----

|                                                                        |
|-----------------------------------------------------------------------------|
| 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        |

**STANLEY      FURNITURE COMPANY, INC.**

| Delaware                                     54-1272589  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (State                or                other jurisdiction of incorporation or organization)          (I.R.S.                Employer Identification No.)                                            |
| 1641                Fairystone Park Highway, Stanleytown, VA 24168                                                                                                                                                                                |
| (Address                of                principal executive offices, Zip                Code)                                                                                                                                                        |

| Common                Stock, par value $.02 per share                   12,252,000                                            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Class                of                Common Stock)                     Number                of                Shares |

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| Part 1                 |   |                                                                                                                                                   Page |
|------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |
| Item                1  |   | Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 3 |
| Item                1A |   | Risk                Factors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 6 |
| Item                1B |   | Unresolved                staff comments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 7 |
| Item                2  |   | Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 8 |
| Item                3  |   | Legal                Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 8 |
| Item                4  |   | Submission                of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 8 |

| Item                5  |   | Market                for                Registrant’s Common Equity, Related Stockholder  |   |   |
|------------------------|--------|------------------------------------------------------------------------------------------------------|--------|--------|
|                   |   | Matters                and                Issuer Purchases of Equity Securities                      |   | 10     |
| Item                6  |   | Selected                Financial Data                                                               |   | 12     |
| Item                7  |   | Management’s                Discussion and Analysis of Financial Condition                     |   |   |
|                   |   | and                Results                of Operations                                              |   | 13     |
| Item                7A |   | Quantitative                and Qualitative Disclosures about Market Risks                           |   | 19     |
| Item                8  |   | Consolidated                Financial Statements and Supplementary Data                              |   | 19     |
| Item                9  |   | Changes                in                and Disagreements with Accountants on Accounting            |   |   |
|                   |   | and                Financial                Disclosure                                               |   | 19     |
| Item                9A |   | Controls                and                Procedures                                                |   | 19     |
| Item                9B |   | Other                Information                                                                     |   | 19     |

| Item                10 |   | Directors                and                Executive Officers of the Company |   | 20     |
|------------------------|--------|-------------------------------------------------------------------------------|--------|--------|
| Item                11 |   | Executive                Compensation                                         |   | 20     |
| Item                12 |   | Security                Ownership of Certain Beneficial Owners and            |   |   |
|                   |   | Management                and Related Stockholder Matters                     |   | 20     |
| Item                13 |   | Certain                Relationships and Related Transactions                 |   | 20     |
| Item                14 |   | Principal                Accounting Fees and Services                         |   | 20     |

| Item                15 |   | Exhibits                and                Financial Statement Schedule |   | 20 |
|------------------------|--------|-------------------------------------------------------------------------|--------|----|

| Signatures                                                                            |   |   25  |
|---------------------------------------------------------------------------------------|--------|-----------------|
|                                                                                  |   |            |
| Index                to                Consolidated Financial Statements and Schedule |   |   F-1 |
|                                                                                  |   |            |

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**PART      I**

**Item      1.**

**General**

**Products      and Styles**

----

**Distribution**

**Manufacturing      and Offshore Sourcing**

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**Raw      Materials**

**Competition**

*Furniture/Today*

**Associates**

**Trademarks**

**Governmental      Regulations**

**Forward-Looking      Statements**

----

**Available      Information**

**Item      1A.**

***Our      results of operations and financial condition can be adversely affected by      numerous risks. You should carefully consider the risk factors detailed below      in      conjunction with the other information contained in this document. Should any      of      these risks actually materialize, our business, financial condition, and future      prospects could be negatively impacted.***

***We      may      not be able to sustain current sales and earnings due to the actions and      strength of our competitors.***

***As      a      result of our increased reliance on foreign sourcing***
*:*

| ·   | **Our                ability to service customers could be adversely affected and result                in                lower sales and earnings.**Our                sourcing                partners may not supply goods that meet our manufacturing, quality                or                safety specifications, in a timely manner and at an acceptable price.                We                may reject goods that do not meet our specifications and either                manufacture internally or find alternative sourcing arrangements                at a                higher cost, or may be forced to discontinue the product. Also, delivery                of goods from our foreign sourcing partners may be delayed for reasons                not                typically encountered with domestic manufacturing or sourcing, such                as                shipment delays caused by customs or labor issues. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Changes                in political, economic, and socail conditiopns, as well as laws and                regulations, in China or other coountries from which we source products                could adversely affcet us.**Foreign sourcing is subject to                polictical and social instability in China and other countries where                our                sourcing partners are located. This could make it more difficult                for us to                service our customers. Also, significant fluctuations of                foreign exchange rates against the value of the U.S. dollar could                increase costs and decrease earnings. In addition, an outbreak of                avian flu or similar epidemic in Asia or elsewhere may lower                our sales and earnings by disrupting our supply chain in the                countries impacted.   |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **International                trade policies of the United States and countries from which we source                products could adversely affect us**.                Imposition                of trade sanctions relating to imports, taxes, import duties and                other                charges on imports could increase our costs and decrease our                earnings. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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***Manufacturing      realignment could result in a decrease in our earnings.***
*** ***

***We      may      not be able to maintain or to raise prices in response to inflation and      increasing costs.***

***We      may      not be able to sustain current sales and earnings due to economic downturns.***

***We      may      not be able to obtain sufficient quantities of quality raw materials in a timely      manner, which could result in a decrease in our sales and earnings.***

***Failure      to anticipate or respond to changes in consumer tastes and fashions in a timely      manner could result in a decrease in our sales and      earnings***

***Business      failures, or the loss, of large customers could result in a decrease in our      future sales and earnings.***
*** ***

***Future      environmental costs could reduce our earnings.***

***Extended      business interruption at our manufacturing facilities could result in reduced      sales.***

**Item      1B.**

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**Item      2.**

|                                         |   |                                                    |   | **Approximate**                  |   | **Owned**  |
|----------------------------------------------|--------|---------------------------------------------------------|--------|----------------------------------|--------|------------|
|                                         |   |                                                    |   | **Facility                Size** |   | **or**     |
| **Location**                                 |   | **Primary                Use**                          |   | **(Square                Feet)** |   | **Leased** |
| Stanleytown,                VA               |   | Manufacturing                and Corporate Headquarters |   | 1,721,000                        |   | Owned      |
| Martinsville,                VA              |   | Manufacturing                                           |   | 300,000                          |   | Owned      |
| Lexington,                NC                 |   | Manufacturing                                           |   | 635,000                          |   | Owned      |
| Robbinsville,                NC              |   | Manufacturing                                           |   | 562,100                          |   | Owned      |
| High                Point,                NC |   | Showroom                                                |   | 63,000                           |   | Leased     |
| Martinsville,                VA              |   | Warehouse                                               |   | 400,000                          |   | Leased     |

**Item      3.**

**Item      4.**

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**Executive      Officers of the Registrant**

| Name                                                |   | Age    |   | Position                                                              |
|-----------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------|
| Jeffrey                R.                Scheffer   |   | 50     |   | Chairman,                President and Chief ExecutiveOfficer         |
| Douglas                I.                Payne      |   | 47     |   | Executive                Vice President - Finance and                 |
|                                                |   |   |   | Administration                and Secretary                           |
| Philip                D.                Haney       |   | 51     |   | Executive                Vice President - Marketing/Sales             |
|                                                |   |   |   | Stanley                Collections                                    |
| R.                Glenn                Prillaman    |   | 34     |   | Senior                Vice                President - Marketing/Sales |
|                                                |   |   |   | Young                America®                                    |
| Robert                A.                Sitler, Jr. |   | 45     |   | Vice                President - Global Sourcing                       |

**Jeffrey      R.      Scheffer**

**Douglas      I.      Payne **

**Philip      D.      Haney**

**R.      Glenn      Prillaman**

**Robert      A.      Sitler, Jr.**

----

**PART      II**

**Item      5.**

**STLY.      **

|                                                                          |   |                                      ** 2005** |      | 2004    |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|---------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                                                                         |      |    |   | **Dividends** |   |   |   |   |   | Dividends |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **High**                                                                                                                                                                                                                                     |      | **Low** |   | **Paid** |   | High |   | Low |   | Paid |   |
| **First                      Quarter**                                                                                                                                                                                                                                                                                                                                                                                                           |   | **$**                                                                                                                                                                                                                                        | **26.85** |    | **$**  | **21.61** |   | **$** | **.06** |   | $ | 20.21 |   | $ | 15.77 |   | $ | 05 |   |
| **Second                      Quarter**                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                         | **24.49** |    |   | **19.14** |   |   | **.06** |   |   | 22.73 |   |   | 19.06 |   |   | .05 |   |
| **Third                      Quarter**                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                         | **30.89** |    |   | **23.16** |   |   | **.06** |   |   | 24.19 |   |   | 19.22 |   |   | .05 |   |
| **Fourth                      Quarter**                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                         | **26.59** |    |   | **19.31** |   |   | **.06** |   |   | 23.98 |   |   | 20.85 |   |   | .05 |   |

