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

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

                   For the fiscal year ended December 31, 2002

                         Commission file number 0-14938

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

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

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

Registrant's telephone number, including area code: (276) 627-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

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

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

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

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

Aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  based on the closing price on February 7, 2003: $124 million

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of February 7, 2003:

 Common Stock, par value $.02 per share                     6,568,717
 --------------------------------------                -------------------
        (Class of Common Stock)                          Number of Shares

Documents incorporated by reference: Portions of the Registrant's Proxy
Statement for its Annual Meeting of Stockholders scheduled for April 16, 2003
are incorporated by reference into Part III.



<PAGE>


                                TABLE OF CONTENTS


Part I                                                                     Page


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



Part II


 Item 5   Market for Registrant's Common Equity and Related Stockholder
          Matters.........................................................    9
 Item 6   Selected Financial Data.........................................   10
 Item 7   Management's Discussion and Analysis of Financial Condition and
          Results of Operations...........................................   11
 Item 7A  Quantitative and Qualitative Disclosures about Market Risks.....   15
 Item 8   Consolidated Financial Statements and Supplementary Data........   15
 Item 9   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure............................................   16


Part III


 Items 10 through 13......................................................   16
 Item 14  Controls and Procedures.........................................   16


Part IV

 Item 15  Exhibits, Financial Statement Schedule and Reports on Form 8-K     16

 Signatures  .............................................................   22

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


<PAGE>


Stanley Furniture Company, Inc.

                                     PART I

Item 1.     Business

General

      The Company is a leading designer and manufacturer of residential wood
furniture exclusively targeted at the upper-medium price range. The Company
offers diversified product lines across all major style and product categories
within this price range. This product depth and extensive style selection makes
the Company a complete wood furniture resource for retailers in its price range
and allows the Company to respond more quickly to shifting consumer preferences.
The Company has established a broad distribution network that includes
independent furniture stores, department stores and regional furniture chains.
To provide its products and support this broad distribution network, the Company
is pursuing a blended strategy combining efficient and flexible manufacturing
processes that it believes are unique in the furniture industry with offshore
sourcing of component parts and finished goods. The Company emphasizes
continuous improvement in its manufacturing and sourcing processes to enable it
to continue providing competitive advantages to its customers, such as quick
delivery, reduced inventory investment, high quality, and value.

      In December 2001, the Company announced a plan to expand offshore
sourcing, realign manufacturing capacity and significantly lower operating
costs. Integration of selected imported component parts and finished items in
its product line will lower costs, provide design flexibility and offer a better
value to customers. This initiative created excess capacity in the Company's
manufacturing facilities. Accordingly, the Company closed its former West End,
North Carolina factory and consolidated production from this facility into other
Company facilities. Production at the former West End facility was completely
phased out in the first half of 2002 along with all closing related activities
including the sale of real estate. The restructuring charge associated with this
plan is discussed in further details in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Item 7 and in Note 2 of Notes
to Consolidated Financial Statements.

Products and Styles

      The Company's product lines cover all major design categories, and include
dining room, bedroom, youth bedroom (Young America(R)), home entertainment and
accent tables, and home office furniture. The Company believes that the
diversity of its product lines enables it to anticipate and respond quickly to
changing consumer preferences and provides retailers a complete wood furniture
resource in the upper-medium price range. The Company believes that its products
represent good value and that the quality and style of its furniture compare
favorably with more premium-priced products.

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

                                           Number of Styles
                                           ----------------

<S>                                                                        <C>
        Dining room...................................................     23
        Bedroom.......................................................     23
        Youth bedroom (Young America(R))..............................     20
        Home entertainment and accent tables..........................     18
        Home office...................................................     14
</TABLE>

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

      The Company designs and develops new product styles each year to replace
discontinued items or styles and, if desired, to expand product lines. The
Company's product design process begins with marketing personnel identifying
customer needs and conceptualizing product ideas, which generally consist of a
group of related furniture pieces. A variety of sketches are produced, usually
by Company designers, from which prototype furniture pieces are built prior to
full-scale production. The Company consults with its marketing personnel, sales
representatives, and selected customers throughout this process and introduces
its new product styles primarily at the fall and spring international furniture
markets.

Distribution

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

      The general marketing practice followed in the furniture industry is to
exhibit products at international and regional furniture markets. In the spring
and fall of each year, an eight-day furniture market is held in High Point,
North Carolina, which is attended by most buyers and is regarded by the industry
as the international market. The Company utilizes approximately 63,000 square
feet of showroom space at the High Point market to introduce new products,
increase sales of its existing products, and test ideas for future products.

      The Company has sold to approximately 2,600 customers during 2002, and
approximately 4% of the Company's sales in 2002 were to international customers.
No single customer accounted for more than ten percent of the Company's sales in
2002. No material part of the Company's business is dependent upon a single
customer, the loss of which would have a material effect on the business of the
Company. The loss of several of the Company's major customers could have a
material impact on the business of the Company.

Manufacturing and Offshore Sourcing

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

      The Company also integrates the sourcing of selected component parts and
finished items with its manufacturing operations to further enhance its product
and distribution strategy. The Company acquires selected finished items and
component parts from a limited number of offshore suppliers who can meet the
Company's quality specifications, production efficiency and scheduling
requirements. The Company expects to source approximately 20% of its sales
volume in 2003 from 6 countries with China representing the largest volume.

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


      The Company schedules production of its various styles based upon actual
and anticipated orders. The Company's manufacturing processes enable it to fill
orders primarily through manufacturing rather than inventory. As a result, the
Company shipped customer orders within 12 days on average during 2002 with
average finished goods inventory turns of 5.1. Since the Company ships customer
orders on average in less than two weeks, management believes that the size of
its backlog is not necessarily indicative of its long-term operations. The
Company's backlog of unshipped orders was $15.4 million at December 31, 2002 and
$11.7 million at December 31, 2001.

Raw Materials

      The principal materials used by the Company in manufacturing its products
include lumber, veneers, plywood, particle board, hardware, glue, finishing
materials, glass products, laminates, fabrics and metals. The Company uses a
variety of species of lumber, including cherry, oak, ash, poplar, pine and
maple. The Company's five largest suppliers accounted for approximately 16% of
its purchases in 2002. The Company believes that its sources of supply for these
materials are adequate and that it is not dependent on any one supplier.

