               --------         --------
               Ending fair value of plan assets........................
                                                                               --------         --------
         Funded status.................................................          (3,233)          (3,137)
         Unrecognized net loss.........................................           1,111            1,087
         Unrecognized transition obligation............................           1,174            1,304
                                                                               --------         --------
           Accrued benefit cost........................................        $   (948)        $   (746)
                                                                               ========         ========
</TABLE>

      Components of net periodic postretirement benefit cost were (in
thousands):
<TABLE>
<CAPTION>

                                                                         2003              2002             2001
                                                                         ----              ----             ----
<S>                                                                      <C>              <C>               <C>
      Service cost............................................           $  58            $  48             $  40
      Interest cost...........................................             187              211               222
      Amortization of transition obligation...................             130              130               130
      Amortization and deferral...............................              53               47                40
                                                                          ----             ----              ----
            Net periodic postretirement benefit cost..........            $428             $436              $432
                                                                          ====             ====              ====
</TABLE>
                                      F15


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


7.  Employee Benefit Plans (continued)

      The weighted-average discount rates used in determining the actuarial
present value of the projected benefit obligation were 6.00% in 2003, 6.50% in
2002 and 7.25% in 2001.

      Assumed health care cost trend rates at December 31:
<TABLE>
<CAPTION>

                                                                         2003       2002     2001
                                                                         ----       ----     ----
<S>                                                                      <C>       <C>      <C>
      Health care cost assumed trend rate for next year.......            8.5%      9.0%     10.0%
      Rate that the cost trend rate gradually declines to.....            5.0%      5.0%      5.0%
      Year that the rate reaches the rate it is assumed to
        remain at.............................................            2011      2011      2011
</TABLE>

      An increase or decrease in the assumed health care cost trend rate of one
percentage point in each future year would affect the accumulated postretirement
benefit obligation at December 31, 2003, by approximately $80,000 and the annual
postretirement benefit cost by approximately $11,000.

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 $1.6 million at both December 31, 2003 and December 31, 2002 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. Policy loan interest of $911,000, $789,000 and $703,000 was charged to
interest expense in 2003, 2002 and 2001, respectively.

 8.   Restructuring and Related Charges

      Beginning in December 2001, the Company has executed a plan to consolidate
its manufacturing operations to maximize production efficiencies as a result of
excess capacity created by expanded offshore sourcing. Manufacturing operations
at its former West End, North Carolina facility were phased out during 2002,
including the sale of real estate. The remaining restructuring accrual at
December 31, 2003 of $188,000 consists of a lease obligation.

9.    Unusual Charge

      An unusual charge of $2.8 million was recorded in 2001 to write off
amounts due from a major customer, which declared bankruptcy and closed its
stores.




<PAGE>
                                      F16

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

10.   Goodwill

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standard No. 142, ("SFAS 142"), "Goodwill and Other Intangible Assets". In
accordance with SFAS 142, the Company discontinued goodwill amortization and
tested goodwill of $9.1 million for impairment as of January 1, 2002 and
December 31, 2002 and 2003 determining that no impairment loss was necessary.
The Company will continue to test goodwill for impairment at least annually. The
following table presents net income on a comparable basis, after adjustment for
goodwill amortization (in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                               2003        2002         2001
                                            ---------   ---------    ---------
Net income:
<S>                                       <C>           <C>         <C>
  As reported ..........................   $   15,150   $   12,571   $   8,321
  Goodwill amortization (net of tax) ...                                   336
                                           ----------   ----------   ---------
    Adjusted net income ................   $   15,150   $   12,571   $   8,657
                                           ==========   ==========   =========

Basic earnings per share:
  As reported ..........................   $     2.40   $     1.90   $    1.26
                                           ==========   ==========   =========
  As adjusted ..........................   $     2.40   $     1.90   $    1.31
                                           ==========   ==========   =========

Diluted earnings per share:
  As reported ..........................   $     2.34   $     1.85   $    1.21
                                           ==========   ==========   =========
  As adjusted ..........................   $     2.34   $     1.85   $    1.25
                                           ==========   ==========   =========
</TABLE>

11.   Commitments and Contingencies

      The Company leases showroom space and certain technology equipment. Rental
expenses charged to operations were $1.3 million, $1.2 million and $1.4 million
in 2003, 2002 and 2001, respectively. Future minimum lease payments are
approximately as follows: 2004 - $774,000; 2005 - $191,000; 2006 - $103,000;
2007 - $57,000 and 2008 - $0.