**Issuer      Purchases of Equity Securities**

| Period |   |   Total                number                of Shares purchased |   | Averageprice                paid                Per                share  |   | Total                number                ofshares                purchasedas                part of                publiclyannounced                plansor                programs   |   | Maximumnumber                (or approximate dollar value) of shares that may                yet be                purchasedunder                the                plans orprograms                (a) |   |
|--------|--------|----------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|                                                          |   |   |        |   |   |      |   |   |        |
|---------------------------------------------------------------|--------|--------|-------------|--------|--------|-----------|--------|--------|-------------|
| October                2 to                November 5, 2005   |   |   | 274,400     |   | $      | 21.04     |   |   | 274,400     |   | $ | 14,388,713 |   |
| November                6 to                December 3, 2005  |   |   | 309,760     |   |   | 23.32     |   |   | 309,760     |   | $ | 7,164,381 |   |
| December                4 to                December 31, 2005 |   |   |        |   |   |      |   |   |        |   | $ | 7,164,381 |   |
|                                                          |   |   |        |   |   |      |   |   |        |   |   |   |   |
| **Total**                                                     |   |   | **584,160** |   | **$**  | **22.25** |   |   | **584,160** |   |   |   |   |

| (a) | On                January                30, 2006, we announced that our Board of Directors increased our                stock                repurchase authorization by an additional $10 million. We previously                announced on each of April 27, 2005 and October 17, 2005 that our                Board of                Directors had increased our stock repurchase authorization by an                additional $10 million. The total amount authorized as of January                31, 2006                is $17.2 million. Consequently, we may purchase our common stock,                from                time to time, either directly or through agents, in the open market,                through negotiated purchases or otherwise, at prices and on terms                satisfactory to us. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Equity      Compensation Plan Information**

|                                                                      |   | Number                      of                      Shares to                      be issued                      upon exercise                      of                      outstanding                      options, warrants                      and                      rights  |        | Weighted                      average exercise                      price of                      outstanding options,                      warrants And                      rights   |   | Number                      of                      shares remaining                      availablefor                      future                      issuance under                      equity                      compensation                      plans |   |
|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity                      compensation plans                            |   |                                                                                                                                                                                                                                                                                       |        |                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                            |   |
| approved                      by                      stockholders        |   |                                                                                                                                                                                                                                                                                       | 655,128     |                                                                                                                                                                                             |   | $14.94                                                                                                                                                                                                                                                          |   |   | 347,276 |   |
|                                                                      |   |                                                                                                                                                                                                                                                                                       |        |                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                            |   |   |   |   |
| Equity                      compensation plans                            |   |                                                                                                                                                                                                                                                                                       |        |                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                            |   |   |   |   |
| not                      approved                      by stockholders(1) |   |                                                                                                                                                                                                                                                                                       | 200,000     |                                                                                                                                                                                             |   | $13.94                                                                                                                                                                                                                                                          |   |   |   |   |
| **Total**                                                                 |   |                                                                                                                                                                                                                                                                                       | **855,128** |                                                                                                                                                                                             |   | **$14.71**                                                                                                                                                                                                                                                      |   |   | **347,276** |   |
|                                                                      |   |                                                                                                                                                                                                                                                                                       |        |                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                            |   |   |   |   |

----

**Item      6.**

|                                                     |   | **Years                Ended December 31,**           |
|----------------------------------------------------------|--------|------------------------------------------------------------|
|                                                     |   | **2005**                                                   |   |  2004 |   |  2003 |   |  2002 |   |  2001 |   |
|                                                     |   | (in                thousands, except per share data)  |   |
| **Income              Statement Data:**                  |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                 | **$**  | **333,646**                                                |   | $ | 305,815 |   | $ | 265,263 |   | $ | 243,547 |   | $ | 238,292 |   |
| Cost                of sales                             |   | **251,937**                                                |   |   | 230,174 |   |   | 203,410 |   |   | 184,967 |   |   | 185,326 |   |
| Restructuring                and related charges(1)      |   |                                                       |   |   |   |   |   |   |   |   | 3,548 |   |   | 2,290 |   |
| Gross                profit                              |   | **81,709**                                                 |   |   | 75,641 |   |   | 61,853 |   |   | 55,032 |   |   | 50,676 |   |
| Selling,                general and administrative       |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| expenses                                                 |   | **44,267**                                                 |   |   | 40,953 |   |   | 35,637 |   |   | 32,671 |   |   | 30,482 |   |
| Unusual                charge(2)                         |   |                                                       |   |   |   |   |   |   |   |   |   |   |   | 2,800 |   |
| Restructuring                and related charges(1)      |   |                                                       |   |   |   |   |   |   |   |   |   |   |   | 733 |   |
| Operating                income                          |   | **37,442**                                                 |   |   | 34,688 |   |   | 26,216 |   |   | 22,361 |   |   | 16,661 |   |
| Other                income                (expense) net |   | **288**                                                    |   |   | 188 |   |   | 203 |   |   | 219 |   |   | (47 | ) |
| Interest                expense, net                     |   | **1,825**                                                  |   |   | 2,343 |   |   | 2,748 |   |   | 3,090 |   |   | 4,007 |   |
| Income                before                income taxes |   | **35,905**                                                 |   |   | 32,533 |   |   | 23,671 |   |   | 19,490 |   |   | 12,607 |   |
| Income                taxes                              |   | **12,674**                                                 |   |   | 11,744 |   |   | 8,521 |   |   | 6,919 |   |   | 4,286 |   |
| Net                income                                | **$**  | **23,231**                                                 |   | $ | 20,789 |   | $ | 15,150 |   | $ | 12,571 |   | $ | 8,321 |   |
|                                                     |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                Earnings Per Share:(3)**          |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                | **$**  | **1.82**                                                   |   | $ | 1.65 |   | $ | 1.20 |   | $ | .95 |   | $ | .63 |   |
| Weighted                average shares                   |   | **12,766**                                                 |   |   | 12,574 |   |   | 12,651 |   |   | 13,218 |   |   | 13,220 |   |
|                                                     |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                Earnings Per Share:(3)**        |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                | **$**  | **1.77**                                                   |   | $ | 1.59 |   | $ | 1.17 |   | $ | .93 |   | $ | .61 |   |
| Weighted                average shares(4)                |   | **13,154**                                                 |   |   | 13,099 |   |   | 12,923 |   |   | 13,564 |   |   | 13,800 |   |
|                                                     |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                dividends paid per share (3) (5)     | **$**  | **.24**                                                    |   | $ | .20 |   | $ | .10 |   |   |   |   |   |   |   |
|                                                     |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                Sheet and Other Data:**         |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                     | **$**  | **12,556**                                                 |   | $ | 7,632 |   | $ | 2,509 |   | $ | 9,227 |   | $ | 1,955 |   |
| Inventories                                              |   | **69,961**                                                 |   |   | 73,658 |   |   | 54,638 |   |   | 54,158 |   |   | 49,522 |   |
| Working                capital                           |   | **91,200**                                                 |   |   | 88,567 |   |   | 64,455 |   |   | 62,944 |   |   | 51,271 |   |
| Total                assets                              |   | **190,488**                                                |   |   | 188,888 |   |   | 164,203 |   |   | 172,485 |   |   | 163,003 |   |
| Long-term                debt including                  |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| current                maturities                        |   | **11,428**                                                 |   |   | 15,685 |   |   | 22,700 |   |   | 29,614 |   |   | 37,053 |   |
| Stockholders’                equity(4)             |   | **132,749**                                                |   |   | 127,265 |   |   | 102,558 |   |   | 99,687 |   |   | 87,294 |   |
| Capital                expenditures                      | **$**  | **4,986**                                                  |   | $ | 1,718 |   | $ | 1,243 |   | $ | 1,037 |   | $ | 4,172 |   |
| Stock                repurchases:                        |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                (3)                                |   | **1,057**                                                  |   |   |   |   |   | 1,132 |   |   | 317 |   |   | 172 |   |
| Total                cost                                | **$**  | **22,993**                                                 |   |   |   |   | $ | 14,788 |   | $ | 3,066 |   | $ | 1,973 |   |

----

**Item      7.**

**Overview**

**Results      of      Operations**

|                                                        |   | **For                the Years Ended**  |
|-------------------------------------------------------------|--------|----------------------------------------------|
|                                                        |   | **December                31, 2005**    |
|                                                        |   |                                         | **2005** |   |   | 2004 |   |   | 2003 |   |
| Net                sales                                    |   |                                         | **100.0** | **%** |   | 100.0 | % |   | 100.0 | % |
| Cost                of                sales                 |   |                                         | **75.5** |   |   | 75.3 |   |   | 76.7 |   |
| Gross                profit                                 |   |                                         | **24.5** |   |   | 24.7 |   |   | 23.3 |   |
| Selling,                general and administrative expenses |   |                                         | **13.3** |   |   | 13.4 |   |   | 13.4 |   |
| Operating                income                             |   |                                         | **11.2** |   |   | 11.3 |   |   | 9.9 |   |
| Other                income,                net             |   |                                         | **.1** |   |   | .1 |   |   |  |   |
| Interest                income                              |   |                                         | **.1** |   |   |   |   |   |   |   |
| Interest                expense                             |   |                                         | **.6** |   |   | .8 |   |   | 1.0 |   |
| Income                before                income taxes    |   |                                         | **10.8** |   |   | 10.6 |   |   | 8.9 |   |
| Income                taxes                                 |   |                                         | **3.8** |   |   | 3.8 |   |   | 3.2 |   |
| Net                income                                   |   |                                         | **7.0** | **%** |   | 6.8 | % |   | 5.7 | % |

