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, 1999

                         Commission file number 0-14938

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

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

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

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

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

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter)is not contained herein,

and will not be contained,  to the best of Registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.[ ]

Aggregate market value of the voting stock held by  non-affiliates  of the
Registrant based on the closing price on January 28, 2000:  $123 million

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of January 28, 2000:

Common Stock, par value $.02 per share                            7,113,655
       (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 19, 2000
are incorporated by reference into Part III.


<PAGE>




                                TABLE OF CONTENTS

Part I                                                                      Page


  Item 1   Business.........................................................   3
  Item 2   Properties.......................................................   6
  Item 3   Legal Proceedings................................................   6
  Item 4   Submission of Matters to a Vote of Security Holders..............   6



Part II

  Item 5   Market for Registrant's Common Equity and Related Stockholder
               Matters......................................................   8
  Item 6   Selected Financial Data..........................................   9
  Item 7   Management's Discussion and Analysis of Financial Condition and
               Results of Operations........................................  10
  Item 7A  Quantitative and Qualitative Disclosures about Market Risks......  13
  Item 8   Financial Statements and Supplementary Data......................  13
  Item 9   Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure.........................................  13



Part III

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



Part IV

  Item 14     Exhibits, Financial Statement Schedule and Reports on Form 8-K  13

      Signatures  ..........................................................  18

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


<PAGE>


                         Stanley Furniture Company, Inc.

                                     PART I

Item 1.     Business

General

      The Company 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.  Its product depth and extensive style  selections make
the Company a complete wood furniture  resource for retailers in its price range
and allow the Company to respond more quickly to shifting consumer  preferences.
The  Company  has  established  a  broad  distribution   network  that  includes
independent  furniture  stores,  department  stores,  and  national and regional
furniture  chains.  To produce its products  and support its broad  distribution
network,  the  Company  has  developed  efficient  and  flexible   manufacturing
processes  that it believes are unique in the  furniture  industry.  The Company
emphasizes continuous improvement in its manufacturing processes to enable it to
continue  providing  competitive  advantages  to its  customers,  such as  quick
delivery, reduced inventory investment, high quality, and value.

Products and Styles

      The Company's product lines cover all major design categories, and include
collections  (dining  room,  bedroom,  tables and  entertainment  units),  youth
bedroom (Young AmericaTM) and home office  furniture.  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  intends to
continue  developing its product styles with particular  emphasis on home office
and youth bedroom.  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
      Collections:
         Dining room.....................................................     18
         Bedroom.........................................................     22
         Tables..........................................................     15
         Entertainment units.............................................      9
      Youth bedroom (Young America(TM))..................................     15
      Home office........................................................      7

      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.  The
Company's  engineering   department  then  prepares  the  prototype  for  actual
full-scale production.  The Company consults with its marketing personnel, sales
representatives,  and selected customers  throughout this process and introduces
its new product styles 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   70   independent   sales
representatives  to  independent  furniture  retailers,  department  stores  and
regional chain stores.  Representative  customers include Homelife, Rooms To Go,
J.C. Penney,  Furnitureland  South,  Baer's,  Breuners Home Furnishings,  Robb &
Stucky,  Nebraska Furniture Mart, Jordan's and Wickes. 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  60,000 square
feet of  showroom  space at the High Point  market to  introduce  new  products,
increase sales of its existing products, and test ideas for future products.

      The  Company has sold to  approximately  3,500 customers  during 1999, and
approximately 6% of the Company's sales in 1999 were to international customers.
No single customer accounted for more than ten percent of the Company's sales in
1999.  No material  part of the  Company's  business is dependent  upon a single
customer,  the loss of which would have a material effect on the business of the
Company.  The loss of  several of the  Company's  major  customers  could have a
material impact on the business of the Company.

Manufacturing

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

      The  Company  operates  manufacturing  facilities  in North  Carolina  and
Virginia  consisting of an aggregate of more than 3.6 million  square feet.  The
Company  considers its present  equipment to be generally  modern,  adequate and
well maintained.

      The Company  schedules  production of its various styles based upon actual
and anticipated orders. The Company's  manufacturing processes enable it to fill
orders through  manufacturing  rather than inventory.  As a result,  the Company
shipped  customer  orders  within 25 days on average  during  1999 with  average
finished goods  inventory  turns of 8.1. Since the Company ships customer orders
on  average  in about  three  weeks,  management  believes  that the size of its
backlog is not necessarily indicative of its long-term operations. The Company's
backlog of  unshipped  orders was $42.4  million at December  31, 1999 and $36.6
million at December 31, 1998.

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, maple,
and mahogany.  The Company's five largest suppliers  accounted for approximately
15% of its  purchases in 1999.  The Company  believes that its sources of supply
for  these  materials  are  adequate  and  that it is not  dependent  on any one
supplier.

Competition

      The  Company is the fourteenth  largest  furniture  manufacturer  in North
America based on 1998 sales, according to Furniture/Today,  a trade publication.
The  furniture  industry is highly  competitive  and  includes a large number of
foreign and domestic  manufacturers,  none of which  dominates  the market.  The
markets in which the Company competes include a large number of relatively small
manufacturers;  however,  certain  competitors of the Company have 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 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, 1999, the Company employed approximately 3,100 associates.
None of the Company's  associates is represented  by a labor union.  The Company
considers its relations with its associates to be good.

Patents and Trademarks

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

Governmental Regulations

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

Forward-Looking Statements

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

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.  The  Company  believes  its  manufacturing  facilities  are  being
efficiently  utilized and each facility is focused on specific  product lines to
optimize  efficiency.  The Company  estimates  that its facilities are presently
operating near capacity,  principally on a one-shift basis. The Martinsville, VA
facility is expected to begin production in early 2000 and is anticipated to add
approximately  $50-$60  million  in  additional  sales  capacity  when  in  full
production in two to three years.
<TABLE>
<CAPTION>

                                                     Approximate       Owned
                                                    Facility Size        or
            Location               Primary Use      (Square Feet)      Leased
        <S>                        <C>               <C>              <C>

         Stanleytown, VA            Manufacturing     1,721,000        Owned
                                    and Corporate
                                    Headquarters
         Martinsville, VA           Manufacturing       300,000        Owned
         West End, NC               Manufacturing       470,000        Owned(1)
         Lexington, NC              Manufacturing       635,000        Owned
         Robbinsville, NC           Manufacturing       540,000        Owned
         High Point, NC             Showroom             63,000        Leased(2)
------------------------------------
(1)  This plant leases its lumber yard; lease expires May 31, 2007.
(2)  Lease expires October 31, 2004.
</TABLE>

Item 3.    Legal Proceedings

      On July 9, 1999, the United States Environmental  Protection Agency served
the Company with an  administrative  complaint  citing the alleged  failure of a
July 1998 compliance test of one boiler at the  Stanleytown,  Virginia  facility
and  seeking a civil  fine in the amount of  $175,000.  The  Company  intends to
vigorously  contest the complaint and in August 1999 filed its answer seeking an
elimination of the civil fine. The Company believes that the cost related to the
complaint  will not have a material  adverse  effect on the Company's  financial
condition or results of operations.

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

     None.