Competition

      The Company is the seventeenth largest furniture manufacturer in North
America based on 2001 sales, according to Furniture/Today, a trade publication.
The furniture industry is highly competitive and includes a large number of
foreign and domestic manufacturers, none of which dominates the market. In
addition, competition has significantly increased from foreign manufacturers in
countries such as China which have lower production costs. The markets in which
the Company competes include a large number of relatively small manufacturers;
however, certain competitors of the Company have substantially greater sales
volumes and financial resources than the Company. Competitive factors in the
upper-medium price range include style, price, quality, delivery, design,
service, and durability. The Company believes that its manufacturing processes,
its sourcing strategy, its long-standing customer relationships and customer
responsiveness, its consistent support of existing diverse product lines that
are high quality and good value, and its experienced management are competitive
advantages.

Associates

      At December 31, 2002, the Company employed approximately 2,600 associates.
None of the Company's associates is represented by a labor union. The Company
considers its relations with its associates to be good.

Trademarks

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

Governmental Regulations

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






Forward-Looking Statements

      Certain statements made in this Annual Report on Form 10-K are not based
on historical facts, but are forward-looking statements. These statements can be
identified by the use of forward-looking terminology such as "believes,"
"estimates," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy. These statements reflect the Company's reasonable
judgment with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. Such risks and uncertainties include competition
in the furniture industry including competition from lower-cost foreign
manufacturers, the Company's success in implementing its blended strategy of
expanded offshore sourcing and domestic manufacturing, disruptions in offshore
sourcing including those arising from supply or distribution disruptions or
changes in political or economic conditions affecting the countries from which
the Company obtains offshore sourcing, the cyclical nature of the furniture
industry, fluctuations in the price for lumber which is the most significant raw
material used by the Company, credit exposure to customers in the current
economic climate, capital costs and general economic conditions. Any forward
looking statement speaks only as of the date of this filing, and the Company
undertakes no obligation to update or revise any forward-looking statements,
whether as a result of new developments or otherwise.

Available Information

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

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

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

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











Item 2.    Properties

      Set forth below is certain information with respect to the Company's
principal properties. The Company believes that all these properties are well
maintained and in good condition. All Company plants are equipped with automatic
sprinkler systems and modern fire protection equipment, which management
believes are adequate. All facilities set forth below are active and
operational. Production capacity and extent of utilization of the Company's
facilities are difficult to quantify with certainty because maximum capacity and
utilization varies periodically depending upon the product being manufactured,
the amount of component parts and finished items outsourced, and the utilization
of the labor force at the facility. In this context, the Company estimates that
its facilities operated at approximately 75-80% of capacity in 2002, principally
on a one shift basis. The Company believes available capacity at its facilities
together with the integration of selected imported component parts and finished
items will be adequate to expand production to meet anticipated product
requirements.
<TABLE>

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

Item 3.    Legal Proceedings

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

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

      None.

<PAGE>


Executive Officers of the Registrant

      The Company's executive officers and their ages as of January 1, 2003 are
as follows:
<TABLE>

Name                                    Age        Position
----                                    ---        --------
<S>                                     <C>       <C>
Albert L. Prillaman..............        57        Chairman
Jeffrey R. Scheffer..............        47        President and Chief Executive Officer
Douglas I. Payne  ...............        44        Executive Vice President -Finance and
                                                    Administration and Secretary
Philip D. Haney   ...............        48        Executive Vice President - Marketing and Sales
William A. Sibbick...............        46        Senior Vice President -Product Manager
Robert J. Smith   ...............        51        Senior Vice President - Operations
</TABLE>

      Albert L. Prillaman has been Chairman of the Board of Directors  since
September  1988. Mr.  Prillaman  served as Chief Executive Officer of the
Company  from  December  1985 to December  2002.  Mr.  Prillaman  also served as
President  from 1985 until April 2001. Prior to 1985, Mr. Prillaman served as
Vice President of the Company and President of the Stanley  Furniture  division
of the Company's predecessor since 1983, and in various executive and other
capacities with the Stanley Furniture  division of the predecessors  Company
since 1969.  Mr. Prillaman is a director of Culp, Inc.

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

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

      Philip D. Haney has been Executive Vice President - Marketing and Sales
since October 2002. Prior to his employment with the Company, Mr. Haney served
as President of Karastan Rug and Home from August 2002 to October 2002 and was
Senior Vice President, Marketing and Sales at Karastan from 1998 to August 2002.

      William A. Sibbick has been Senior Vice President - Product Manager since
October 2002. Mr. Sibbick previously held the position of Senior Vice President
- Sales from December 1997 to October 2002. He was Vice President - Product
Development and Merchandising - Dining Room and Occasional from December 1996 to
December 1997. He was Vice President - Product Development and Merchandising
from April 1995 until December 1996. Prior to that time, Mr. Sibbick held
various management positions related to product development since his employment
by the Company in 1989.

      Robert J. Smith has been Senior Vice President - Operations since December
2001. He was Vice President of Supply Management from January 2000 to December
2001. He was Vice President of Quality from January 1996 to January 2000. He was
Vice President of Production from October 1986 to January 1996. Prior to that
time, Mr. Smith held various management positions in manufacturing since his
employment by the Company in 1977.



<PAGE>



                                                       PART II

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

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

<TABLE>
                                                                   High             Low
              2002
             <S>                                                 <C>              <C>
              First Quarter...................................    $33.25           $23.29
              Second Quarter..................................     36.82            26.44
              Third Quarter...................................     27.05            17.70
              Fourth Quarter..................................     26.20            19.75



              2001
              First Quarter...................................    $29.88           $22.63
              Second Quarter..................................     33.73            25.06
              Third Quarter...................................     29.02            21.66
              Fourth Quarter..................................     28.19            22.30
</TABLE>

As of February 7, 2003, there were approximately 2,000 beneficial stockholders.
To date the Company has used all earnings to finance the growth and development
of its business and to repurchase its common stock. Accordingly, no cash
dividends have been paid through December 31, 2002. In January 2003, the
Company's Board of Directors approved a dividend policy of $.20 per share per
year, payable quarterly. The first quarter 2003 dividend of $.05 is payable
March 3, 2003, to stockholders of record as of February 14, 2003. The Company's
dividend policy is subject to review and revision by the Board of Directors and
any future payments will depend upon the financial condition, capital
requirements and earnings of the Company, as well as other factors that the
Board of Directors may deem relevant. The Company's ability to pay dividends and
repurchase its common stock is restricted under certain loan covenants. See Note
5 of the Notes to Consolidated Financial Statements.