----

----

**Financial      Condition, Liquidity and Capital Resources**

----

| **                Payment                due or commitment expiration**  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                          |   | **Less                Than** |   | **Over** |
|                                                                                                                                                          | **Total** | **1                year** | **1-3                years** | **3-5                years** | **5                years** |
| Contractual                cash obligations:                                                                                                                  |   |   |   |   |   |
| Long-term                debt                                                                                                                                 | **$11,428** | $2,857 | $4,285 | $2,857 | $1,429 |
| Postretirement                benefits other than pensions(1)                                                                                                 | **2,865** | 296 | 568 | 568 | 1,433 |
| Fixed                interest payment on long-term debt                                                                                                       | **2,105** | 759 | 899 | 397 | 50 |
| Operating                leases                                                                                                                               | **2,602** | 872 | 1,303 | 427 |    |
| Total                contractual cash obligations                                                                                                             | **$19,000** | $4,784 | $7,055 | $4,249 | $2,912 |
| Other                commercial commitments:                                                                                                                  |   |   |   |   |   |
| Letters                of                credit                                                                                                               | **$                3,681** | $3,681 |   |   |   |

**Critical      Accounting Policies**

----

----

**Continued      Dumping and Subsidy Offset Act**

**New      Accounting Standards**

----

**Item      7A.**

**Item      8.**

**Item      9.**

**Item      9A.**

**Conclusion      Regarding the Effectiveness of Disclosure Controls and      Procedures**

**Management’s      Report on Internal Control Over Financial Reporting**

*Internal      Control-Integrated Framework*
*Internal      Control - Integrated Framework*

**Changes      in      Internal Controls over Financial Reporting**

**Item      9B.**

----

**PART      III**

**Item      10.**

**Item      11.**

**Item      12.**

**Item      13.**

**Item      14.**

**PART      IV**

**Item      15.**

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| (1)    | The                following consolidated financial statements are included in this                report on                Form 10-K:                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Report                of                Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Consolidated                Balance Sheets as of December 31, 2005 and 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Consolidated                Statements of Income for each of the three years in the period ended                December 31, 2005                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Consolidated                Statements of Changes in Stockholders’ Equity for each of the three years                in the period ended December 31, 2005                                                                                                                                                                                                                                                                                                                                                            |
|   | Consolidated                Statements of Cash Flow for each of the three years in the period                ended                December 31, 2005                                                                                                                                                                                                                                                                                                                                                                         |
|   | Notes                to                Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (2)    | Financial                Statement Schedule:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Schedule                II -                Valuation and Qualifying Accounts for each of the three years in                the                period ended December 31, 2005                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (b)    | Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.1    | The                Restated                Certificate of Incorporation of the Registrant (incorporated by reference                to Exhibit 3.1 to the Registrant’s Form 10-Q (Commission File No. 0-14938)                for the quarter ended July 2, 2005).                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2    | By-laws                of                the Registrant as amended (incorporated by reference to Exhibit 3                to the                Registrant’s Form 10-Q (Commission File No. 0-14938) for the quarter ended                September 27, 2003).                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.1    | The                Certificate of Incorporation and By-laws of the Registrant as currently                in                effect (incorporated by reference to Exhibits 3.1 and 3.2                hereto).                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.2    | Note                Purchase                and Private Shelf Agreement, dated as of June 29, 1995, among the                Registrant, 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).                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.3    | 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 Exhibit4.1                to                the Registrant’s Statement on Form 8-K (Commission File No. 0-14938) filed                July 9, 1997).                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.5    | Amendment,                dated as of May 10, 1999, to Note Agreements, dated February 15,                1994 and                June 29, 1995, between the Registrant and The Prudential Insurance                Company                of America (incorporated by reference to Exhibit 4.1 to the Registrant’s                Form 10-Q (Commission File No. 0-14938) for the quarter ended June                26,                1999).                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.6    | Private                Shelf                Agreement dated as of September 8, 1999, as amended as of April 26,                2001,                among the Registrant, The Prudential Insurance Company of America                and the                affiliates of Prudential who became purchasers as defined therein                (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-Q                (Commission File No 0-14938) for the quarter ended June 30,                2001). |

----

| 10.1   | Employment                Agreement made as of January 1, 1991 between Albert L. Prillaman                and us                (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   | 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)                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.3   | 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)                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.4   | 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) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.5   | 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)                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.6   | 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)                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.7   | 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)  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.8   | 2000                Incentive Compensation Plan (incorporated by reference to Exhibit                A to the                Registrant’s Proxy Statement (Commission File No. 0-14938) for the special                meeting of stockholders held on August 24, 2000).(2)                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.9   | Amendment                No.                1 to The Stanley Furniture Company, Inc. 1994 Stock Option Plan dated                as                of July 1, 2000 (incorporated by reference to Exhibit 10.3 to the                Registrant’s Form 10-Q (Commission File No. 0-14938) for the quarter ended                September 30, 2000).(2)                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.10  | Employment                Agreement made as of April 9, 2001 between Jeffrey R. Scheffer and                the                Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s                Form 10-Q (Commission File No. 0-14938) for the quarter ended June                30,                2001).(2)                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.11  | Option                Agreement, dated April 30, 2001, between the Registrant and Jeffrey                R.                Scheffer (incorporated by reference to Exhibit 10.1 to the Registrant’s                Form 10-Q (Commission File No. 0-14938) for the quarter ended September                29, 2001).(2)                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.12  | Agreement,                dated April 25, 2002, between Stanley Furniture Company, Inc. and                Albert                L. Prillaman (incorporated by reference to Exhibit 99.2 to the                Registrant’s Form 8-K (Commission File No. 0-14938) filed on April 25,                2002).(2)                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |
| (2)    | Management                contract or compensatory                plan                                                                                                                                                                                                                                                                                                                                                      |

----

| 10.13  | Second                Amendment to Supplemental Retirement Plan of Stanley Furniture Company,                Inc. effective January 1, 2002 (incorporated by reference to Exhibit                10.33                to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year                ended December 31, 2002).(2)                                           |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.14  | Second                Amendment, dated March 1, 2003, to the Employment Agreement, dated                January                1, 1991, between the Registrant and Albert L. Prillaman (incorporated                by                reference to Exhibit 10.1 to the Registrant’s Form 10-Q (Commission File                No. 0-14938) for the quarter ended March 29, 2003).(2) |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.15  | First                Amendment, dated March 1, 2003, to the Employment Agreement, dated                April                9, 2001, between the Registrant and Jeffrey R. Scheffer (incorporated                by                reference to Exhibit 10.2 to the Registrant’s Form 10-Q (Commission File                No. 0-14938) for the quarter ended March 29, 2003).(2)    |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.16  | Credit                Agreement, dated August 29, 2003, between the Registrant and SouthTrust                Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Form                10-Q (Commission File No. 0-14938) for the quarter ended September                27,                2003).                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.17  | First                amendment, dated April 23, 2004, to the revolving credit facility                dated                August 29, 2003, between the registrant and SouthTrust Bank (incorporated                by reference to Exhibit 10.1 to the Registrant’s Form 10-Q (Commission                File No. 0-14938) for the quarter ended June 26, 2004).                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.18  | 2005                Incentive Compensation Award, dated as of December 15, 2004, from                the                Registrant to Jeffrey R. Scheffer (incorporated by reference to Exhibit                10.21 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the                year ended December 31, 2004).(2)                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.19  | 2005                Incentive Compensation Award, dated as of December 15, 2004, from                the                Registrant to Douglas I. Payne (incorporated by reference to Exhibit                10.22                to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year                ended December 31, 2004). (2)                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.20  | Form                of Stock                Option Award under 2000 Incentive Plan (ISO) (incorporated by reference                to                Exhibit 10.23 to the Registrant’s Form 10-K (Commission File No. 0-14938)                for the year ended December 31, 2004). (2)                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.21  | Form                of Stock                Option Award under 2000 Incentive Plan (ISO/NSO) (incorporated by                reference to Exhibit 10.24 to the Registrant’s Form 10-K (Commission File                No. 0-14938) for the year ended December 31, 2004). (2)                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.22  | Form                of Stock                Option Award under 2000 Incentive Plan (Directors) (incorporated                by                reference to Exhibit 10.25 to the Registrant’s Form 10-K (Commission File                No. 0-14938) for the year ended December 31, 2004). (2)                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.23  | Second                Amendment dated June 15, 2005, to the revolving credit facility dated                August 29, 2003, between the Registrant and Wachovia Bank (incorporated                by                reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File                No. 0-14938) filed on June 16, 2005).                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.24  | Third                Amendment, dated as of April 26, 2005, to the Employment Agreement                between                the Registrant and Albert L. Prillaman (incorporated by reference                to                Exhibit 10.01 to the Registrant’s Form 8-K (Commission File No. 0-14938)                filed May 2, 2005). (2)                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.25  | Non-Competition                Agreement, dated as of December 14, 2005, between the Registrant                and                Albert L. Prillaman (incorporated by reference to Exhibit 10.1 to                the                Registrant’s Form 8-K (Commission File No. 0-14938) filed on December 19,                2005). (2)                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
|   |
| (2)    | Management                contract or compensatory plan                                                                                                                                                                                                                                                                                                                                    |