Executive Officers of the Registrant

      The  Company's  executive officers and their ages as of January 1, 2000 as
follows:
<TABLE>
<CAPTION>

Name                                  Age    Position
<S>                                  <C>    <C>

Albert L. Prillaman...........        54     Chairman, President and Chief
                                               Executive Officer
John W. Johnson   ............        55     Senior Vice President-Manufacturing
Douglas I. Payne  ............        41     Senior Vice President -
                                             Finance and Administration,
                                               Treasurer and Secretary
William A. Sibbick............        43     Senior Vice President -Sales
Kelly S. Cain  ...............        45     Senior Vice President -
                                               Product Development
                                               and Merchandising
Robert A. Sitler, Jr..........        39     Vice President - Human Resources
</TABLE>

      Albert L. Prillaman has been President and Chief Executive  Officer of the
Company  since  December  1985 and  Chairman  of the  Board of  Directors  since
September 1988.  Prior thereto,  Mr. Prillaman served as a Vice President of the
Company  and  President  of the  Stanley  Furniture  division  of the  Company's
predecessor  since 1983, and in various  executive and other capacities with the
Stanley  Furniture  division of the  predecessors of the Company since 1969. Mr.
Prillaman is a director of American Woodmark Corporation.

      John  W.  Johnson  has  been  Senior  Vice  President-Manufacturing  since
December 1998. He was Vice President of  Manufacturing  from November 1984 until
December 1998. Prior to that time, Mr. Johnson held various management positions
related to manufacturing since his employment by the Company in 1966.

      Douglas I. Payne has been Senior Vice President-Finance and Administration
since  December  1996.  He was Vice  President  of Finance and  Treasurer of the
Company 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.

      William A.  Sibbick has been Senior Vice  President-Sales  since  December
1997. He was Vice President-Product  Development and  Merchandising-Dining  Room
and  Occasional  from  December 1996 to December  1997. He was Vice  President -
Product Development and Merchandising from April 1995 until December 1996. Prior
to that time, Mr. Sibbick held various  management  positions related to product
development since his employment by the Company in 1989.

      Kelly S.  Cain has been  Senior  Vice  President-Product  Development  and
Merchandising since December 1997. He was Vice President-Product Development and
Merchandising  for bedroom product lines from December 1996 to December 1997. He
was Vice  President-Sales  National  Accounts from April 1993 to December  1996.
Prior to that time,  Mr. Cain held  various  management  positions  in sales and
marketing since his employment by the Company in 1985.

      Robert A.  Sitler,  Jr.  has been  Vice  President-Human  Resources  since
December  1998. He was a plant manager from December 1996 to December 1998 and a
plant  superintendent  from August 1995 to December 1996. Prior to that time, he
held  various  management  positions  in  manufacturing  and  credit  since  his
employment by the Company in 1985.


<PAGE>



PART II

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

      The Company's common stock is quoted on The Nasdaq Stock Market ("Nasdaq")
under the symbol STLY.  The table below sets forth the high and low sales prices
per share, for the periods indicated, as reported by Nasdaq, adjusted to reflect
a two-for-one  stock split,  distributed  in the form of a stock dividend on May
15, 1998.
<TABLE>
<CAPTION>

                                                          High              Low
             <S>                                        <C>               <C>
              1999

              First Quarter..............                $22.63           $16.50
              Second Quarter.............                 23.63            19.00
              Third Quarter..............                 24.50            18.75
              Fourth Quarter.............                 22.25            17.00

              1998

              First Quarter..............                $20.13           $13.50
              Second Quarter.............                 27.50            17.88
              Third Quarter..............                 27.50            16.50
              Fourth Quarter.............                 19.75            10.38
</TABLE>



As of January 24, 2000, there were approximately 2,500 beneficial  stockholders.
To date the  Company  has  retained  all  earnings  to  finance  the  growth and
development of its business.  However, the Company will continue to evaluate its
dividend  policy,  and any  future  payments  will  depend  upon  the  financial
condition,  capital requirements,  and earnings of the Company, as well as other
factors that the Board of Directors may deem relevant.  The Company's ability to
pay dividends is  restricted  under  certain loan  covenants.  See Note 3 of the
Notes to Financial Statements.


<PAGE>



Item 6.     Selected Financial Data

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                   1999          1998          1997          1996          1995
                                                              (in thousands, except per share data)
<S>                                             <C>           <C>           <C>           <C>           <C>

Income Statement Data:
Net sales..................................      $264,717      $247,371      $211,905      $201,905      $174,179
Cost of sales..............................       196,631       186,931       159,453       153,332       137,621
                                                 --------      --------      --------      --------      --------
  Gross profit.............................        68,086        60,440        52,452        48,573        36,558
Selling, general and administrative
  expenses.................................        33,796        32,496        29,949        30,403        26,454
Unusual items, net (1).....................                                                                  (136)
                                                 --------      --------      --------      --------      --------
  Operating income.........................        34,290        27,944        22,503        18,170        10,240
Other expense, net ........................           388           411           276           616           433
Interest expense...........................         3,478         4,164         3,538         3,344         3,534
                                                 --------      --------      --------      --------      --------
  Income from continuing operations
    before income taxes....................        30,424        23,369        18,689        14,210         6,273
Income taxes...............................        11,211         8,886         7,102         5,470         2,384
                                                 --------      --------      --------      --------      --------
  Income from continuing operations........      $ 19,213      $ 14,483      $ 11,587      $  8,740      $  3,889
                                                 ========      ========      ========      ========      ========
Basic Earnings Per Share:(2)
Income from continuing operations..........      $   2.70      $   2.07      $   1.38      $    .92      $    .41
                                                 ========      ========      ========      ========      ========
Weighted average shares(3).................         7,119         7,008         8,394         9,444         9,454
                                                 ========      ========      ========      ========      ========
Diluted Earnings Per Share:(2)
Income from continuing operations..........      $   2.47      $   1.82      $   1.25      $    .88      $    .41
                                                 ========      ========      ========      ========      ========
Weighted average shares(3).................         7,770         7,963         9,278         9,890         9,454
                                                 ========      ========      ========      ========      ========
Balance Sheet and Other Data:
Cash.......................................      $  3,597      $  6,791      $    756      $  8,126      $    298
Inventories................................        43,580        46,514        45,730        40,239        40,167
Working capital............................        38,531        44,408        41,440        46,225        42,422
Total assets...............................       170,522       154,374       143,225       141,510       134,551
Long-term debt including
  current maturities (3) ..................        38,404        43,539        52,577        39,350        41,067
Stockholders' equity (3)(4)................        79,573        62,368        48,247        61,617        54,739
Capital expenditures(5)....................        25,566         6,680         4,076         3,599        14,225

</TABLE>




(1)   In 1995,  the Company  recognized a pretax credit of $1.1 million after it
      was released from a lease obligation at a previously closed  manufacturing
      facility. Also included is a pretax charge for a severance accrual.

(2)   Amounts have been retroactively  adjusted to reflect the two-for-one stock
      split, distributed in the form of a stock dividend, on May 15, 1998.

(3)   The Company purchased 226,750,  315,000 and 2,326,402 shares of its common
      stock for a total  consideration  of $4.7 million,  $5.6 million and $25.3
      million in 1999, 1998 and 1997, respectively.  In 1998, the Company issued
      103,400 shares to the Stanley Retirement Plan.

(4)   No dividends have been paid on the Company's common stock during any of
      the years presented.