           Equity Compensation Plan Information

      The following table summarizes our equity compensation plans as of
December 31, 2002:
<TABLE>

                                   Number of shares to be      Weighted-average         Number of shares
                                   issued upon exercise        exercise price of        remaining available for
                                   of outstanding options,     outstanding options,     future issuance under
                                   warrants and rights         warrants, and rights     equity compensation plans
<S>                                        <C>                       <C>                           <C>
Equity compensation plans
  approved by stockholders                  972,756                   $22.93                      185,002

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

Total                                     1,072,756                   $23.39                      185,002
                                          =========                   ======                      =======
<FN>

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



<PAGE>
<TABLE>
<CAPTION>


Item 6.     Selected Financial Data
                                                         Years Ended December 31,
                                        -------------------------------------------------------
                                        2002          2001        2000         1999        1998
                                        ----          ----        ----         ----        ----
                                                  (in thousands, except per share data)
<S>                                   <C>          <C>         <C>          <C>         <C>
Income Statement Data:
Net sales ..........................   $239,485     $234,322    $283,092     $264,717    $247,371
Cost of sales ......................    180,905      181,356     214,499      196,631     186,931
Restructuring and related charges(1)      3,548        2,290
                                       --------     --------    --------     --------    --------
    Gross profit ...................     55,032       50,676      68,593       68,086      60,440
Selling, general and administrative
  expenses .........................     32,671       30,482      33,656       33,796      32,496
Unusual charge(2) ..................                   2,800
Restructuring and related charges(1)                     733
                                       --------     --------    --------     --------    --------
  Operating income .................     22,361       16,661      34,937       34,290      27,944
Other expense (income), net ........       (219)          47         (82)         388         411
Interest expense ...................      3,090        4,007       4,003        3,478       4,164
                                       --------     --------    --------     --------    --------
  Income before income taxes .......     19,490       12,607      31,016       30,424      23,369
Income taxes .......................      6,919        4,286      11,476       11,211       8,886
                                       --------     --------    --------     --------    --------
  Net income(3) ....................   $ 12,571     $  8,321    $ 19,540     $ 19,213    $ 14,483
                                       ========     ========    ========     ========    ========

Basic Earnings Per Share:
Net income .........................   $   1.90     $   1.26    $   2.76     $   2.70    $   2.07
                                       ========     ========    ========     ========    ========
Weighted average shares(4) .........      6,609        6,610       7,076        7,119       7,008
                                       ========     ========    ========     ========    ========

Diluted Earnings Per Share:
Net income(3) ......................   $   1.85     $   1.21    $   2.63     $   2.47    $   1.82
                                       ========     ========    ========     ========    ========
Weighted average shares(4) .........      6,782        6,900       7,429        7,770       7,963
                                       ========     ========    ========     ========    ========
Balance Sheet and Other Data:
Cash ...............................   $  9,227     $  1,955    $  1,825     $  3,597    $  6,791
Inventories ........................     54,158       49,522      54,423       43,580      46,514
Working capital ....................     62,944       51,271      53,759       38,531      44,408
Total assets .......................    172,485      163,003     179,206      170,522     154,374
Long-term debt including
  current maturities ...............     29,614       37,053      52,169       38,404      43,539
Stockholders' equity(4)(5) .........     99,687       87,294      79,477       79,573      62,368
Capital expenditures(6) ............      1,037        4,172       6,068       25,566       6,680
Stock repurchases:(7)
  Shares ...........................        158           86         869          227         315
  Total cost .......................   $  3,066     $  1,973    $ 19,754     $  4,708    $  5,553

<FN>
(1)   In 2002 and 2001, the Company recorded $3.6 million and $3.0 million
      respectively, in restructuring and related charges for the closure of its
      former West End, North Carolina facility. See Note 2 of Notes to
      Consolidated Financial Statements.
(2)   In 2001, the Company recorded a $2.8 million charge to write off amounts
      due from a major customer.  See Note 3 of Notes to Consolidated Financial
      Statements.
(3)   Net income before restructuring and unusual charges was $14.9 million in
      2002, or $2.19 per diluted share, and $12.2 million in 2001, or $1.76 per
      diluted share.
(4)   In 2002, the Company issued 49,000 shares to the Stanley Retirement Plan
      and 103,400 shares in 1998. (5) No dividends have been paid on the
      Company's common stock during any of the years presented. (6) In 1999, the
      Company spent $10 million on expansion projects at existing facilities and
      $15 million to purchase and equip a new facility.
(7)   Stock repurchases authorized by the Board of Directors. Approximately $4.9
      million remains authorized by the Board of Directors. Item 7. Management's
      Discussion and Analysis of Financial Condition and Results of Operations
</FN>
</TABLE>
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations

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

Results of Operations

      The following table sets forth the percentage relationship to net sales of
certain items included in the Consolidated Statements of Income:
<TABLE>
                                                   For the Years Ended
                                                       December 31,
                                                 -----------------------
                                                  2002     2001     2000
                                                 -----    -----    -----
<S>                                             <C>      <C>      <C>
Net sales ..................................     100.0%   100.0%   100.0%
Cost of sales ..............................      75.5     77.4     75.8
Restructuring and related charges ..........       1.5      1.0
                                                 -----    -----    -----
  Gross profit .............................      23.0     21.6     24.2
Selling, general and administrative expenses      13.6     13.0     11.9
Unusual charge .............................                1.2
Restructuring and related charges ..........                 .3
                                                 -----    -----    -----
  Operating income .........................       9.4      7.1     12.3
Other income, net ..........................        .1                .1
Interest expense ...........................       1.3      1.7      1.4
                                                 -----    -----    -----
  Income before income taxes ...............       8.2      5.4     11.0
Income taxes ...............................       2.9      1.8      4.1
                                                 -----    -----    -----
  Income from operations ...................       5.3%     3.6%     6.9%
                                                 =====    =====    =====
</TABLE>


2002 Compared to 2001

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

      Gross profit margin for 2002 increased to 24.5% from 22.6% in 2001,
excluding restructuring and related charges. The increase was due primarily to
cost savings resulting from closing the Company's former West End, North
Carolina facility, offshore sourcing initiatives and lower raw material cost.
This improvement was partially offset by lower production levels and higher wage
and benefit expenses, primarily increased health care claims and pension
expense. The Company expects these trends to continue in 2003.