----

| 21     | List                of                Subsidiaries(1)                                                                                                                                                                                                      |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                       |
| 23     | Consent                of                PricewaterhouseCoopers LLP(1)                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                       |
| 31.1   | Certification                by Jeffrey R. Scheffer, our Chief Executive Officer, pursuant to                18 U.S.C.                Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act                of 2002.(1) |
|   |                                                                                                                                                                                                                                                       |
| 31.2   | Certification                by Douglas I. Payne, our Chief Financial Officer, pursuant to 18                U.S.C.                Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act                of 2002.(1)    |
|   |                                                                                                                                                                                                                                                       |
| 32.1   | Certification                by Jeffrey R. Scheffer, our Chief Executive Officer, pursuant to                18 U.S.C.                Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley                Act                of 2002.(1) |
|   |                                                                                                                                                                                                                                                       |
| 32.2   | Certification                by Douglas I. Payne, our Chief Financial Officer, pursuant to 18                U.S.C.                Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley                Act                of 2002.(1)    |
|   |                                                                                                                                                                                                                                                       |
|   |
| (1)    | Filed                Herewith                                                                                                                                                                                                                              |

----

**SIGNATURES**

|                                           |   | STANLEY                FURNITURE COMPANY, INC.                      |
|------------------------------------------------|--------|---------------------------------------------------------------------|
|                                           |   |                                                                |
| February                3,                2006 |   | By: /s/Jeffrey                R.                Scheffer       |
|                                           |   | Jeffrey                R.                Scheffer                   |
|                                           |   | Chairman                                                            |
|                                           |   | President                and                Chief Executive Officer |

| Signature                                                                                        |   | Title                                                                                                                                                                        |   | Date                                           |
|--------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|
|                                                                                             |   |                                                                                                                                                                         |   |                                           |
| /s/Jeffrey                R. Scheffer(Jeffrey                R.                Scheffer)         |   | Chairman                and                President      and  Chief Executive Officer(Principal                Executive Officer)   |   | February                3,                2006 |
|                                                                                             |   |                                                                                                                                                                         |   |                                           |
| /s/Douglas                I. Payne(Douglas                I.                Payne)               |   | Executive                Vice President - Finance and                Administration and Secretary                (Principal Financial and                Accounting Officer) |   | February                3,                2006 |
|                                                                                             |   |                                                                                                                                                                         |   |                                           |
| /s/Robert                G. Culp, III(Robert                G.                Culp, III)         |   | Director                                                                                                                                                                     |   | February                3,                2006 |
|                                                                                             |   |                                                                                                                                                                         |   |                                           |
| /s/Michael                P. Haley(Michael                P.                Haley)               |   | Director                                                                                                                                                                     |   | February                3,                2006 |
|                                                                                             |   |                                                                                                                                                                         |   |                                           |
| /s/Thomas                L. Millner(Thomas                L.                Millner)             |   | Director                                                                                                                                                                     |   | February                3,                2006 |
|                                                                                             |   |                                                                                                                                                                         |   |                                           |
| /s/T.                Scott McIlhenny, Jr.(T.                Scott                McIlhenny, Jr.) |   | Director                                                                                                                                                                     |   | February                3,                2006 |
|                                                                                             |   |                                                                                                                                                                         |   |                                           |
| /s/Albert                L. Prillaman(Albert                L.                Prillaman)         |   | Director                                                                                                                                                                     |   | February                3,                2006 |

----

| Consolidated                Financial Statements                                                               | Page   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
| Report                of                Independent Registered Public Accounting Firm                          | F2     |
|                                                                                                           |   |
| Consolidated                Balance Sheets as of December 31, 2005 and 2004                                    | F4     |
|                                                                                                           |   |
| Consolidated                Statements of Income for each of the three years in the                period      |   |
| ended                December 31, 2005                                                                    | F5     |
|                                                                                                           |   |
| Consolidated                Statements of Changes in Stockholders’ Equity for each of                the |   |
| three                years                in the period ended December 31, 2005                                | F6     |
|                                                                                                           |   |
| Consolidated                Statements of Cash Flows for each of the three years in the                        |   |
| period                ended                December 31, 2005                                                   | F7     |
|                                                                                                           |   |
| Notes                to                Consolidated Financial Statements                                       | F8     |
|                                                                                                           |   |
|                                                                                                           |   |
| Financial                Statement Schedule                                                                    |   |
|                                                                                                           |   |
| Schedule                II -                Valuation and Qualifying Accounts for each of the three            |   |
| years                in the                period ended December 31, 2005                                      | S1     |

----

**Report      of      Independent Registered Public Accounting Firm**

** **

*Internal      Control - Integrated Framework *
*Internal      Control - Integrated Framework*

----

----

**STANLEY      FURNITURE COMPANY, INC.**

|                                                                                          |   | **December                  31, 2005**  |
|-----------------------------------------------------------------------------------------------|--------|----------------------------------------------|
|                                                                                          |   |                                         | **2005** |   |   | 2004 |   |
| **ASSETS**                                                                                    |   |                                         |   |   |   |   |   |
| Current                  assets:                                                              |   |                                         |   |   |   |   |   |
| Cash                                                                                          |   | **$**                                        | **12,556** |   | $ | 7,632 |   |
| Accounts                  receivable, less allowances of $1,566 and $1,961                    |   |                                         | **36,957** |   |   | 36,036 |   |
| Inventories:                                                                                  |   |                                         |   |   |   |   |   |
| Finished                  goods                                                               |   |                                         | **52,609** |   |   | 52,646 |   |
| Work-in-process                                                                               |   |                                         | **7,609** |   |   | 8,449 |   |
| Raw                  materials                                                                |   |                                         | **9,743** |   |   | 12,563 |   |
| Total                  inventories                                                            |   |                                         | **69,961** |   |   | 73,658 |   |
|                                                                                          |   |                                         |   |   |   |   |   |
| Prepaid                  expenses and other current assets                                    |   |                                         | **1,435** |   |   | 1,585 |   |
| Deferred                  income taxes                                                        |   |                                         | **2,462** |   |   | 2,414 |   |
| Total                  current                  assets                                        |   |                                         | **123,371** |   |   | 121,325 |   |
|                                                                                          |   |                                         |   |   |   |   |   |
| Property,                  plant and equipment, net                                           |   |                                         | **50,744** |   |   | 51,342 |   |
| Goodwill                                                                                      |   |                                         | **9,072** |   |   | 9,072 |   |
| Other                  assets                                                                 |   |                                         | **7,301** |   |   | 7,149 |   |
| Total                  assets                                                                 |   | **$**                                        | **190,488** |   | $ | 188,888 |   |
|                                                                                          |   |                                         |   |   |   |   |   |
| **LIABILITIES**                                                                               |   |                                         |   |   |   |   |   |
| Current                  liabilities:                                                         |   |                                         |   |   |   |   |   |
| Current                  maturities of long-term debt                                         |   | **$**                                        | **2,857** |   | $ | 4,257 |   |
| Accounts                  payable                                                             |   |                                         | **16,405** |   |   | 16,056 |   |
| Accrued                  salaries, wages and benefits                                         |   |                                         | **11,144** |   |   | 10,573 |   |
| Other                  accrued                  expenses                                      |   |                                         | **1,765** |   |   | 1,872 |   |
| Total                  current                  liabilities                                   |   |                                         | **32,171** |   |   | 32,758 |   |
|                                                                                          |   |                                         |   |   |   |   |   |
| Long-term                  debt, exclusive of current maturities                              |   |                                         | **8,571** |   |   | 11,428 |   |
| Deferred                  income taxes                                                        |   |                                         | **10,164** |   |   | 10,742 |   |
| Other                  long-term liabilities                                                  |   |                                         | **6,833** |   |   | 6,695 |   |
| Total                  liabilities                                                            |   |                                         | **57,739** |   |   | 61,623 |   |
|                                                                                          |   |                                         |   |   |   |   |   |
| Commitments                  and Contingencies                                                |   |                                         |   |   |   |   |   |
|                                                                                          |   |                                         |   |   |   |   |   |
| **STOCKHOLDERS’                  EQUITY**                                               |   |                                         |   |   |   |   |   |
| Common                  stock,                  $.02 par value, 25,000,000 shares authorized, |   |                                         |   |   |   |   |   |
| 12,252,000                  and 12,830,004 shares issued and outstanding                      |   |                                         | **245** |   |   | 257 |   |
| Capital                  in                  excess of par value                              |   |                                         |   |   |   | 10,207 |   |
| Retained                  earnings                                                            |   |                                         | **132,682** |   |   | 116,952 |   |
| Accumulated                  other comprehensive loss                                         |   |                                         | **(178** | **)** |   | (151 | ) |
| Total                  stockholders’ equity                                             |   |                                         | **132,749** |   |   | 127,265 |   |
| Total                  liabilities and stockholders’ equity                             |   | **$**                                        | **190,488** |   | $ | 188,888 |   |