(5)   In 1999,  the Company spent $10 million on expansion  projects at existing
      facilities and $15 million to purchase and equip a new facility.  In 1995,
      the  Company  spent  $10  million  to  purchase  two   previously   leased
      manufacturing facilities.
<PAGE>

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

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

Results of Operations

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

                                                      For the Years Ended
                                                          December 31,
                                               1999          1998          1997
<S>                                          <C>           <C>           <C>

Net sales..............................       100.0%        100.0%        100.0%
Cost of sales..........................        74.3          75.6          75.3
                                              -----         -----         -----
  Gross profit.........................        25.7          24.4          24.7
Selling, general and administrative
  expenses.............................        12.7          13.1          14.1
                                              -----         -----         -----
     Operating income..................        13.0          11.3          10.6
Other expenses, net....................          .2            .1            .1
Interest expense.......................         1.3           1.7           1.6
                                              -----         -----         -----
  Income from operations before
    income taxes.......................        11.5           9.5           8.9
Income taxes...........................         4.2           3.6           3.4
                                              -----         -----         -----
  Income from operations...............         7.3%          5.9%          5.5%
                                              =====         =====         =====
</TABLE>

1999 Compared to 1998

      Net sales increased $17.3 million, or 7.0%, for 1999 compared to 1998. The
Company ceased its upholstery  operations in the second half of 1998.  Excluding
upholstered product sales in 1998, wood furniture sales increased 9.1% for 1999.
The increase was due to higher unit volume and to a lesser extent higher average
selling prices. Capacity constraints limited shipments during 1999.

      Gross profit margin for 1999  increased to 25.7% from 24.4% for 1998.  The
increase  resulted  primarily  from  improved  operating  efficiencies  and  the
favorable impact in 1999 from the phase out of upholstered products in the prior
year.

      Selling,  general and administrative expenses as a percentage of net sales
were 12.7% and 13.1% for 1999 and 1998,  respectively.  The lower  percentage in
1999 was due  principally to higher net sales.  Expenditures in 1999 were higher
due principally to selling  expenses  directly  attributable to increased sales.
However,  the  majority  of  the  increase  was  offset  by the  elimination  of
expenditures related to upholstered products.

      As a result of the above,  operating income increased to $34.3 million, or
13.0% of net sales, from $27.9 million, or 11.3% of net sales, in 1998.

      Interest expense for 1999 decreased due to lower average debt levels.

      The  Company's  effective  income tax rate declined to 36.9% for 1999 from
38.0% in 1998, due to state income tax credits related to expansion projects.

1998 Compared to 1997

      Net sales  increased $35.5 million,  or 16.7%,  for 1998 compared to 1997.
The increase was due primarily to higher unit volume.

      Gross profit margin for 1998  decreased to 24.4% from 24.7% for 1997.  The
decrease resulted primarily from higher raw material costs,  principally lumber,
partially offset by improved operating efficiencies.

      Selling,  general and administrative expenses as a percentage of net sales
were 13.1% and 14.1% for 1998 and 1997,  respectively.  The lower  percentage in
1998 was due  principally  to higher net sales.  The  majority of the  increased
expenditures in 1998 were selling  expenses  directly  attributable to the sales
increase.

      During  the  second  half of  1998,  the  Company  ceased  its  upholstery
operations.  Upholstered  products accounted for less than 3.0% of net sales and
resulted in a pretax operating loss of approximately $1 million in both 1998 and
1997.

      As a result of the above,  operating income increased to $27.9 million, or
11.3% of net sales, from $22.5 million, or 10.6% of net sales, in 1997.

      Interest  expense for 1998  increased  due to higher  average  debt levels
resulting from the Company's repurchases of its common stock in 1997 and 1998.

      The Company's effective income tax rate was 38% for both 1998 and 1997.

Financial Condition, Liquidity and Capital Resources

      The  Company  generated  cash from  operations  of $27.8  million  in 1999
compared to $25.0 million in 1998 and $8.3 million in 1997. The increase in 1999
compared to 1998 was due  primarily  to  increased  sales.  The increase in 1998
compared to 1997 was due  primarily to increased  sales and to a lesser  extent,
lower tax payments. The Company used the cash generated from operations in 1999,
1998 and 1997 to fund capital expenditures, reduce borrowings and repurchase its
common stock.

      Net cash used by investing  activities  was $23.0 million in 1999 compared
to $6.5  million  and $4.2  million  in 1998 and  1997,  respectively.  The 1999
increase  was due  principally  to  increased  capital  expenditures  related to
capacity  expansion  projects.  Capital  expenditures  for 1999 aggregated $25.6
million,  reflecting  $22.9  million of cash  expenditures  and $2.7  million in
accounts  payable.  Approximately  $10  million  was used to  expand  production
capability  at existing  facilities  to add $30-$35  million of increased  sales
capacity on an annualized basis for the Company's  bedroom and Young America(TM)
youth bedroom products.  This new capacity enabled the Company to increase sales
13%  in  the  fourth  quarter  of  1999  compared  to the  prior  year  quarter.
Approximately $15 million was used to purchase and equip a facility dedicated to
the  production  of home office  furniture.  This  facility is expected to begin
operation in the first  quarter of 2000 and should  provide  $50-$60  million of
sales  capacity on an annualized  basis when in full  production in two to three
years. The remaining  expenditures in 1999 and the expenditures in 1998 and 1997
were  primarily for plant and equipment and other assets in the normal course of
business. Capital expenditures in 2000 are anticipated to be approximately $6-$7
million.

      Net cash used by financing activities was $7.9 million,  $12.5 million and
$11.5 million in 1999,  1998 and 1997,  respectively.  In 1999,  the purchase of
common stock and the reduction in borrowings were financed from operations, cash
on hand and the  proceeds  from the  exercise  of stock  options.  In 1998,  the
purchase of common stock and the reduction in  borrowings  were financed by cash
generated  from  operations and the proceeds from the exercise of stock options.
In 1997,  the purchase of common stock was financed by the private  placement of
debt, the revolving credit facility and cash generated from operations.

      During 1999, the Company's Board of Directors  increased the authorization
to  repurchase  shares of its common  stock to $20  million.  Consequently,  the
Company may, from time to time,  either directly or through  agents,  repurchase
its common stock in the open market,  through negotiated purchases or otherwise,
at prices and on terms  satisfactory  to the Company.  Since October  1998,  the
Company has utilized  $10.3 million to purchase a total of 541,750 shares of its
common stock at an average price of $18.94 per share,  including the purchase of
226,750  shares at an average  price of $20.76 per share in 1999.  Depending  on
market prices and other conditions  relevant to the Company,  such purchases may
be discontinued at any time.

      At December 31, 1999,  long-term debt,  including current maturities,  was
$38.4 million.  Approximately $24.0 million of additional borrowing capacity was
available under a revolving credit facility.  Also, the Company had cash on hand
of $3.6 million. Annual debt service requirements are $5.2 million in 2000, $6.7
million in 2001, $6.8 million in 2002, $6.9 million in 2003, and $7.0 million in
2004. The Company believes that its financial  resources are adequate to support
its capital needs and debt service requirements.