      Selling, general and administrative expenses for 2002 as a percentage of
net sales, excluding restructuring charges, increased to 13.6% from 13.0% for
2001. Selling, general and administrative expenses increased $2.2 million
compared to 2001 primarily as a result of the reinstatement of management
bonuses due to higher earnings, higher selling expenses related to new product
introductions and increased sales. The Company expects increased sourcing
activities along with increases in certain marketing and product development
costs to increase selling, general and administrative expenses in 2003.

      As a result, operating income (excluding the unusual and restructuring
charges) increased to $25.9 million, from $22.5 million in 2001.

      An unusual charge of $1.8 million ($2.8 million pretax) was recorded in
2001 to write off amounts due from a major customer, which declared bankruptcy
and closed its stores.

      In December 2001, the Company announced a plan to expand offshore
sourcing, realign manufacturing capacity and significantly lower operating
costs. Integration of selected imported component parts and finished items in
its product line will lower costs, provide design flexibility and offer a better
value to customers. This initiative created excess capacity in the Company's
manufacturing facilities. Accordingly, the Company decided to close its West
End, North Carolina factory and consolidate production from this facility into
other Company facilities. In 2002, manufacturing operations at the former West
End facility were completely phased out and all closing related activities
including the sale of real estate was completed.

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

      The Company continues to evaluate its manufacturing capacity needs
considering increased offshore sourcing, current and anticipated demand for its
products, overall market conditions and other factors deemed relevant by
management. Further capacity reductions could cause asset impairment or other
restructuring charges in the future.

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

      The Company's effective income tax rate increased to 35.5% for 2002 from
34.0% in 2001. The lower 2001 percentage was due to lower state income taxes.
The Company's effective tax rate is expected to increase to 36.3% in 2003, due
to higher state taxes resulting from the phase-out of certain state tax credits.

2001 Compared to 2000

      Net sales decreased $48.8 million, or 17.2%, for 2001 compared to 2000.
The decrease was due primarily to lower unit volume in bedroom, dining room,
home entertainment and accent tables and to a lesser extent lower unit volume in
the Young America(R) youth bedroom. An unusual charge of $1.8 million ($2.8
million pretax) or $.26 per diluted share was recorded in the second quarter of
2001 to write off amounts due from a major customer, which declared bankruptcy
and closed its stores. The elimination of shipments to this customer, which
represented 7% of sales in 2000 and 2% of sales in 2001, reduced the Company's
sales in 2001. During 2001, the Company adjusted production in response to lower
demand levels. As a result, total inventories at December 31, 2001, declined
$4.9 million compared to the prior year.

      Gross profit margin for 2001 decreased to 22.6% from 24.2% in 2000,
excluding restructuring and related charges. The decrease resulted primarily
from lower sales and production in 2001. Start-up costs associated with the new
home office factory, which began production in March 2000, reduced gross profit
in the prior year. Improved performance from this facility partially offset the
impact of lower sales and production levels in 2001. Fourth quarter 2001 results
also benefited from lower raw material costs, primarily lumber.

      Selling, general and administrative expenses for 2001 as a percentage of
net sales, excluding the unusual and restructuring charges, increased to 13.0%
from 11.9% for 2000. The higher percentage was the result of lower net sales.
Selling, general and administrative expenses declined $3.2 million compared to
2000 primarily as a result of lower selling expenses directly attributable to
the decrease in sales and the elimination of annual management bonuses for 2001
resulting from lower earnings.

      As a result, operating income (excluding the unusual and restructuring
charges) decreased to $22.5 million, from $34.9 million in 2000.

      Interest expense for 2001 approximated prior year expense as increased
average debt levels during 2001, resulting from stock repurchases in the later
part of 2000, were offset by lower average borrowing rates.

      The Company's effective income tax rate declined to 34.0% for 2001 from
37.0% in 2000, due to lower state income taxes.

Financial Condition, Liquidity and Capital Resources

      The Company generated cash from operations of $16.1 million in 2002
compared to $19.8 million in 2001 and $11.8 million in 2000. The decrease in
2002 compared to 2001 is attributable primarily to reduced collections from
customers as a majority of the sales increase occurred in the fourth quarter of
2002 and will be collected in the first quarter of 2003. Offsetting this
decrease was lower tax payments required during 2002 as overpayments in 2001
were applied to 2002. The increase in 2001 compared to 2000 was attributable
primarily to lower tax payments resulting from lower taxable income and lower
state taxes. The cash generated from operations in 2002, 2001 and 2000 was used
to reduce borrowings, fund capital expenditures and repurchase common stock.

      Net cash used by investing activities was $342,000 in 2002 compared to
$4.2 million and $8.7 million in 2001 and 2000, respectively. The Company
received net proceeds of $695,000 from the sale of real estate at its former
West End, North Carolina facility. The decline in capital expenditures for 2002
is due to the relocation of a significant portion of the machinery and equipment
from the West End facility to other Company facilities. Net cash used for
capital expenditures in 2000 was $8.8 million, reflecting $2.7 million of prior
year capital expenditures included in accounts payable at December 31, 1999 and
$6.1 million of capital expenditures in 2000. The expenditures in 2002, 2001 and
the remaining expenditures in 2000 were primarily for plant and equipment and
other assets in the normal course of business. Capital expenditures in 2003 are
anticipated to be approximately $2.0 million.

      Net cash used by financing activities was $8.5 million, $15.4 million and
$4.9 million in 2002, 2001 and 2000, respectively. In 2002, cash from operations
and proceeds from the exercise of stock options provided cash for senior debt
payments, repayment of the revolving credit facility and purchase and retirement
of the Company's common stock. In 2001, cash from operations and proceeds from
the issuance of $10.0 million in senior notes provided cash for reduction of
borrowings under the revolving credit facility, senior debt payments, capital
expenditures and purchase and retirement of the Company's common stock. In 2000,
cash from operations and borrowings under the revolving credit facility provided
cash for the purchase and retirement of the Company's common stock, senior debt
payments and capital expenditures.