----

**STANLEY      FURNITURE COMPANY, INC.**

|                                                        |   |   | For                the Years                Ended  |   |
|-------------------------------------------------------------|--------|--------|---------------------------------------------------------|--------|
|                                                        |   |   | December                31,                        |   |
|                                                        |   |   | **2005**                                                |   |   | 2004 |   |   | 2003 |   |
| Net                sales                                    |   | **$**  | **333,646**                                             |   | $ | 305,815 |   | $ | 265,263 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Cost                of                sales                 |   |   | **251,937**                                             |   |   | 230,174 |   |   | 203,410 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Gross                profit                                 |   |   | **81,709**                                              |   |   | 75,641 |   |   | 61,853 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Selling,                general and administrative expenses |   |   | **44,267**                                              |   |   | 40,953 |   |   | 35,637 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Operating                Income                             |   |   | **37,442**                                              |   |   | 34,688 |   |   | 26,216 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Other                income,                net             |   |   | **288**                                                 |   |   | 188 |   |   | 203 |   |
| Interest                income                              |   |   | **358**                                                 |   |   | 43 |   |   | 48 |   |
| Interest                expense                             |   |   | **2,183**                                               |   |   | 2,386 |   |   | 2,796 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Income                before                income taxes    |   |   | **35,905**                                              |   |   | 32,533 |   |   | 23,671 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Income                taxes                                 |   |   | **12,674**                                              |   |   | 11,744 |   |   | 8,521 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Net                income                                   |   | **$**  | **23,231**                                              |   | $ | 20,789 |   | $ | 15,150 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Earnings                per                share:      |   |   |                                                    |   |   |   |   |   |   |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Basic                                                       |   | **$**  | **1.82**                                                |   | $ | 1.65 |   | $ | 1.20 |   |
| Diluted                                                     |   | **$**  | **1.77**                                                |   | $ | 1.59 |   | $ | 1.17 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Weighted                average shares outstanding:         |   |   |                                                    |   |   |   |   |   |   |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Basic                                                       |   |   | **12,766**                                              |   |   | 12,574 |   |   | 12,651 |   |
| Diluted                                                     |   |   | **13,154**                                              |   |   | 13,099 |   |   | 12,923 |   |
|                                                        |   |   |                                                    |   |   |   |   |   |   |   |
| Cash                dividends declared and paid             |   |   |                                                    |   |   |   |   |   |   |   |
| per                common                share              |   | **$**  | **.24**                                                 |   | $ | .20 |   | $ | .10 |   |

----

**STANLEY      FURNITURE COMPANY, INC.**

|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   | Accumulated                                                                                                                                  |   |                                                                                               |
|----------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|-------------------------------------------------|--------|----------|--------|-----------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
|                                                                                   |                                                                                 |   |                                                           |   | Capital                        in               |   | Stock    |   |                                                                                                            |   | Other                                                                                                                                        |   |                                                                                               |
|                                                                                   | Common                        Stock                                                  |   | Excess                        of                               |   | Option                                          |   | Retained |   | Comprehensive                                                                                                   |   |                                                                                                                                         |
|                                                                                   | Shares                                                                               |   | Amount                                                         |   | Par                        Value                |   | Loans    |   | Earnings                                                                                                        |   | Loss                                                                                                                                         |   | Total                                                                                              |
| Balance                        at January 1, 2003                                      | 13,138                                                                               |   | $263                                                           |   | $14,641                                         |   | $(16)    |   | $                        84,799                                                                                 |   |                                                                                                                                         |   |  $                        99,687                                                              |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Net                        income                                                 |                                                                                 |   |                                                           |   |                                            |   |     |   |                           15,150                                                                      |   |                                                                                                                                         |   |                            15,150                                                   |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Minimum                        pension liability, net of                               |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| deferred                        income tax benefit of                        $40  |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                            $ (65)                                                                                             |   |                                 (65)                       |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Comprehensive                        income                                       |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |      15,085                                                               |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Purchase                        and retirement of stock                                |     (1,132)                                                      |   |                          (22)                             |   |  (14,758)                                  |   |     |   |             (8)                                     |   |                                                                                                                                         |   |                               (14,788)                               |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Exercise                        of stock options                                  |                                396                |   |                             8              |   |                            2,341 |   |     |   |                                                                                                            |   |                                                                                                                                         |   |         2,349                                              |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Tax                        benefit on exercise of stock options                   |                                                                                 |   |                                                           |   |                           1,475       |   |     |   |                                                                                                            |   |                                                                                                                                         |   |            1,475                            |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Stock                        option loan payments                                 |                                                                                 |   |                                                           |   |                                            |   | 11       |   |                                                                                                            |   |                                                                                                                                         |   |                 11 |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Dividends                        paid, $0.10 per share                            |                                                                                 |   |                                                           |   |                                            |   |     |   |                                     (1,261)         |   |                                                                                                                                         |   |         (1,261)                                            |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Balance                        at December 31, 2003                               | 12,402                                                                               |   | 249                                                            |   |                          3,699             |   | (5)      |   |                               98,680                                              |   |                      (65)           |   |       102,558                                                        |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Net                        Income                                                 |                                                                                 |   |                                                           |   |                                            |   |     |   |                               20,789                                              |   |                                                                                                                                         |   |                                20,789                           |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Minimum                        pension liability, net of                               |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| deferred                        income tax benefit of                        $53       |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                       (86)     |   |              (86)                 |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Comprehensive                        income                                            |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                  20,703               |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Exercise                        of stock options                                  |                             428                                  |   |                            8                    |   |  5,030                                     |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                 5,038                      |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Tax                        benefit on exercise of stock options                   |                                                                                 |   |                                                           |   |  1,478                                     |   |     |   |                                                                                                            |   |                                                                                                                                         |   |            1,478                            |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Stock                        option loan payments                                 |                                                                                 |   |                                                           |   |                                            |   | 5        |   |                                                                                                            |   |                                                                                                                                         |   |                5        |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Dividends                        paid, $0.20 per share                            |                                                                                 |   |                                                           |   |                                            |   |     |   |                                     (2,517)              |   |                                                                                                                                         |   |          (2,517)                                      |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| Balance                        at December 31, 2004                                    | 12,830                                                                               |   | 257                                                            |   | 10,207                                          |   |     |   |                             116,952                                                         |   |                     (151)                |   |        127,265                                                  |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Net                        Income**                                             |                                                                                 |   |                                                           |   |                                            |   |     |   | **                              23,231**                                          |   |                                                                                                                                         |   | **         23,231**                                   |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Minimum                        pension liability, net of**                           |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **deferred                        income tax                        benefit of $17**   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   | **                      (27)** |   | **              (27****)**   |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Comprehensive                        income**                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   | **                                23,204**                 |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Exercise                        of stock options**                              | **           469**            |   | **                          9**                      |   | ** 6,353**                                 |   |     |   |                                                                                                            |   |                                                                                                                                         |   | **           6,362**                        |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Stock                        awards**                                           | **             10** |   |                                                           |   | **                          244**     |   |     |   |                                                                                                            |   |                                                                                                                                         |   | **              244**        |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Tax                        benefit on exercise of stock options**                    |                                                                                 |   |                                                           |   | **1,748**                                       |   |     |   |                                                                                                            |   |                                                                                                                                         |   | **                                  1,748**      |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Purchase                        and retirement of stock**                       | **   (1,057)**                                                        |   | **         (21)** |   | **    (18,552)**            |   |     |   | **                                    (4,420)**     |   |                                                                                                                                         |   | **       (22,993)**                                             |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Dividends                        paid, $0.24 per share**                        |                                                                                 |   |                                                           |   |                                            |   |     |   | **                                    (3,081****)** |   |                                                                                                                                         |   | **         (3,081****)**                              |
|                                                                                   |                                                                                 |   |                                                           |   |                                            |   |     |   |                                                                                                            |   |                                                                                                                                         |   |                                                                                               |
| **Balance                        at December 31, 2005**                           | **                         12,252**                                             |   | **       $245**             |   |                                            |   |     |   | **                                $132,682**                            |   | **       $(178****)**                                                                                     |   | **     $132,749**                                                         |