Year 2000

      The  conversion  from  calendar  year 1999 to calendar  year 2000 occurred
without any disruption to the Company's  critical business systems.  Since 1996,
the Company has been  upgrading  its  information  systems  with Year 2000 (Y2K)
compliant  software  and  hardware.  These  actions have  minimized  Y2K related
capital  costs and expenses,  which is estimated at less than $1.0 million.  The
Company will continue to monitor Y2K related  exposures both internally and with
its suppliers,  customers and other business  partners.  Such monitoring will be
ongoing  and  encompassed  in normal  operations  and  associated  costs are not
expected to be significant.

Item 7A.Quantitative and Qualitative Disclosures about Market Risks

            Not applicable.

Item 8.   Financial Statements and Supplementary Data

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

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

      None.

                                    PART III

      In accordance with general  instruction G(3) of Form 10-K, the information
called for by Items 10, 11, 12, and 13 of Part III is  incorporated by reference
to the  Registrant's  definitive  Proxy  Statement  for its  Annual  Meeting  of
Stockholders scheduled for April 19, 2000, except for information concerning the
executive  officers of the Registrant which is included in Part I of this report
under the caption "Executive Officers of the Registrant."

                                     PART IV

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

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

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

      Report of Independent Accountants

      Balance Sheets as of December 31, 1999 and 1998

      Statements of Income for each of the three years in the period ended
       December 31, 1999

      Statements of Changes in Stockholders'  Equity for each of the three years
       in the period ended December 31, 1999

      Statements of Cash Flows for each of the three years in the period ended
       December 31, 1999

      Notes to Financial Statements

(2)   Financial Statement Schedule:

      Schedule  II - Valuation  and  Qualifying  Accounts  for each of the three
       years in the period ended December 31, 1999

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

      None.

(c)   Exhibits:

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

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

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

 4.1     The  Certificate  of  Incorporation  and By-laws of the  Registrant  as
         currently in effect  (incorporated by reference to Exhibits 3.1 through
         3.4 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).

      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)

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     The Stanley  Retirement  Plan, as restated  effective  January 1, 1989,
         adopted  April 20, 1995  (incorporated  by reference to Exhibit 10.4 to
         the  Registrant's  Form 10-K (Commission File No. 0-14938) for the year
         ended December 31, 1995).(2)

10.5     Amendment No. 1, The Stanley  Retirement  Plan, effective  December 31,
         1995, adopted December 15, 1995 (incorporated  by reference to Exhibit
         10.5 to the  Registrant's  Form 10-K  (Commission File No. 0-14938)
         for the year ended December 31, 1995).(2)

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

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

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

10.9     Split Dollar Insurance Agreement  dated as of March  21,  1991  between
         Albert L. Prillaman and the Registrant (incorporated  by reference to
         Exhibit 10.43 to the Registrant's Form 10-K (Commission File
         No. 0-14938) for the year ended December 31, 1991).(2)

10.10    Second  Amended and Restated  Revolving  Credit  Facility and Term Loan
         Agreement  dated  February 15, 1994 (the  "Second  Amended and Restated
         Credit  Facility")  between the  Registrant,  National  Canada  Finance
         Corp.,  and the National Bank of Canada  (incorporated  by reference to
         Exhibit 10.17 to Registrant's  Form 10-K  (Commission File No. 0-14938)
         for the year ended December 31, 1994).

10.11    First Amendment to Second Amended and Restated Credit Facility dated as
         of August 21,  1995  (incorporated  by  reference  to Exhibit  10.14 to
         Registrant's Form 10-K (Commission File No. 0-14938) for the year ended
         December 31, 1995).

10.12    1992 Stock  Option Plan  (incorporated  by  reference  to  Registrant's
         Registration Statement on Form S-8 No. 33-58396).(2)

10.13    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)

10.14    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)

10.15    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)

10.16    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)

10.17    Assignment and Transfer Agreement, dated as of October 8, 1996, between
         National  Canada Finance Corp. and National Bank of Canada  relating to
         the Second Amended and Restated Revolving Credit Facility (incorporated
         by reference to Exhibit 10.1 to the Registrant's  Form 10-Q (Commission
         File No. 0-14938) for the quarter ended September 29, 1996).

10.18    Second  Amendment,  dated as of October 14, 1996, to the Second Amended
         and Restated  Revolving  Credit Facility  (incorporated by reference to
         Exhibit  10.2  to the  Registrant's  Form  10-Q  (Commission  File  No.
         0-14938) for the quarter ended September 29, 1996).

10.19    Third  Amendment,  dated as of June 24, 1997, to the Second Amended and
         Restated  Revolving  Credit  Facility  and Term  Loan  Agreement  dated
         February  15, 1994  between the  Registrant,  National  Canada  Finance
         Corp.,  and the National Bank of Canada  (incorporated  by reference to
         Exhibit 99.4 to the Registrant's Form 8-K (Commission File No. 0-14938)
         filed July 9, 1997).

10.20    Fourth  Amendment,  dated  February 24, 1998, to the Second Amended and
         Restated  Revolving  Credit  Facility  and Term  Loan  Agreement  dated
         February  15, 1994  between the  Registrant,  National  Canada  Finance
         Corp.,  and the National Bank of Canada  (incorporated  by reference to
         Exhibit  10.1  to the  Registrant's  Form  10-Q  (Commission  File  No.
         0-14938) for the quarter ended March 28, 1998).

10.21    Fifth Amendment,  dated as of March 10, 1999, to the Second Amended and
         Restated  Revolving  Credit  Facility  and Term  Loan  Agreement  dated
         February 15, 1994 among the Registrant,  National Canada Finance Corp.,
         and the National Bank of Canada  (incorporated  by reference to Exhibit
         10.1 to the  Registrant's  Form 10-Q  (Commission File No. 0-14938) for
         the quarter ended March 27, 1999).

10.22    Employment  Agreement dated as of April 1, 1999 between John W. Johnson
         and the  Registrant  (incorporated  by reference to Exhibit 10.2 to the
         Registrant's  Form 10-Q  (Commission  File No. 0-14938) for the quarter
         ended March 27, 1999).(2)

10.23    Employment Agreement dated as of April 1, 1999 between William A.
         Sibbick, Jr. and the Registrant (incorporated  by reference to Exhibit
         10.3 to the  Registrant's  Form 10-Q  (Commission File No. 0-14938)
         for the quarter ended March 27, 1999).(2)

10.24    Employment  Agreement  dated as of April 1, 1999 between  Kelly S. Cain
         and the  Registrant  (incorporated  by reference to Exhibit 10.4 to the
         Registrant's  Form 10-Q  (Commission  File No. 0-14938) for the quarter
         ended March 27, 1999).(2)

21       Listing of Subsidiaries:

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

23       Consent of PricewaterhouseCoopers LLP(1)

27       Financial Data Schedule.(1)

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

<PAGE>
                                   SIGNATURES

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

                                                 STANLEY FURNITURE COMPANY, INC.

February 4, 2000                                 By:   /s/Albert L. Prillaman
                                                       Albert L. Prillaman
                                                       Chairman, 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.

    Signature                         Title                            Date

/s/Albert L. Prillaman      Chairman, President, and Chief      February 4, 2000
(Albert L. Prillaman)        Executive Officer, and Director
                             (Principal Executive Officer)

/s/Douglas I. Payne         Senior Vice President - Finance     February 4, 2000
(Douglas I. Payne)           and Administration, Treasurer
                             and Secretary (Principal
                             Financial and Accounting Officer)

/s/Robert G. Culp, III      Director                            February 4, 2000
(Robert G. Culp, III)

/s/David V. Harkins         Director                            February 4, 2000
(David V. Harkins)

/s/Edward J. Mack           Director                            February 4, 2000
(Edward J. Mack)

/s/Thomas L. Millner        Director                            February 4, 2000
(Thomas L. Millner)

/s/T. Scott McIlhenny, Jr.  Director                            February 4, 2000
(T.Scott McIlhenny, Jr.)