      During 2002, the Company purchased 158,500 shares of its stock in the open
market at an average price of $19.34. At December 31, 2002, approximately $4.9
million remains authorized by the Company's Board of Directors to repurchase
shares of the Company's common stock. Consequently, the Company may, from time
to time, either directly or through agents, repurchase its common stock in the
open market, through negotiated purchases or otherwise, at prices and on terms
satisfactory to the Company. Depending on market prices and other conditions
relevant to the Company, such purchases may be discontinued at any time. Also in
2002, 85,914 shares of the Company's common stock were surrendered by an
executive officer to the Company in payment of a $2.6 million outstanding loan
and accrued interest, relating to stock option exercises in 2000.

      On January 28, 2003, the Company's Board of Directors approved a dividend
policy of $.20 per share per year, payable quarterly. The aggregate payments for
2003 are expected to be approximately $1.3 million.

      At December 31, 2002, long-term debt including current maturities was
$29.6 million. Debt service requirements are $6.9 million in 2003, $7.0 million
in 2004, $4.3 million in 2005, and $2.9 million in 2006. In August 2002, the
revolving credit facility was amended to decrease available borrowings from
$35.0 million to $25.0 million. As of December 31, 2002, approximately $24.2
million of additional borrowings were available under the Company's revolving
credit facility and cash on hand was $9.2 million. The Company believes that its
financial resources are adequate to support its capital needs and debt service
requirements.


The following table sets forth the Company's contractual cash obligations and
other commercial commitments at December 31, 2002:
<TABLE>
                                                   Payment due or commitment expiration
                                                   Less than                         Over
                                            Total    1 year   2-3 years  4-5 years  5 years

<S>                                       <C>       <C>       <C>        <C>        <C>
Contractual cash obligations:
   Long-term debt ......................   $29,614   $6,914    $11,272    $5,714     $5,714
   Operating leases ....................     1,453      780        607        59          7
                                           -------   -------   -------    ------     ------
      Total contractual cash obligations   $31,067   $7,694    $11,879    $5,773     $5,721
                                           =======   ======    =======    ======     ======

Other commercial commitments:
   Letters of credit ...................   $ 1,051   $1,051
                                           =======   ======
</TABLE>

Critical Accounting Policies

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

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

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

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

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

Pension costs - The Company's pension expense is developed from actuarial
valuations. Inherent in these valuations are key assumptions, including discount
rates and expected return on plan assets, which are usually updated on an annual
basis at the beginning of each year. The Company is required to consider current
market conditions, including changes in interest rates, in making these
assumptions. Changes in pension costs may occur in the future due to changes in
these assumptions. The key assumptions used in developing 2002 net pension costs
were a 7.25% discount rate and a 7.50% expected return on plan assets. These
were consistent with the prior year assumptions except that the discount rate
was reduced by 35 basis points due to current market conditions. Compared with
the prior year, net pension cost increased $349,000, excluding the impact of
settlement expense. Net pension cost is projected to increase approximately
$425,000 in 2003, excluding the impact of settlement expense, primarily as a
result of a reduction in discount rate from 7.25% in 2002 to 6.50% in 2003, a
reduction in expected return on plan assets from 7.50% in 2002 to 6.50% in 2003
and increased amortization of unrecognized loss. In establishing its expected
return on plan assets assumption, the Company reviews asset allocation
considering plan maturity and develops return assumptions based on different
asset classes adjusting for plan operating expenses. Actual asset over/under
performance compared to expected returns will respectively decrease/increase
unrecognized loss. The change in the unrecognized loss will change amortization
cost in upcoming periods. A one percentage point change in the expected return
assumption in the current year would have resulted in a change in pension
expense of approximately $150,000.

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

Recent Accounting Pronouncements

      On December 31, 2002, the Financial Accounting Standards Board (FASB)
issued SFAS No. 148, "Accounting For Stock-Based Compensation -Transition and
Disclosure". SFAS No. 148 provides additional guidance for those entities that
elect to voluntarily adopt the accounting provisions of SFAS 123, "Accounting
For Stock-Based Compensation". The Company has adopted this pronouncement for
year ending December 31, 2002.

      In November 2002, FASB issued FASB Interpretation No. 45 (FIN 45)
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN 45 clarifies the
requirements of FASB Statement No. 5, "Accounting for Contingencies". FIN 45
requires that upon issuances of a guarantee, the guarantor must recognize a
liability for the fair value of the obligation it assumes under that guarantee.
The Company does not anticipate the adoption of FIN 45 will have a material
impact on the Company's Consolidated Financial Statements.

      In June 2002, the FASB issued SFAS No. 146,"Accounting for Exit or
Disposal Activities".  SFAS No. 146 addresses significant issues regarding the
recognition, measurement and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the Emerging Issues Task Force
("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31,
2002. The Company does not anticipate the adoption of SFAS No. 146 will have a
material impact on the Company's Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

      Because the Company's obligation under its revolving credit facility bears
interest at a variable rate, the Company is sensitive to changes in prevailing
interest rates. A one-percentage point fluctuation in market interest rates
would not have had a material impact on earnings in 2002.

Item 8.   Financial Statements and Supplementary Data

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



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


      None.

                                    PART III

      In accordance with general instruction G(3) of Form 10-K, the information
called for by Items 10, 11, 12, and 13 of Part III is incorporated by reference
to the Registrant's definitive Proxy Statement for its Annual Meeting of
Stockholders scheduled for April 16, 2003, except for information concerning the
executive officers of the Registrant which is included in Part I of this report
under the caption "Executive Officers of the Registrant."

Item 14.  Controls and Procedures

(a)   Evaluation of disclosure controls and procedures.  The Company's principal
      executive officer and principal financial officer have concluded that the
      Company's disclosure controls and procedures (as defined in Exchange Act
      Rule 13a-14(c)), based on their evaluation of such controls and procedures
      conducted within 90 days prior to the date hereof, are effective to ensure
      that information required to be disclosed by the Company in the reports it
      files under the Securities Exchange Act of 1934, as amended, is recorded,
      processed, summarized and reported within the time periods specified in
      the rules and forms of the Securities and Exchange Commission and that
      such information is accumulated and communicated to the Company's
      management, including its principal executive officer and principal
      financial officer, as appropriate to allow timely decisions regarding
      required disclosure.