----

**STANLEY        FURNITURE COMPANY, INC**

|                                                                    |   |                                      For the Years Ended |         |
|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
|                                                                    |   | December                31,                                                                                                                                  |         |
|                                                                    |   | **2005**                                                                                                                                                          |         | 2004 |   | 2003 |   |
| Cash                flows                from operating activities:     |   |                                                                                                                                                              |         |   |   |   |   |   |   |   |
| Cash                received                from customers              |   | **$**                                                                                                                                                             | **333,233**  |   | $ | 300,429 |   | $ | 263,211 |   |
| Cash                paid to                suppliers and employees      |   |                                                                                                                                                              | **(287,559** | **)** |   | (278,509 | ) |   | (236,334 | ) |
| Interest                paid, net                                       |   |                                                                                                                                                              | **(1,792**   | **)** |   | (2,387 | ) |   | (2,793 | ) |
| Income                taxes                paid                         |   |                                                                                                                                                              | **(11,080**  | **)** |   | (9,061 | ) |   | (9,740 | ) |
| Net                cash                provided by operating activities |   |                                                                                                                                                              | **32,802**   |   |   | 10,472 |   |   | 14,344 |   |
|                                                                    |   |                                                                                                                                                              |         |   |   |   |   |   |   |   |
| Cash                flows                from investing activities:     |   |                                                                                                                                                              |         |   |   |   |   |   |   |   |
| Capital                expenditures                                     |   |                                                                                                                                                              | **(4,986**   | **)** |   | (1,718 | ) |   | (1,243 | ) |
| Other,                net                                               |   |                                                                                                                                                              | **(33**      | **)** |   | (135 | ) |   | (104 | ) |
| Net                cash used                by investing activities     |   |                                                                                                                                                              | **(5,019**   | **)** |   | (1,853 | ) |   | (1,347 | ) |
|                                                                    |   |                                                                                                                                                              |         |   |   |   |   |   |   |   |
| Cash                flows                from financing activities:     |   |                                                                                                                                                              |         |   |   |   |   |   |   |   |
| Purchase                and                retirement of common stock   |   |                                                                                                                                                              | **(22,993**  | **)** |   |   |   |   | (14,788 | ) |
| Repayment                of                senior notes                 |   |                                                                                                                                                              | **(4,257**   | **)** |   | (7,015 | ) |   | (6,914 | ) |
| Dividends                paid                                           |   |                                                                                                                                                              | **(3,081**   | **)** |   | (2,517 | ) |   | (1,261 | ) |
| Proceeds                from                exercise of stock options   |   |                                                                                                                                                              | **6,362**    |   |   | 5,043 |   |   | 2,360 |   |
| Proceeds                from                insurance policy loans      |   |                                                                                                                                                              | **1,110**    |   |   | 993 |   |   | 888 |   |
| Net                cash used                by financing activities     |   |                                                                                                                                                              | **(22,859**  | **)** |   | (3,496 | ) |   | (19,715 | ) |
|                                                                    |   |                                                                                                                                                              |         |   |   |   |   |   |   |   |
| Net                increase                (decrease) in cash           |   |                                                                                                                                                              | **4,924**    |   |   | 5,123 |   |   | (6,718 | ) |
| Cash                at                beginning of year                 |   |                                                                                                                                                              | **7,632**    |   |   | 2,509 |   |   | 9,227 |   |
|                                                                    |   |                                                                                                                                                              |         |   |   |   |   |   |   |   |
| Cash                at end                of year                       |   | **$**                                                                                                                                                             | **12,556**   |   | $ | 7,632 |   | $ | 2,509 |   |

| Net                income                                                           |   | **$**  | **23,231** |   | $      | 20,789  |   | $      | 15,150 |   |
|-------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|---------|--------|--------|--------|--------|
| Adjustments                to reconcile net income to net cash                      |   |   |       |   |   |    |   |   |   |   |
| provided                by                operating activities:                     |   |   |       |   |   |    |   |   |   |   |
| Depreciation                                                                        |   |   | **5,582**  |   |   | 5,524   |   |   | 5,623  |   |
| Amortization                                                                        |   |   | **88**     |   |   | 98      |   |   | 160    |   |
| Deferred                income taxes                                                |   |   | **(609**   | **)**  |   | (1,324  | )      |   | (463   | )      |
| Other,                net                                                           |   |   | **2**      |   |   | (3      | )      |   | 2      |   |
| Changes                in                assets and liabilities:                    |   |   |       |   |   |    |   |   |   |   |
| Accounts                receivable                                                  |   |   | **(921**   | **)**  |   | (5,916  | )      |   | (2,288 | )      |
| Inventories                                                                         |   |   | **3,697**  |   |   | (19,020 | )      |   | (480   | )      |
| Prepaid                expenses and other current assets                            |   |   | **(1,415** | **)**  |   | 1,586   |   |   | 403    |   |
| Accounts                payable                                                     |   |   | **349**    |   |   | 5,461   |   |   | (2,791 | )      |
| Accrued                salaries, wages and benefits                                 |   |   | **815**    |   |   | 1,062   |   |   | (270   | )      |
| Other                accrued                expenses                                |   |   | **1,641**  |   |   | 470     |   |   | (977   | )      |
| Other                assets                                                         |   |   | **248**    |   |   | 66      |   |   | 57     |   |
| Other                long-term liabilities                                          |   |   | **94**     |   |   | 1,679   |   |   | 218    |   |
|   Net                cash provided by                operating activities |   | **$**  | **32,802** |   | $      | 10,472  |   | $      | 14,344 |   |
|                                                                                |   |   |       |   |   |    |   |   |   |   |
| Supplemental                disclosure of cash flow information:                    |   |   |       |   |   |    |   |   |   |   |
| Non-cash                financing activities:                                       |   |   |       |   |   |    |   |   |   |   |
| Stock                awards                                                         |   | **$**  | **244**    |   |   |    |   |   |   |   |

----

**STANLEY      FURNITURE COMPANY, INC.**

**Summary      of      Significant Accounting Policies**

----

**STANLEY      FURNITURE COMPANY, INC.**

**Summary      of      Significant Accounting Policies (continued)**

|                                                                         |   | **2005**  |       | 2004  |   | 2003  |   |
|------------------------------------------------------------------------------|--------|----------------|------------|------------|--------|------------|--------|
|                                                                         |   |           |       |       |   |       |   |
| Net                income as                reported                         |   | **$**          | **23,231** |       | $      | 20,789     |   | $ | 15,150 |   |
| Deduct:                Total                stock-based compensation expense |   |           |       |       |   |       |   |   |   |   |
| determined                under fair value based method for all              |   |           |       |       |   |       |   |   |   |   |
| awards,                net                of related tax effects             |   |           | **628**    |       |   | 1,801      |   |   | 1,618 |   |
|                                                                         |   |           |       |       |   |       |   |   |   |   |
| Pro                forma net                income                           |   | **$**          | **22,603** |       | $      | 18,988     |   | $ | 13,532 |   |
|                                                                         |   |           |       |       |   |       |   |   |   |   |
| Earnings                per                share:                            |   |           |       |       |   |       |   |   |   |   |
| Basic                - as                reported                            |   | **$**          | **1.82**   |       | $      | 1.65       |   | $ | 1.20 |   |
| Basic                - pro                forma                              |   | **$**          | **1.77**   |       | $      | 1.51       |   | $ | 1.07 |   |
|                                                                         |   |           |       |       |   |       |   |   |   |   |
| Diluted                - as                reported                          |   | **$**          | **1.77**   |       | $      | 1.59       |   | $ | 1.17 |   |
| Diluted                - pro                forma                            |   | **$**          | **1.72**   |       | $      | 1.47       |   | $ | 1.06 |   |

----

**STANLEY      FURNITURE COMPANY, INC.**

**Summary      of      Significant Accounting Policies (continued)**

**Property,      Plant and Equipment**

|                                                  |   | Depreciable               |                    |                          |   |        |   |
|-------------------------------------------------------|--------|---------------------------|-------------------------|-------------------------------|--------|-------------|--------|
|                                                  |   | lives                     |                    | (in                thousands) |   |
|                                                  |   | (in                years) |                    | **2005**                      |   | 2004        |   |
| Land                and                buildings      |   |                      | 20                to 50 |                          | **$**  | **39,894**  |   | $ | 38,775 |   |
| Machinery                and                equipment |   |                      | 5                to 12  |                          |   | **77,693**  |   |   | 74,846 |   |
| Office                furniture and equipment         |   |                      | 3                to 10  |                          |   | **1,916**   |   |   | 2,386 |   |
| Property,                plant and equipment, at cost |   |                      |                    |                          |   | **119,503** |   |   | 116,007 |   |
| Less                accumulated depreciation          |   |                      |                    |                          |   | **68,759**  |   |   | 64,665 |   |
| Property,                plant and equipment, net     |   |                      |                    |                          | **$**  | **50,744**  |   | $ | 51,342 |   |

| **3.  ** | **Debt** |
|--------------------|----------|

|                                                                           |   | (in                thousands) |       |
|--------------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                           |   | **2005**                      |       | 2004 |   |
| 7.57%                Senior                note due through June 30, 2005      |   |                          |       |   | $ | 1,400 |   |
| 7.43%                Senior                notes due through November 18, 2007 |   | **$**                         | **2,857**  |   |   | 4,285 |   |
| 6.94%                Senior                notes due through May 3, 2011       |   |                          | **8,571**  |   |   | 10,000 |   |
| Total                                                                          |   |                          | **11,428** |   |   | 15,685 |   |
| Less                current                maturities                          |   |                          | **2,857**  |   |   | 4,257 |   |
| Long-term                debt, exclusive of current maturities                 |   | **$**                         | **8,571**  |   | $ | 11,428 |   |