<PAGE>
                        STANLEY FURNITURE COMPANY, INC.
                           ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

Financial Statements                                                        Page

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

Balance Sheets as of December 31, 1999 and 1998......................        F-3

Statements of Income for each of the three years in the period
  ended December 31, 1999............................................        F-4

Statements of Changes in Stockholders' Equity for each of the
  three years in the period ended December 31, 1999..................        F-5

Statements of Cash Flows for each of the three years in the period
  ended December 31, 1999............................................        F-6

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


Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts for each of the
  three years in the period ended December 31, 1999..................        S-1






















<PAGE>








                        Report of Independent Accountants

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

In our  opinion,  the  financial  statements  listed in the  accompanying  index
present  fairly,  in all material  respects,  the financial  position of Stanley
Furniture  Company,  Inc. at December 31, 1999 and 1998,  and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States. In addition, in our opinion, the financial statement schedule
listed in the accompanying index presents fairly, in all material respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
financial  statements.   These  financial  statements  and  financial  statement
schedule are the responsibility of the Company's management;  our responsibility
is to express an opinion on these financial  statements and financial  statement
schedule  based on our audits.  We conducted  our audits of these  statements in
accordance  with auditing  standards  generally  accepted in the United  States,
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 the opinion expressed above.

                                                      PricewaterhouseCoopers LLP



Richmond, Virginia
January 24, 2000


<PAGE>

<TABLE>

                         STANLEY FURNITURE COMPANY, INC.
                                 BALANCE SHEETS
                       (in thousands, except share data)
<CAPTION>
                                                                              December 31,
                                                                         1999              1998
                                                                      ----------        ----------
<S>                                                                     <C>              <C>
ASSETS
Current assets:

  Cash ..........................................................       $  3,597          $  6,791
  Accounts receivable, less allowances of $2,050 and $1,906......         32,133            29,141
  Inventories:
    Finished goods...............................................         22,393            22,853
    Work-in-process..............................................          8,432             7,495
    Raw materials................................................         12,755            16,166
                                                                        --------          --------
      Total inventories..........................................         43,580            46,514

  Prepaid expenses and other current assets......................          1,011               903
  Deferred income taxes..........................................          2,463             1,980
                                                                        --------          --------
    Total current assets.........................................         82,784            85,329

Property, plant and equipment, net...............................         72,100            52,474
Goodwill, less accumulated amortization of $3,696 and $3,360.....          9,744            10,080
Other assets.....................................................          5,894             6,491
                                                                        --------          --------
    Total assets.................................................       $170,522          $154,374
                                                                        ========          ========

LIABILITIES
Current liabilities:

  Current maturities of long-term debt...........................       $  5,236          $  5,136
  Accounts payable...............................................         25,836            21,837
  Accrued salaries, wages and benefits...........................         10,864            11,939
  Other accrued expenses.........................................          2,317             2,009
                                                                        --------          --------
    Total current liabilities....................................         44,253            40,921

Long-term debt, exclusive of current maturities..................         33,168            38,403
Deferred income taxes............................................         11,072            10,694
Other long-term liabilities......................................          2,456             1,988
                                                                        --------          --------
  Total liabilities..............................................         90,949            92,006
                                                                        --------          --------

STOCKHOLDERS' EQUITY

Common stock, $.02 par value, 10,000,000 shares authorized,
  7,113,655 and 7,069,715 shares issued and outstanding..........            142               141
Capital in excess of par value...................................         35,064            37,073
Retained earnings................................................         44,367            25,154
                                                                        --------          --------
  Total stockholders' equity.....................................         79,573            62,368
                                                                        --------          --------
     Total liabilities and stockholders' equity..................       $170,522          $154,374
                                                                        ========          ========
</TABLE>


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



<PAGE>
<TABLE>


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

                                                                  For the Years Ended
                                                                      December 31,
                                                         ---------------------------------------
                                                         1999             1998              1997
                                                         ----             ----              ----
<S>                                                    <C>              <C>               <C>

Net sales........................................      $264,717         $247,371          $211,905

Cost of sales....................................       196,631          186,931           159,453
                                                       --------         --------          --------

  Gross profit...................................        68,086           60,440            52,452

Selling, general and administrative expenses.....        33,796           32,496            29,949
                                                       --------         --------          --------

  Operating income...............................        34,290           27,944            22,503

Other expense, net...............................           388              411               276
Interest expense.................................         3,478            4,164             3,538
                                                       --------         --------          --------

  Income before income taxes.....................        30,424           23,369            18,689

Income taxes.....................................        11,211            8,886             7,102
                                                       --------         --------          --------

  Net income.....................................      $ 19,213         $ 14,483          $ 11,587
                                                       ========         ========          ========

Earnings per share:

  Basic..........................................      $   2.70         $   2.07          $   1.38
                                                       ========         ========          ========
  Diluted........................................      $   2.47         $   1.82          $   1.25
                                                       ========         ========          ========

Weighted average shares outstanding:

  Basic..........................................         7,119            7,008             8,394
                                                       ========         ========          ========
  Diluted........................................         7,770            7,963             9,278
                                                       ========         ========          ========

</TABLE>









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



<PAGE>

<TABLE>

                         STANLEY FURNITURE COMPANY, INC.
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
        For each of the three years in the period ended December 31, 1999
                                 (in thousands)
<CAPTION>

                                                                                     Capital
                                                                Common Stock            In        Retained
                                                             -------------------    Excess of     Earnings
                                                             Shares        Amount   Par Value     (Deficit)
                                                             ------         ----    --------      --------

<S>                                                          <C>           <C>      <C>           <C>

Balance at January 1, 1997.............................       9,158         $183     $62,350       $  (916)

Purchase and retirement of stock.......................      (2,326)         (46)    (25,283)

Compensation expense for executive loan plan, net......                                  133

Exercise of stock options..............................          34                      239

Net income.............................................                                             11,587
                                                              -----         ----     -------       -------

  Balance at December 31, 1997.........................       6,866          137      37,439        10,671

Purchase and retirement of stock.......................        (315)          (6)     (5,547)

Issuance of stock to the Stanley
  Retirement Plan......................................         103            2       1,872

Compensation expense and stock issuance related
  to the executive loan plan...........................         100            2         131

Exercise of stock options..............................         316            6       3,178

Net income.............................................                                             14,483
                                                              -----         ----     -------       -------

  Balance at December 31, 1998.........................       7,070          141      37,073        25,154

Purchase and retirement of stock.......................        (227)          (4)     (4,704)

Exercise of stock options..............................         271            5       2,695

Net income.............................................                                             19,213
                                                              -----         ----     -------       -------

  Balance at December 31, 1999.........................       7,114         $142     $35,064       $44,367
                                                              =====         ====     =======       =======
</TABLE>

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



<PAGE>
<TABLE>


                         STANLEY FURNITURE COMPANY, INC.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
<CAPTION>