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

                                     PART IV

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

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

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

      Report of Independent Accountants

      Consolidated Balance Sheets as of December 31, 2002 and 2001

      Consolidated Statements of Income for each of the three years in the
      period ended December 31, 2002

      Consolidated Statements of Changes in Stockholders' Equity for each of the
      three years in the period ended December 31, 2002

      Consolidated Statements of Cash Flows for each of the three years in the
      period ended December 31, 2002

      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, 2002


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

      A report on Form 8-K was filed on December 11, 2002, to announce the
      election of Jeffrey Scheffer as Chief Executive Officer.

(c)   Exhibits:

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

3.2      By-laws of the Registrant as amended.

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

4.2      Note Agreement dated February 15, 1994 between the Registrant and the
         Prudential Insurance Company of America (Incorporated by reference to
         Exhibit 4.6 to the Registrant's Form 10-K (Commission File No. 0-14938)
         for the year ended December 31, 1993).

4.3      Letter Amendment, dated October 14, 1996, to Note Agreements, dated
         February 15, 1994 and June 29, 1995, between the Registrant and The
         Prudential Insurance Company of America (incorporated by reference to
         Exhibit 4.1 to the Registrant's Form 10-Q (Commission File No. 0-14938)
         for the quarter ended September 29, 1996).

4.4      Letter Amendment, dated June 16, 1997, to Note Agreements, dated
         February 15, 1994 and June 29, 1995, between the Registrant and The
         Prudential Insurance Company of America (incorporated by reference to
         Exhibit 4.1 to the Registrant's Statement on Form 8-K (Commission File
         No. 0-14938) filed July 9, 1997).

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

4.6      Amendment, dated as of May 10, 1999, to Note Agreements, dated February
         15, 1994 and June 29, 1995, between the Registrant and The Prudential
         Insurance Company of America (incorporated by reference to Exhibit 4.1
         to the Registrant's Form 10-Q (Commission File No. 0-14938) for the
         quarter ended June 26, 1999).

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

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





10.1     Employment  Agreement  made as of January 1, 1991 between Albert L.
         Prillaman and the Company  (incorporated  by reference to
         Exhibit 10.1 to the Registrant's Form 10-K
         (Commission File No.0-14938) for the year ended December 31, 1991).(2)

10.2     Lease dated February 23, 1987 between Stanley Interiors  Corporation
         and Southern Furniture  Exposition  Building,  Inc. d/b/a Southern
         Furniture Market Center  (incorporated by reference to Exhibit 10.10
         to the Registrant's  Form 10-K (Commission File No. 0-14938) for the
         year ended December 31, 1987).

10.3     Lease dated June 30, 1987 between A. Allan  McDonald,  Virginia  Cary
         McDonald,  C. R.  McDonald,  Dorothy V.  McDonald,  and Lillian S.
         McDonald,  as lessor, and Stanley Interiors  Corporation,  as lessee
         (incorporated by reference to Exhibit 10.14 to the Registrant's Form
         10-K (Commission File No. 0-14938) for the year ended December 31,
         1987).

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

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

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

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

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

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

10.10    1992 Stock Option Plan (incorporated by reference to Registrant's
         Registration Statement on Form S-8 No. 33-58396).(2)

10.11    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)

10.12    1994 Executive Loan Plan.  (incorporated  by reference to Exhibit
         10.19 to the  Registrant's  Form 10-K  (Commission  File No. 0-14938)
         for the year ended December 31, 1994).(2)


(2) Management contract or compensatory plan

<PAGE>



10.13    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)

10.14    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)

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

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

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

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

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

10.20    Sixth Amendment, dated March 30, 2000, to the Second Amended and
         Restated Revolving Credit Facility and Term Loan Agreement dated
         February 15, 1994, among the Registrant, National Bank of Canada
         (incorporated by reference to Exhibit 10.1 to the Registrant's Form
         10-Q (Commission File No. 0-14938) for the quarter ended April 1,
         2001).

10.21    Seventh Amendment, dated as of March 31, 2000, to the Second Amended
         and Restated Revolving Credit Facility and Term Loan Agreement dated
         February 15, 1994, among the Registrant, National Bank of Canada
         (incorporated by reference to Exhibit 10.2 to the Registrant's Form
         10-Q (Commission File No. 0-14938) for the quarter ended April 1,
         2000).

10.22    2000 Incentive Compensation Plan (incorporate by reference to Exhibit A
         to the Registrant's Proxy
         Statement (Commission File No. 0-14938) for the special meeting of
         stockholders held on August 24, 2000). (2)

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



(2) Management contract or compensatory plan
<PAGE>

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

10.25    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)

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

10.27    Eighth Amendment, dated as of December 18, 2001, to the Second Amended
         and Restated Revolving Credit Facility and Term Loan Agreement dated
         February 15, 1994, between the Registrant and the National Bank of
         Canada (incorporated by reference to Exhibit 10.31 to the Registrant's
         Form 10-K (Commission File No. 0-14938) filed February 19, 2002).

10.28    Employment Agreement, dated May 2, 2002, between the Registrant and
         William A. Sibbick, J (incorporated by reference to Exhibit 10.1 to the
         Registrant's Form 10-Q (Commission File No. 0-14938) for the quarter
         ended July 16, 2002). (2)

10.29    Employment Agreement, dated May 2, 2002, between the Registrant and
         Kelly S. Cain (incorporated by reference to Exhibit 10.2 to the
         Registrant's Form 10-Q (Commission File No. 0-14938) for the quarter
         ended July 16, 2002). (2)

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

10.31    Ninth Amendment, dated August 16, 2002, to the second amended and
         restated revolving credit facility dated February 15, 1994, between the
         Registrant and PNC Bank, National Association (incorporated by
         reference to Exhibit 10.1 to the Registrant's Form 10-Q (Commission
         File No. 0-14938) for the quarter ended October 15, 2002).

10.32    Tenth Amendment dated November 1, 2002, to the Second Amended and
         Restated Revolving Credit Facility and Term Loan Agreement dated
         February 15, 1994, between the Registrant and PNC Bank, successor in
         interest to National Bank of Canada. (1)

10.33    Second Amendment to Supplemental Retirement Plan of Stanley Furniture
         Company, Inc. effective January 1, 2002. (1) (2)





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




21       List of Subsidiaries(1)

23       Consent of PricewaterhouseCoopers LLP(1)

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

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

------------------------------------
(1) Filed herewith



<PAGE>

                                   SIGNATURES

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

                                  STANLEY FURNITURE COMPANY, INC.