----

**STANLEY      FURNITURE COMPANY, INC.**

**Income      Taxes**

|                          |   | **2005** |       | 2004   |   | 2003   |   |
|-------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Current:                      |   |     |       |   |   |   |   |
| Federal                       |   | **$**    | **12,198** |   | $      | 10,943 |   | $ | 8,190 |   |
| State                         |   |     | **1,101**  |   |   | 1,005  |   |   | 794 |   |
| Total                current  |   |     | **13,299** |   |   | 11,948 |   |   | 8,984 |   |
| Deferred:                |   |     |       |   |   |   |   |   |   |   |
| Federal                       |   |     | **(543**   | **)**  |   | (177   | )      |   | (400 | ) |
| State                         |   |     | **(82**    | **)**  |   | (27    | )      |   | (63 | ) |
| Total                deferred |   |     | **(625**   | **)**  |   | (204   | )      |   | (463 | ) |
| Income                taxes   |   | **$**    | **12,674** |   | $      | 11,744 |   | $ | 8,521 |   |

|                                                            |   | **2005** |     | 2004   |   | 2003   |   |
|-----------------------------------------------------------------|--------|----------|----------|--------|--------|--------|--------|
| Federal                statutory rate                           |   |     | **35.0** | **%**  |   | 35.0   | %      |   | 35.0 | % |
| State                tax,                net of federal benefit |   |     | **2.5**  |   |   | 2.5    |   |   | 2.6 |   |
| State                tax                credits and adjustments |   |     | **(.7**  | **)**  |   | (1.0   | )      |   | (1.0 | ) |
| Increase                in                cash surrender value  |   |     |     |   |   |   |   |   |   |   |
| of                life                insurance policies        |   |     | **(.9**  | **)**  |   | (.9    | )      |   | (1.0 | ) |
| Deduction                for                qualified domestic  |   |     |     |   |   |   |   |   |   |   |
| production                activities                            |   |     | **(.5**  | **)**  |   |   |   |   |   |   |
| Other,                net                                       |   |     | **(.1**  | **)**  |   | .5     |   |   | .4 |   |
| Effective                income tax rate                        |   |     | **35.3** | **%**  |   | 36.1   | %      |   | 36.0 | % |

|                                                         |   | ** ****2005** |       |  2004 |   |
|--------------------------------------------------------------|--------|--------------------|------------|------------|--------|
| Current                deferred tax assets (liabilities):    |   |               |       |       |   |
| Accounts                receivable                           |   | **$**              | **599**    |       | $      | 750 |   |
| Employee                benefits                             |   |               | **1,732**  |       |   | 1,676 |   |
| Other                accrued                expenses         |   |               | **131**    |       |   | (12 | ) |
| Net                current                deferred tax asset |   | **$**              | **2,462**  |       | $      | 2,414 |   |
|                                                         |   |               |       |       |   |   |   |
| Noncurrent                deferred tax liabilities:          |   |               |       |       |   |   |   |
| Property,                plant and equipment                 |   | **$**              | **9,937**  |       | $      | 10,522 |   |
| Employee                benefits                             |   |               | **227**    |       |   | 220 |   |
| Net                noncurrent deferred tax liability         |   | **$**              | **10,164** |       | $      | 10,742 |   |

**Stockholders’      Equity**

----

**STANLEY      FURNITURE COMPANY, INC.**

**Stockholders’      Equity (continued)**

|                                                        |   | **2005** |       | 2004   |   | 2003   |   |
|-------------------------------------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Weighted                average shares outstanding          |   |     |       |   |   |   |   |   |   |   |
| for                basic                calculation         |   |     | **12,766** |   |   | 12,574 |   |   | 12,651 |   |
| Effect                of                stock options       |   |     | **388**    |   |   | 525    |   |   | 272 |   |
| Weighted                average shares outstanding          |   |     |       |   |   |   |   |   |   |   |
| For                diluted                calculation  |   |     | **13,154** |   |   | 13,099 |   |   | 12,923 |   |

**Stock      Compensation Plans**

|                                                |   | Number                   |         | Weighted-Average              |   |
|-----------------------------------------------------|--------|--------------------------|--------------|-------------------------------|--------|
|                                                |   | of                shares |         | Exercise                Price |   |
| Outstanding                at January 1, 2003       |   |                     | 2,145,512    |                          | $      | 11.70 |   |
| Lapsed                                              |   |                     | (120,000     | )                             |   | 13.17 |   |
| Exercised                                           |   |                     | (395,512     | )                             |   | 5.94 |   |
| Granted                                             |   |                     | 8,000        |                          |   | 10.95 |   |
|                                                |   |                     |         |                          |   |   |   |
| Outstanding                at December 31, 2003     |   |                     | 1,638,000    |                          |   | 12.98 |   |
| Exercised                                           |   |                     | (428,600     | )                             |   | 11.76 |   |
| Granted                                             |   |                     | 8,000        |                          |   | 19.50 |   |
|                                                |   |                     |         |                          |   |   |   |
| Outstanding                at December 31, 2004     |   |                     | 1,217,400    |                          |   | 13.45 |   |
| **Exercised**                                       |   |                     | **(469,000** | **)**                         |   | **13.57** |   |
| **Granted**                                         |   |                     | **106,728**  |                          |   | **24.09** |   |
| **Outstanding                at December 31, 2005** |   |                     | **855,128**  |                          | **$**  | **14.71** |   |

----

**STANLEY      FURNITURE COMPANY, INC.**

**Employee      Benefits Plans**

|                                                                                             |   | **2005**  |             | 2004           |   |
|--------------------------------------------------------------------------------------------------|--------|----------------|------------------|----------------|--------|
|                                                                                             |   | **Stanley**    |             | **Supple-**    |   | Stanley |   | Supple- |   |
|                                                                                             |   | **Retirement** |             | **mental**     |   | Retirement |   | mental |   |
|                                                                                             |   | **Plan**  |             | **Plan**  |   | Plan  |   | Plan  |   |
| Change                    in                    benefit obligation:                              |   |           |             |           |   |   |   |   |   |   |   |   |   |
| Beginning                    benefit obligation                                                  |   | **$**          | **15,602**       |           | **$**  | **2,056** |   | $ | 14,571 |   | $ | 1,891 |   |
| Interest                    cost                                                                 |   |           | **828**          |           |   | **111** |   |   | 861 |   |   | 112 |   |
| Actuarial                    loss                                                                |   |           | **709**          |           |   | **48** |   |   | 1,436 |   |   | 139 |   |
| Benefits                    paid                                                                 |   |           | **(2,942**       | **)**          |   | **(131** | **)** |   | (1,266 | ) |   | (86 | ) |
| Ending                    benefit obligation                                                     |   |           | **14,197**       |           |   | **2,084** |   |   | 15,602 |   |   | 2,056 |   |
| Change                    in                    plan assets:                                     |   |           |             |           |   |   |   |   |   |   |   |   |   |
| Beginning                    fair value of plan assets                                           |   |           | **15,766**       |           |   |   |   |   | 15,117 |   |   |   |   |
| Actual                    return                    on plan assets                               |   |           | **930**          |           |   |   |   |   | 1,615 |   |   |   |   |
| Employer                    contributions                                                        |   |           | **1,500**        |           |   | **131** |   |   | 300 |   |   | 86 |   |
| Benefits                    paid                                                                 |   |           | **(2,942**       | **)**          |   | **(131** | **)** |   | (1,266 | ) |   | (86 | ) |
|      Ending                  fair                  value of plan assets |   |           | **15,254**  |           |   |   |   |   | 15,766  |   |   |   |   |
| Funded                    status                                                                 |   |           | **1,057**        |           |   | **(2,084** | **)** |   | 163 |   |   | (2,056 | ) |
| Unrecognized                    loss                                                             |   |           | **5,264**        |           |   | **288** |   |   | 5,895 |   |   | 244 |   |
| Net                    amount                    recognized                                      |   | **$**          | **6,321**        |           | **$**  | **(1,796** | **)** | $ | 6,058 |   | $ | (1,812 | ) |
| Amount                    recognized in the consolidated balance sheet:                          |   |           |             |           |   |   |   |   |   |   |   |   |   |
| Prepaid                    (accrued) benefit cost                                           |   | **$**          | **6,321**        |           | **$**  | **(2,084** | **)** | $ | 6,058 |   | $ | (2,056 | ) |
| Accumulated                    other comprehensive loss                                     |   |           |             |           |   | **288** |   |   |   |   |   | 244 |   |
| Net                    amount                    recognized                                 |   | **$**          | **6,321**        |           | **$**  | **(1,796** | **)** | $ | 6,058 |   | $ | (1,812 | ) |