                                                                  For the Years Ended
                                                                      December 31,
                                                         ---------------------------------------
                                                         1999             1998              1997
                                                         ----             ----              ----
<S>                                                   <C>              <C>              <C>
Cash flows from operating activities:

  Cash received from customers....................     $261,566         $245,492          $207,590
  Cash paid to suppliers and employees............     (220,642)        (209,030)         (187,346)
  Interest paid...................................       (3,527)          (4,228)           (3,403)
  Income taxes paid, net..........................       (9,620)          (7,211)           (8,529)
                                                       --------         --------          --------

    Net cash provided by operating activities.....       27,777           25,023             8,312
                                                       --------         --------          --------

Cash flows from investing activities:

  Capital expenditures............................      (22,866)          (6,680)           (4,076)
  Purchase of other assets........................         (157)            (106)             (143)
  Proceeds from sale of assets....................                           297
                                                       --------         --------          --------

    Net cash used by investing activities.........      (23,023)          (6,489)           (4,219)
                                                       --------         --------          --------

Cash flows from financing activities:

  Purchase and retirement of common stock.........       (4,708)          (5,553)          (25,329)
  Issuance of senior notes........................                                          10,000
  Repayment of senior notes.......................       (5,135)          (5,086)             (725)
  Proceeds from (repayment of) revolving
    credit facility, net..........................                        (3,952)            3,952
  Proceeds from exercise of stock options.........        1,299            1,556               160
  Other, net......................................          596              536               479
                                                       --------         --------          --------

    Net cash used by financing activities.........       (7,948)         (12,499)          (11,463)
                                                       --------         --------          --------

Net increase (decrease) in cash...................       (3,194)           6,035            (7,370)
Cash at beginning of year.........................        6,791              756             8,126
                                                       --------         --------          --------

  Cash at end of year.............................     $  3,597         $  6,791          $    756
                                                       ========         ========          ========
</TABLE>





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



<PAGE>


                         STANLEY FURNITURE COMPANY, INC.
                          NOTES TO FINANCIAL STATEMENTS

 1.   Summary of Significant Accounting Policies

Organization and Basis of Presentation

      Stanley Furniture Company,  Inc. (the "Company") is a leading designer and
manufacturer of 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 upon shipment of product.

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, 1999 and 1998 was $815,000
and $831,000, respectively.

Goodwill and Long-lived Assets

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

Income Taxes

      Deferred income taxes are determined  based on the difference  between the
financial statement and income tax bases of assets and liabilities using enacted
tax  rates in  effect in the years in which  the  differences  are  expected  to
reverse.  Deferred  tax  expense  represents  the  change  in the  deferred  tax
asset/liability  balance.  Income tax  credits are  reported  as a reduction  of
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, 1999, the fair value  approximated  the carrying  amount.  The fair
value of trade receivables, trade payables and letters of credit approximate the
carrying amount because of the short maturity of these instruments.


<PAGE>


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

1.    Summary of Significant Accounting Policies (continued)

Pension Plans

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

Earnings per Common Share

      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.

Use of Estimates

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

2.    Property, Plant and Equipment
<TABLE>
<CAPTION>

                                                      Depreciable
                                                        lives                  (in thousands)
                                                      (in years)           1999              1998
                                                      ----------           ----              ----
     <S>                                              <C>               <C>                <C>
      Land and buildings..........................     20 to 50         $ 35,871           $34,699
      Machinery and equipment.....................      5 to 12           62,120            51,728
      Office furniture and equipment..............      3 to 10            1,732             1,772
      Construction in progress....................                        15,528             1,876
                                                                        --------           -------
        Property, plant and equipment, at cost....                       115,251            90,075
      Less accumulated depreciation...............                        43,151            37,601
                                                                        --------           -------
        Property, plant and equipment, net........                      $ 72,100           $52,474
                                                                        ========           =======
</TABLE>

      Capital  expenditures for 1999 aggregated $25.6 million,  reflecting $22.9
million of cash expenditures and $2.7 million in accounts payable.


<PAGE>


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

 3.    Long-Term Debt
<TABLE>
<CAPTION>

                                                                               (in thousands)
                                                                           1999             1998
                                                                           ----             ----
     <S>                                                                <C>               <C>
      7.28% Senior notes due March 15, 2004................              $21,429           $25,714
      7.57% Senior note due June 30, 2005..................                6,975             7,825
      7.43% Senior notes due November 18, 2007.............               10,000            10,000
                                                                        --------          --------
        Total..............................................               38,404            43,539
      Less current maturities..............................                5,236             5,136
                                                                       ---------         ---------
      Long-term debt, exclusive of current maturities......              $33,168           $38,403
                                                                         =======           =======
</TABLE>

      The Company has a revolving  credit facility which provides for borrowings
of up to $25.0 million through August 2000,  automatically  renewable thereafter
for one year periods  unless  terminated  by either  party.  Interest  under the
facility  is payable  monthly at prime (8.5% on  December  31,  1999) or, at the
Company's  option,  the  reserve  adjusted  LIBOR plus .75% per annum  (6.75% on
December 31,  1999).  The Company  utilizes  letters of credit to  collateralize
certain  insurance  policies and  inventory  purchases.  Outstanding  letters of
credit at December  31, 1999 were $1.0  million.  At December  31,  1999,  $24.0
million of additional  borrowings  were  available  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 the
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, 1999, these covenants limit  additional  borrowings to $59
million and limit funds  available to pay dividends and repurchase the Company's
common stock to $31 million.

      Annual debt service requirements are $5.2 million in 2000, $6.7 million in
2001, $6.8 million in 2002, $6.9 million in 2003 and $7.0 million in 2004.

4.    Income Taxes

      The provision for income taxes consists of (in thousands):
<TABLE>
<CAPTION>

                                                         1999              1998             1997
                                                         ----              ----             ----
        <S>                                           <C>                <C>              <C>
         Current:
           Federal............................         $10,435            $8,558           $6,454
           State..............................             881             1,292              757
                                                       -------            ------           ------
             Total current....................          11,316             9,850            7,211
                                                       -------            ------           ------
         Deferred:
           Federal............................             (93)             (852)             (96)
           State..............................             (12)             (112)             (13)
                                                       -------            ------           ------
             Total deferred...................            (105)             (964)            (109)
                                                       -------            ------           ------
               Income taxes...................         $11,211            $8,886           $7,102
                                                       =======            ======           ======
</TABLE>


<PAGE>


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

4.    Income Taxes (continued)

      A reconciliation  of the difference  between the federal  statutory income
tax rate and the effective income tax rate follows:
<TABLE>
<CAPTION>

                                                          1999              1998              1997
                                                          ----              ----              ----
        <S>                                              <C>               <C>               <C>
         Federal statutory rate..................         35.0%             35.0%             35.0%
         State taxes, net of federal benefit.....          2.4               3.3               2.6
         Goodwill................................           .4                .5                .6
         Life insurance..........................          (.5)              (.6)              (.7)
         Tax savings from foreign sales
           corporation...........................          (.3)              (.2)              (.5)
         Other, net..............................          (.1)                                1.0
                                                         -----              ----              ----
           Effective income tax rate.............         36.9%             38.0%             38.0%
                                                          ====              ====              ====
</TABLE>

      The income tax effects of temporary differences that comprise deferred tax
assets and liabilities at December 31 follow (in thousands):
<TABLE>
<CAPTION>