February 13, 2003                 By: /s/Jeffrey R. Scheffer
                                      ----------------------
                                      Jeffrey R. Scheffer
                                      President, and
                                      Chief Executive Officer

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

         Signature                       Title                       Date

/s/Albert L. Prillaman        Chairman and Director            February 13, 2003
---------------------------
(Albert L. Prillaman)

/s/Jeffrey R. Scheffer        President and Chief Executive    February 13, 2003
---------------------------   Officer and Director
(Jeffrey R. Scheffer)         (Principal Executive Officer)


/s/Douglas I. Payne           Executive Vice President -       February 13, 2003
---------------------------   Finance and Administration and
(Douglas I. Payne)            Secretary (Principal Financial
                              and Accounting Officer)


/s/Robert G. Culp, III        Director                         February 13, 2003
---------------------------
(Robert G. Culp, III)

/s/David V. Harkins           Director                         February 13, 2003
---------------------------
(David V. Harkins)

/s/Edward J. Mack             Director                         February 13, 2003
---------------------------
(Edward J. Mack)

/s/Thomas L. Millner          Director                         February 13, 2003
---------------------------
(Thomas L. Millner)

/s/T. Scott McIlhenny, Jr.    Director                         February 13, 2003
---------------------------
(T. Scott McIlhenny, Jr.)




<PAGE>


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey R. Scheffer, certify that:

1.   I have reviewed this annual report on Form 10-K of Stanley Furniture
     Company, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the consolidated financial statements, and other
     financial information included in this annual report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     annual report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date
          of this annual report (the "Evaluation Date"); and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date  February 13, 2003        /s/ Jeffrey R. Scheffer
                               -----------------------
                               Jeffrey R. Scheffer
                               Chief Executive Officer


<PAGE>


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas I. Payne, certify that:

1.   I have reviewed this annual report on Form 10-K of Stanley Furniture
     Company, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the consolidated financial statements, and other
     financial information included in this annual report, fairly present in
     all material respects the financial condition, results of operations and
     cash flows of the registrant as of, and for, the periods presented in this
     annual report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
     we have:

     a.    designed such disclosure controls and procedures to ensure that
           material information relating to the registrant, including its
           consolidated subsidiaries, is made known to us by others within those
           entities, particularly during the period in which this annual report
           is being prepared;

     b.    evaluated the effectiveness of the registrant's disclosure controls
           and procedures as of a date within 90 days prior to the filing date
           of this annual report (the "Evaluation Date"); and

     c.    presented in this annual report our conclusions about the
           effectiveness of the disclosure controls and procedures based on our
           evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

    a)    all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

    b)    any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and
     material weaknesses.

Date:      February 13, 2003          /s/ Douglas I. Payne
                                      --------------------
                                      Douglas I. Payne
                                      Chief Financial Officer


<PAGE>



                         STANLEY FURNITURE COMPANY, INC.
                           ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2002
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE



Consolidated Financial Statements                                           Page


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

Consolidated Balance Sheets as of December 31, 2002 and 2001........         F-3

Consolidated Statements of Income for each of the three years in
  the period ended December 31, 2002................................         F-4

Consolidated Statements of Changes in Stockholders' Equity for each
  of the three years in the period ended December 31, 2002..........         F-5

Consolidated Statements of Cash Flows for each of the three years in
  the period ended December 31, 2002................................         F-6

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


Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts for each of the
  three years in the period ended December 31, 2002.................         S-1



<PAGE>





                        Report of Independent Accountants


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

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) on page 16 present fairly, in all material
respects, the financial position of Stanley Furniture Company, Inc. and its
subsidiaries at December 31, 2002 and December 31, 2001, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 15(a) (2)
on page 16 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 6 to the consolidated financial statements, the Company
changed its accounting policy for goodwill amortization during 2002.





Greensboro, North Carolina
January 25, 2003
















<PAGE>
<TABLE>
<CAPTION>


                         STANLEY FURNITURE COMPANY, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
                                                                   December 31,
                                                                2002         2001
                                                              --------     --------
ASSETS
Current assets:
<S>                                                          <C>          <C>
  Cash ....................................................   $  9,227     $  1,955
  Accounts receivable, less allowances of $2,633 and $2,024     27,832       23,862
  Inventories:
    Finished goods ........................................     35,537       31,287
    Work-in-process .......................................      6,922        7,833
    Raw materials .........................................     11,699       10,402
                                                              --------     --------
      Total inventories ...................................     54,158       49,522

  Prepaid expenses and other current assets ...............      1,311        2,354
  Deferred income taxes ...................................      2,876        3,153
                                                              --------     --------
    Total current assets ..................................     95,404       80,846

Property, plant and equipment, net ........................     59,539       66,708
Goodwill ..................................................      9,072        9,072
Other assets ..............................................      8,470        6,377
                                                              --------     --------
    Total assets ..........................................   $172,485     $163,003
                                                              ========     ========

LIABILITIES
Current liabilities:
  Current maturities of long-term debt ....................   $  6,914     $  6,839
  Accounts payable ........................................     13,386       11,841
  Accrued salaries, wages and benefits ....................      9,781        9,060
  Other accrued expenses ..................................      2,379        1,835
                                                              --------     --------
    Total current liabilities .............................     32,460       29,575

Long-term debt, exclusive of current maturities ...........     22,700       30,214
Deferred income taxes .....................................     13,084       11,251
Other long-term liabilities ...............................      4,554        4,669
                                                              --------     --------
  Total liabilities .......................................     72,798       75,709
                                                              --------     --------

Commitments and Contingencies

STOCKHOLDERS' EQUITY
Common stock, $.02 par value, 10,000,000 shares authorized,
6,568,717 and 6,643,388 shares issued and outstanding .....        131          133
Capital in excess of par value ............................     14,773       17,537
Retained earnings .........................................     84,799       72,228
Stock option loans ........................................        (16)      (2,604)
                                                              --------     --------
  Total stockholders' equity ..............................     99,687       87,294
                                                              --------     --------
     Total liabilities and stockholders' equity ...........   $172,485     $163,003
                                                              ========     ========
</TABLE>

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


<PAGE>
<TABLE>
<CAPTION>


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

                                                      For the Years Ended
                                                          December 31,
                                               ---------------------------------
                                                 2002         2001        2000
                                               --------     --------    --------

<S>                                           <C>          <C>         <C>
Net sales ..................................   $239,485     $234,322    $283,092