----

**STANLEY      FURNITURE COMPANY, INC.**

**Employee      Benefits Plans (continued)**

|                          |   | Target     |                           | Percentage                  of                  Assets |   |
|-------------------------------|--------|------------|--------------------------------|--------------------------------------------------------|--------|
|                          |   | Allocation |                           | **2005**                                               |   | 2004 |   |
|                          |   |       |                           |                                                   |   |   |   |
| Equity                        |   |       | **30                  to 90%** |                                                   |   | ** 60.3%** |   |   |                     58.3% |   |
| Fixed                  income |   |       | **30                  to 60%** |                                                   |   | **                         30.0** |   |   | 26.2 |   |
| Other                         |   |       | **3                  to 25%**  |                                                   |   | **                           9.7** |   |   | 15.5 |   |
| Total                         |   |       |                           |                                                   |   | **     100.0%** |   |   | 100.0% |   |

|                                          |   | **2005** |       | 2004   |   | 2003 |   |
|-----------------------------------------------|--------|----------|------------|--------|--------|------|--------|
| Interest                cost                  |   | **$**    | **939**    |   | $      | 973  |   | $ | 1,028 |   |
| Expected                return on plan assets |   |     | **(1,009** | **)**  |   | (967 | )      |   | (958 | ) |
| Net                amortization and deferral  |   |     | **437**    |   |   | 460  |   |   | 573 |   |
| Net                cost                       |   |     | **367**    |   |   | 466  |   |   | 643 |   |
| Settlement                expense             |   |     | **985**    |   |   | 372  |   |   | 682 |   |
| Total                expense                  |   | **$**    | **1,352**  |   | $      | 838  |   | $ | 1,325 |   |

|                                                                  |   | **2005** |          | 2004   |   | 2003   |   |
|-----------------------------------------------------------------------|--------|----------|---------------|--------|--------|--------|--------|
| Discount                    rate                    for funded status |   |     | **5.50****%** |   | 5.50%  |   | 6.00%  |
| Discount                    rate                    for pension cost  |   |     | **5.50****%** |   | 6.00%  |   | 6.50%  |
| Return                    on                    assets                |   |     | **6.50****%** |   | 6.50%  |   | 6.50%  |

----

**STANLEY      FURNITURE COMPANY, INC.**

**Employee      Benefits Plans (continued)**

|                                                                        |   | **2005** |       | 2004   |   |
|-----------------------------------------------------------------------------|--------|----------|------------|--------|--------|
| Change                in                benefit obligation:                 |   |     |       |   |   |
| Beginning                benefit obligation                                 |   | **$**    | **3,111**  |   | $      | 3,233 |   |
| Service                cost                                                 |   |     | **88**     |   |   | 67 |   |
| Interest                cost                                                |   |     | **183**    |   |   | 174 |   |
| Actuarial                (gain) loss                                        |   |     | **160**    |   |   | (203 | ) |
| Plan                participants’ contributions                       |   |     | **159**    |   |   | 142 |   |
| Benefits                paid                                                |   |     | **(403**   | **)**  |   | (302 | ) |
| Ending                benefit obligation                                    |   |     | **3,298**  |   |   | 3,111 |   |
| Change                in                plan assets:                        |   |     |       |   |   |   |   |
| Beginning                fair value of plan assets                          |   |     |       |   |   |   |   |
| Employer                contributions                                       |   |     | **244**    |   |   | 160 |   |
| Plan                participants’ contributions                       |   |     | **159**    |   |   | 142 |   |
| Benefits                paid                                                |   |     | **(403**   | **)**  |   | (302 | ) |
|      Ending              fair value of plan assets |   |     |       |   |   |   |   |
| Funded                status                                                |   |     | **(3,298** | **)**  |   | (3,111 | ) |
| Unrecognized                net loss                                        |   |     | **962**    |   |   | 868 |   |
| Unrecognized                transition obligation                           |   |     | **914**    |   |   | 1,044 |   |
| Accrued                benefit cost                                         |   | **$**    | **(1,422** | **)**  | $      | (1,199 | ) |

|                                                                   |   | **2005** |    | 2004   |   | 2003 |   |
|------------------------------------------------------------------------|--------|----------|---------|--------|--------|------|--------|
| Service                cost                                            |   | **$**    | **88**  |   | $      | 67   |   | $ | 58 |   |
| Interest                cost                                           |   |     | **183** |   |   | 174  |   |   | 187 |   |
| Amortization                of transition obligation                   |   |     | **130** |   |   | 130  |   |   | 130 |   |
| Amortization                of net actuarial loss                      |   |     | **66**  |   |   | 40   |   |   | 53 |   |
| Net                periodic                postretirement benefit cost |   | **$**    | **467** |   | $      | 411  |   | $ | 428 |   |

----

**STANLEY      FURNITURE COMPANY, INC.**

**Employee      Benefits Plans (continued)**

|                                                                               |   | **2005** |     | 2004   |   | 2003   |   |
|------------------------------------------------------------------------------------|--------|----------|----------|--------|--------|--------|--------|
| Health                care                cost assumed trend rate for next year    |   |     | **9.5%** |   |   | 10.0%  |   |   | 8.5% |   |
| Rate                that the                cost trend rate gradually declines to  |   |     | **5.5%** |   |   | 5.5%   |   |   | 5.0% |   |
| Year                that the                rate reaches the rate it is assumed to |   |     |     |   |   |   |   |   |   |   |
| remain                at                                                           |   |     | **2010** |   |   | 2010   |   |   | 2011 |   |

**Commitments      and Contingencies**

----

**STANLEY      FURNITURE COMPANY, INC.**

**New      Accounting Standards**

| **10.  ** | **Quarterly                Results of Operations (Unaudited)** |
|---------------------|----------------------------------------------------------------|

| **2005                Quarters:**                     |   | **First** |       | **Second** |   | **Third**  |   | **Fourth** |       |
|-------------------------------------------------------|--------|-----------|------------|------------|--------|------------|--------|------------|------------|
| **Net                Sales**                          |   | **$**     | **82,950** |       | **$**  | **83,635** |   | **$**      | **85,615** |   | **$** | **81,446** |   |
| **Gross                profit**                       |   |      | **20,465** |       |   | **20,632** |   |       | **20,484** |   |   | **20,128** |   |
| **Net                income**                         |   |      | **5,760**  |       |   | **5,827**  |   |       | **5,802**  |   |   | **5,842** |   |
| **Net                income per share:**              |   |      |       |       |   |       |   |       |       |   |   |   |   |
| **Basic**                                             |   | **$**     | **.45**    |       | **$**  | **.45**    |   | **$**      | **.45**    |   | **$** | **.47** |   |
| **Diluted**                                           |   |      | **.43**    |       |   | **.44**    |   |       | **.44**    |   |   | **.46** |   |
| **Dividend                paid per share**            |   |      | **.06**    |       |   | **.06**    |   |       | **.06**    |   |   | **.06** |   |
|                                                  |   |      |       |       |   |       |   |       |       |   |   |   |   |
| 2004                Quarters:                         |   |      |       |       |   |       |   |       |       |   |   |   |   |
| Net                sales                              |   | $         | 71,520     |       | $      | 72,223     |   | $          | 78,803     |   | $ | 83,269 |   |
| Gross                profit                           |   |      | 17,221     |       |   | 18,246     |   |       | 19,414     |   |   | 20,760 |   |
| Net                income                             |   |      | 4,607      |       |   | 5,211      |   |       | 5,285      |   |   | 5,686 |   |
| Net                income                per share:   |   |      |       |       |   |       |   |       |       |   |   |   |   |
| Basic                                                 |   | $         | .37        |       | $      | .42        |   | $          | .42        |   | $ | .45 |   |
| Diluted                                               |   |      | .36        |       |   | .40        |   |       | .40        |   |   | .43 |   |
| Dividend                paid                per share |   |      | .05        |       |   | .05        |   |       | .05        |   |   | .05 |   |

----

|                                      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
|-------------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|-----------------------------------------------|
| 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                                        |
| **2005**                                  |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| **Doubtful                  receivables** |   | **$1,050**                                        |   | **$(213)**                                                               |   | **$187(a)**                                                                |   | **                   $650**              |
| **Discounts,                  returns,**  |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| **and                  allowances**       |   | **                      911** |   | **                         5****(b)** |   |                                                                       |   | **                     916**   |
|                                      |   | **$1,961**                                        |   | **$                  (208****)**                                         |   | **                          $187** |   | **$1,566**                                    |
|                                      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
|                                      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| 2004                                      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| Doubtful                  receivables     |   | $1,842                                            |   | $(334)                                                                   |   | $458(a)                                                                    |   | $1,050                                        |
| Discounts,                  returns,      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| and                  allowances           |   |                      704           |   |                          207(b)       |   |                                                                       |   |                       911 |
|                                      |   | $2,546                                            |   | $(127)                                                                   |   |  $458                                                                 |   | $1,961                                        |
|                                      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| 2003                                      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| Doubtful                  receivables     |   | $2,053                                            |   | $(20)                                                                    |   | $191(a)                                                                    |   | $1,842                                        |
| Discounts,                  returns,      |   |                                              |   |                                                                     |   |                                                                       |   |                                          |
| and                  allowances           |   |                      580           |   |                    124(b)                                           |   |                                                                       |   |      704             |
|                                      |   | $2,633                                            |   |                           $104   |   |  $191                                                                 |   |  $                  2,546                |