                                                                           1999             1998
                                                                           ----             ----
        <S>                                                             <C>              <C>
         Current deferred tax assets (liabilities):
           Accounts receivable..................................         $   497          $   444
           Inventory............................................              48              141
           Employee benefits....................................           1,903            1,452
           Other accrued expenses...............................              15              (57)
                                                                         -------          -------
             Net current deferred tax asset.....................         $ 2,463          $ 1,980
                                                                         =======          =======
         Noncurrent deferred tax liabilities:
           Property, plant and equipment........................         $10,201          $ 9,681
           Employee benefits....................................             871            1,013
                                                                         -------          -------
             Net noncurrent deferred tax liability..............         $11,072          $10,694
                                                                         =======          =======
</TABLE>

5.    Stockholders' Equity

      During 1999, the Company's Board of Directors  increased the authorization
to repurchase  its common stock to $20 million.  Since October 1998, the Company
has utilized $10.3 million to purchase  541,750 shares of its common stock at an
average price of $18.94 per share,  including the purchase of 226,750  shares at
an average price of $20.76 in 1999.

      In 1998, the Company  contributed 103,400 shares of its common stock, with
a fair value of $1.9 million, to the Stanley Retirement Plan.

      The Company effected a two-for-one stock split, distributed in the form of
a stock dividend on May 15, 1998, to  stockholders of record on May 1, 1998. All
related amounts have been retroactively adjusted to reflect the stock split.


<PAGE>


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

5.    Stockholders' Equity (continued)

      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, 1999. 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.

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

                                                           1999             1998              1997
                                                           ----             ----              ----
       <S>                                               <C>              <C>              <C>
        Weighted average shares outstanding
            for basic calculation....................     7,119            7,008             8,394
        Effect of stock options......................       651              955               884
                                                          -----            -----             -----
            Weighted average shares outstanding
                 for diluted calculation.............     7,770            7,963             9,278
                                                          =====            =====             =====
</TABLE>

6.  Employee Stock Plans

      The Company's stock option plans provide for the granting of stock options
up to an  aggregate of 1,400,000  shares of common stock to key  employees.  The
exercise  price  may not be less  than the fair  market  value of the  Company's
common stock on the grant date. Granted options vest 20% annually.

      At  December  31, 1999 and 1998,  options to purchase  727,256 and 930,878
shares, were exercisable with a weighted-average exercise price of approximately
$5.00.  At December 31, 1999, no shares were  available for grant.  Activity for
the three years ended December 31, 1999 follows:
<TABLE>
<CAPTION>

                                                                        Number        Weighted-Average
                                                                      of shares        Exercise Price

        <S>                                                           <C>                   <C>
         Outstanding at January 1, 1997.......................         1,360,474             $ 4.87
           Lapsed.............................................           (18,000)              4.59
           Exercised..........................................           (33,804)              4.74
           Granted............................................            35,000              10.06
                                                                       ---------
         Outstanding at December 31, 1997.....................         1,343,670               4.95
           Lapsed.............................................           (36,400)              7.43
           Exercised..........................................          (316,392)              4.95
           Granted............................................            43,000              17.75
                                                                       ---------
         Outstanding at December 31, 1998.....................         1,033,878               5.47
           Lapsed.............................................            (5,000)              5.73
           Exercised..........................................          (270,762)              4.80
           Granted............................................             5,700              19.13
                                                                       ---------
         Outstanding at December 31, 1999.....................           763,816             $ 5.82
                                                                       =========
</TABLE>

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

6.  Employee Stock Plans (continued)

      Options  outstanding  at December 31, 1999,  include  683,116  shares with
exercise  prices  ranging from $4.25 to $6.06 and a  weighted-average  remaining
contractual life of  approximately 5 years. The remaining  options have exercise
prices  ranging  from  $8.19  to  $19.13  with  a   weighted-average   remaining
contractual life of approximately 8 years.

      The  estimated  per share  weighted-average  fair  value of stock  options
granted during 1999, 1998, and 1997 was $12.73, $11.78 and $7.25,  respectively,
on the date of grant. A risk-free interest rate of 6.5%, 4.7% and 5.4% for 1999,
1998, and 1997, respectively, and a 50% volatility rate with an expected life of
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>

                                             1999                   1998                     1997
                                     ------------------     --------------------     ---------------------
                                        As         Pro         As           Pro         As            Pro
                                     Reported     Forma     Reported       Forma     Reported        Forma

<S>                                  <C>        <C>          <C>         <C>          <C>          <C>
Net income.........................  $19,213    $18,902      $14,483     $14,175      $11,587      $11,326
Basic earnings per share...........     2.70       2.65         2.07        2.02         1.38         1.35
Diluted earnings per share.........     2.47       2.44         1.82        1.79         1.25         1.23
</TABLE>

      In 1994, the Company entered into a contractual agreement to issue 100,000
shares of common  stock to the chief  executive  officer at $5.00 per share (the
market price on the date of the agreement) in exchange for a  non-recourse  7.6%
note  receivable.  The principal  amount plus accrued interest was forgiven over
time, subject to the executive's continued employment. The contractual agreement
was  completed  in 1998 and 100,000  shares  were issued to the chief  executive
officer.  Compensation  expense was  $271,000  and  $285,000  for 1998 and 1997,
respectively.

 7. Employee Benefit Plans

Defined Contribution Plan

      The Company maintains a defined  contribution plan covering  substantially
all of its employees.  Discretionary  matching and profit sharing  contributions
were $1.5 million in both 1999 and 1998, and $1.2 million in 1997.

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

7.  Employee Benefit Plans (continued)

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>
                                                              1999                                1998
                                                -------------------------------     -----------------------------
                                                    Stanley            Supple-         Stanley            Supple-
                                                  Retirement           mental         Retirement          mental
                                                     Plan               Plan             Plan              Plan
                                                -------------        ----------     -------------        --------
<S>                                                 <C>               <C>              <C>               <C>
Change in benefit obligation:
   Beginning benefit obligation...............       $17,963           $ 1,444          $17,146           $ 1,210
   Interest cost..............................         1,177                97            1,188                91
   Actuarial loss (gain)......................        (3,019)                               924               160
   Benefits paid .............................        (2,740)              (34)          (1,582)              (17)
   Settlement cost............................         1,158                                287
                                                     -------           -------          -------           -------
       Ending benefit obligation..............        14,539             1,507           17,963             1,444
                                                     -------           -------          -------           -------
Change in plan assets:
   Beginning fair value of plan assets........        19,028                             17,170
   Actual return on plan assets...............         1,777                              1,201
   Employer contributions.....................                                            2,239
   Benefits paid..............................        (2,740)                            (1,582)
                                                     -------           -------          -------           -------
       Ending fair value of plan assets.......        18,065                             19,028
                                                     -------           -------          -------           -------
Funded status.................................         3,526            (1,507)           1,065            (1,444)
Unrecognized loss.............................         2,450                              5,420
                                                     -------           -------          -------           -------
    Prepaid (accrued) pension costs...........       $ 5,976           $(1,507)         $ 6,485           $(1,444)
                                                     =======           =======          =======           =======
</TABLE>

      At December 31, 1999, the Stanley  Retirement Plan assets included Company
stock with a fair value of $1.9 million.