      In the normal course of business, the Company is involved in claims and
lawsuits, none of which currently, in management's opinion, will have a material
adverse affect on the Company's Consolidated Financial Statements.











                                      F17


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

12.   Supplemental Cash Flow Information
<TABLE>
<CAPTION>

                                                                 (in thousands)
                                                          2003        2002       2001
                                                        --------    --------    --------

<S>                                                    <C>         <C>         <C>
Net income ..........................................   $ 15,150    $ 12,571    $  8,321
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation .....................................      5,623       5,724       5,900
   Amortization .....................................        160         214         565
   Unusual charge ...................................                              2,800
   Restructuring charge .............................                  1,755       1,990
   Deferred income taxes ............................       (463)      2,110        (248)
   Other, net .......................................          2          34          29
   Changes in assets and liabilities:
     Accounts receivable ............................     (2,288)     (3,970)      6,563
     Inventories ....................................       (480)     (4,636)      4,600
     Prepaid expenses and other current assets ......        403        (418)     (2,300)
     Accounts payable ...............................     (2,791)      1,545      (7,666)
     Accrued salaries, wages and benefits ...........       (270)        721      (1,719)
     Other accrued expenses .........................       (977)        544       1,313
     Other assets ...................................         57          40          49
     Other long-term liabilities ....................        218        (115)       (394)
                                                        --------    --------    --------
       Net cash provided by operating activities ....   $ 14,344    $ 16,119    $ 19,803
                                                        ========    ========    ========
</TABLE>
<TABLE>
<CAPTION>

13.    Quarterly Results of Operations (Unaudited)

                          (in thousands, except per share data)
      2003 Quarters:       First    Second     Third     Fourth
                          -------   -------   -------   -------
<S>                      <C>       <C>       <C>       <C>
Net sales .............   $61,298   $61,409   $65,227   $72,707
Gross profit ..........    14,622    14,565    15,641    17,025
Net income ............     3,466     3,536     3,716     4,432
Net income per share:
   Basic ..............   $   .53   $   .54   $   .61   $   .72
   Diluted ............       .52       .53       .59       .70
Dividend paid per share       .05       .05       .05       .05

2002 Quarters:
Net sales .............   $59,574   $55,268   $61,338   $63,305
Gross profit ..........    11,563    12,621    15,161    15,687
Net income ............     1,867     2,615     4,139     3,950
Net income per share:
   Basic ..............   $   .28   $   .39   $   .63   $   .60
   Diluted ............       .27       .37       .62       .59
</TABLE>


                       -----------------------------------

                                      F18
<PAGE>

<TABLE>
<CAPTION>

                         STANLEY FURNITURE COMPANY, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
        For each of the Three Years in the Period Ended December 31, 2003
                                 (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
-------------------------------------------------------------------------------------------------------------------

2003
<S>                                                <C>            <C>                <C>               <C>
    Doubtful receivables....................       $2,053          $   (20)          $   191(a)        $1,842
    Discounts, returns,
      and allowances........................          580              124(b)                             704
                                                   ------          -------           -------           ------
                                                   $2,633          $   104           $   191           $2,546
                                                   ======          =======           =======           ======


2002
    Doubtful receivables....................       $1,457          $   760           $   164(a)        $2,053
    Discounts, returns,
      and allowances........................          567               13(b)                             580
                                                   ------          -------           -------           ------
                                                   $2,024          $   773           $   164           $2,633
                                                   ======          =======           =======           ======


2001
    Doubtful receivables....................       $1,277           $3,150            $2,971(a)        $1,456
    Discounts, returns,
      and allowances........................          953             (385)(b)                            568
                                                   ------           ------            ------           ------
                                                   $2,230           $2,765            $2,971           $2,024
                                                   ======           ======            ======           ======


<FN>

------------------------------------
(a) Uncollectible receivables written-off, net of recoveries.
(b) Represents net increase (decrease) in the reserve.
</FN>
</TABLE>










                                       S-1