      Components of net periodic pension cost follow (in thousands):
<TABLE>
<CAPTION>

                                                         1999              1998              1997
                                                         ----              ----              ----
        <S>                                            <C>               <C>               <C>
         Interest cost..........................        $1,274            $1,279            $1,279
         Expected return on plan assets.........        (1,411)           (1,290)           (1,216)
         Net amortization and deferral..........           333               435               179
                                                        ------            ------            ------
            Net periodic benefit cost...........           196               424               242
         Settlement expense.....................           409               376
                                                        ------            ------            ------
            Total expense.......................        $  605            $  800            $  242
                                                        ======            ======            ======
</TABLE>






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

7.  Employee Benefit Plans (continued)

      The assumptions  used as of December 31 to determine the plans'  financial
status and pension cost were:
<TABLE>
<CAPTION>

                                                          1999              1998              1997
                                                          ----              ----              ----
        <S>                                              <C>               <C>               <C>
         Discount rate for funded status........          8.00%             6.65%             7.00%
         Discount rate for pension cost.........          6.65%             7.00%             7.75%
         Return on assets.......................          7.50%             7.50%             7.50%
</TABLE>

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 follows (in thousands):
<TABLE>
<CAPTION>

                                                                           1999             1998
                                                                         -------          -------
        <S>                                                              <C>              <C>
         Change in benefit obligation:
           Beginning benefit obligation.........................          $3,568           $3,641
           Service cost.........................................              45               44
           Interest cost........................................             212              239
           Actuarial (gain) loss................................            (552)              93
           Plan participants' contributions.....................             125              105
           Benefits paid........................................            (487)            (554)
                                                                          ------           ------
               Ending benefit obligation........................           2,911            3,568
                                                                          ------           ------
         Change in plan assets:
           Beginning fair value of plan assets..................
           Employer contributions...............................             362              449
           Plan participants' contributions.....................             125              105
           Benefits paid........................................            (487)            (554)
                                                                          ------           ------
               Ending fair value of plan assets.................
                                                                          ------           ------
         Funded status..........................................          (2,911)          (3,568)
         Unrecognized net loss..................................             487              946
         Unrecognized transition obligation.....................           1,694            1,824
                                                                          ------           ------
           Accrued benefit cost.................................          $ (730)          $ (798)
                                                                          ======           ======
</TABLE>

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

                                                           1999             1998              1997
                                                           ----             ----              ----
     <S>                                                  <C>              <C>               <C>
      Service cost....................................     $ 45             $ 44              $ 36
      Interest cost...................................      212              239               261
      Amortization of transition obligation...........      130              130               131
      Amortization and deferral.......................       32               41                29
                                                           ----             ----              ----
            Net periodic postretirement benefit cost..     $419             $454              $457
                                                           ====             ====              ====
</TABLE>


                         STANLEY FURNITURE COMPANY, INC.
                    NOTES TO 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 8.00%,  6.65% and 7.00%
for 1999,  1998 and 1997,  respectively.  The rate of increase in future  health
care benefit cost used in  determining  the obligation for 1999 was 8% gradually
decreasing  to 5.5%  beginning  in 2004,  and for 1998 and 1997 was 9% gradually
decreasing to 5.5% beginning in 2004.

      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, 1999, by approximately $75,000 and the annual
postretirement benefit cost by approximately $12,000.

Deferred Compensation

      The Company has a deferred  compensation  plan, funded with life insurance
policies,  which permits certain management employees to defer portions of their
compensation and earn a fixed rate of return. The accrued  liabilities  relating
to this plan of $1.4  million at  December  31, 1999 and 1998,  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.

 8. Leases

      The Company  leases  showroom  space and certain other  equipment.  Rental
expenses charged to operations were $1.5 million, $1.2 million, and $1.1 million
in 1999,  1998 and 1997,  respectively.  Future minimum lease  payments,  net of
subleases,  are approximately as follows: 2000 - $959,000; 2001 - $859,000;
2002 - $645,000; and 2003 - $503,000.


<PAGE>


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

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

                                                                            (in thousands)
                                                                1999             1998              1997
                                                                ----             ----              ----
     <S>                                                     <C>              <C>               <C>
      Net income..........................................    $19,213          $14,483           $11,587
      Adjustments to reconcile net income to net cash
        provided by operating activities:
         Depreciation.....................................      5,801            5,328             5,000
         Amortization.....................................        546              447               432
         Deferred income taxes............................       (105)            (964)             (109)
         Other, net.......................................        140              555               340
         Changes in assets and liabilities:
           Accounts receivable............................     (2,992)          (1,714)           (4,331)
           Inventories....................................      2,933             (784)           (5,491)
           Prepaid expenses and other current assets......       (201)             315            (2,180)
           Accounts payable...............................      1,299            3,673             3,534
           Accrued salaries, wages and benefits...........     (1,075)           2,125               (27)
           Other accrued expenses.........................      1,710            1,760              (713)
           Other assets...................................         40               36                32
           Other long-term liabilities....................        468             (237)              238
                                                              -------          -------           -------
             Net cash provided by operating activities....    $27,777          $25,023           $ 8,312
                                                              =======          =======           =======
</TABLE>

10.   Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
                                                           (in thousands, except per share data)
      1999 Quarters:                                  First            Second            Third           Fourth
                                                      -----            ------            -----           ------
     <S>                                            <C>               <C>              <C>               <C>
      Net sales............................          $63,661           $63,384          $65,319           $72,353
      Gross profit.........................           16,046            16,444           17,116            18,480
      Net income...........................            4,188             4,395            4,957             5,674
      Net income per share:
         Basic.............................          $   .59           $   .62          $   .69           $   .80
         Diluted...........................              .54               .56              .64               .74

      1998 Quarters:                                  First            Second             Third           Fourth
                                                      -----            ------             -----           ------
      Net sales............................          $57,691           $61,863          $63,832           $63,985
      Gross profit.........................           14,145            15,273           15,383            15,639
      Net income...........................            3,270             3,580            3,706             3,927
      Net income per share:
         Basic.............................          $   .48           $   .51          $   .52           $   .56
         Diluted...........................              .41               .45              .46               .50

</TABLE>








<PAGE>


                         STANLEY FURNITURE COMPANY, INC.
                     SCHEDULE II - VALUATION AND QUALIFYING
               ACCOUNTS For each of the Three Years in the Period
                             Ended December 31, 1999
                                 (In thousands)
<TABLE>
<CAPTION>

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

<S>                               <C>            <C>        <C>          <C>

1999

    Doubtful receivables....       $1,163         $270       $256(a)      $1,177
    Discounts, returns,
      and allowances........          743          130(b)                    873
                                   ------         ----       ----         ------
                                   $1,906         $400       $256         $2,050
                                   ======         ====       ====         ======
1998

    Doubtful receivables....       $1,116         $435       $388(a)      $1,163
    Discounts, returns,
      and allowances........          779          (36)(b)                   743
                                   ------         ----       ----         ------
                                   $1,895         $399       $388         $1,906
                                   ======         ====       ====         ======
1997

    Doubtful receivables....       $1,332         $ 20       $236(a)      $1,116
    Discounts, returns,
      and allowances........          613          166(b)                    779
                                   ------         ----       ----         ------
                                   $1,945         $186       $236         $1,895
                                   ======         ====       ====         ======
</TABLE>

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








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