Cost of sales ..............................    180,905      181,356     214,499
Restructuring and related charges (Note 2) .      3,548        2,290
                                               --------     --------    --------

  Gross profit .............................     55,032       50,676      68,593

Selling, general and administrative expenses     32,671       30,482      33,656
Unusual charge (Note 3) ....................                   2,800
Restructuring and related charges (Note 2) .                     733
                                               --------     --------    --------

  Operating income .........................     22,361       16,661      34,937

Other expense (income), net ................       (219)          47         (82)
Interest expense ...........................      3,090        4,007       4,003
                                               --------     --------    --------

  Income before income taxes ...............     19,490       12,607      31,016

Income taxes ...............................      6,919        4,286      11,476
                                               --------     --------    --------

  Net income ...............................   $ 12,571     $  8,321    $ 19,540
                                               ========     ========    ========

Earnings per share:

  Basic ....................................   $   1.90     $   1.26    $   2.76
                                               ========     ========    ========
  Diluted ..................................   $   1.85     $   1.21    $   2.63
                                               ========     ========    ========

Weighted average shares outstanding:

  Basic ....................................      6,609        6,610       7,076
                                               ========     ========    ========
  Diluted ..................................      6,782        6,900       7,429
                                               ========     ========    ========


</TABLE>





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


<PAGE>
<TABLE>
<CAPTION>


                         STANLEY FURNITURE COMPANY, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
        For each of the three years in the period ended December 31, 2002
                                 (in thousands)


                                                                          Capital in               Stock
                                                         Common Stock      Excess of   Retained    Option
                                                         ------------
                                                        Shares   Amount    Par Value   Earnings    Loans
<S>                                                    <C>       <C>       <C>        <C>        <C>
Balance at January 1, 2000 .........................    7,114     $142      $35,064    $44,367

Purchase and retirement of stock ...................     (870)     (17)     (19,737)

Exercise of stock options ..........................      352        7        2,833               $(3,078)

Stock option loan payments .........................                                                  356

Net income .........................................                                    19,540
                                                        -----     ----      -------    -------    -------

  Balance at December 31, 2000 .....................    6,596      132       18,160     63,907     (2,722)

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

Exercise of stock options ..........................      133        3        1,348                   (16)

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

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

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

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

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

Exercise of stock options ..........................      121        2        2,070                   (72)

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

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

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

</TABLE>






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


<PAGE>
<TABLE>
<CAPTION>


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

                                                       For the Years Ended
                                                           December 31,
                                                 -------------------------------
                                                 2002          2001         2000
                                                 ----          ----         ----
Cash flows from operating activities:

<S>                                            <C>          <C>          <C>
  Cash received from customers ..............   $235,017     $241,273     $281,949
  Cash paid to suppliers and employees ......   (213,794)    (212,169)    (255,058)
  Interest paid, net ........................     (3,155)      (4,011)      (4,013)
  Income taxes paid, net ....................     (1,949)      (5,290)     (11,033)
                                                --------     --------     --------

    Net cash provided by operating activities     16,119       19,803       11,845
                                                --------     --------     --------

Cash flows from investing activities:

  Capital expenditures ......................     (1,037)      (4,172)      (8,768)
  Other, net ................................        695          (71)          42
                                                --------     --------     --------

    Net cash used by investing activities ...       (342)      (4,243)      (8,726)
                                                --------     --------     --------

Cash flows from financing activities:

  Purchase and retirement of common stock ...     (3,066)      (1,973)     (19,754)
  Issuance of senior notes ..................                  10,000
  Repayment of senior notes .................     (6,839)      (6,715)      (5,236)
  Proceeds from (repayment of) revolving
    credit facility, net ....................       (600)     (18,401)      19,001
  Proceeds from exercise of stock options ...      1,205          940          459
  Other, net ................................        795          719          639
                                                --------     --------     --------

    Net cash used by financing activities ...     (8,505)     (15,430)      (4,891)
                                                --------     --------     --------

Net increase (decrease) in cash .............      7,272          130       (1,772)
Cash at beginning of year ...................      1,955        1,825        3,597
                                                --------     --------     --------

  Cash at end of year .......................   $  9,227     $  1,955     $  1,825
                                                ========     ========     ========

</TABLE>




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



<PAGE>


                         STANLEY FURNITURE COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

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

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

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

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

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

Capitalized Software Cost
      The Company amortizes certain purchased computer software costs using the
straight-line method over the economic lives of the related products not to
exceed five years. Unamortized cost at December 31, 2002 and 2001 was $237,000
and $439,000, respectively.

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

Fair Value of Financial Instruments
      The fair value of the Company's long-term debt is estimated using
discounted cash flow analysis based on the incremental borrowing rates currently
available to the Company for loans with similar terms and maturities. At
December 31, 2002, the fair value approximated the carrying amount. The fair
value of trade receivables, trade payables and letters of credit approximate the
carrying amount because of the short maturity of these instruments.

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

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

1. Summary of Significant Accounting Policies (continued)

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

Stock Options
      The Company applies Accounting Principles Board Opinion No. 25 in
accounting for stock options and discloses the fair value of options granted as
permitted by Statement of Financial Accounting Standards No. 123. No stock-based
employee compensation cost is reflected in net income, as all options granted
under those plans had an exercise price equal to the market value of the common
stock at date of grant.

      The estimated per share weighted-average fair value of stock options
granted during 2002, 2001 and 2000 was $14.36, $14.70 and $15.86, respectively,
on the date of grant. A risk-free interest rate of 4.0%, 5.1% and 5.0% for 2002,
2001 and 2000, respectively, and a 50% volatility rate with an expected life of
10 years was assumed in estimating the fair value for all three years.

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


                                             2002       2001      2000
                                            ------     ------    ------
<S>                                        <C>       <C>       <C>
Net income as reported ..................   $12,571   $ 8,321   $19,540
Deduct:  Total stock-based employee
  compensation expense determined under
  fair value based method for all awards,
  net of related tax effects ............     1,783     1,940       879
                                            -------   -------   -------

  Pro forma net income ..................   $10,788   $ 6,381   $18,661
                                            =======   =======   =======

Earnings per share:
  Basic - as reported ...................   $  1.90   $  1.26   $  2.76
                                            =======   =======   =======
  Basic - pro forma .....................   $  1.63   $  0.97   $  2.64
                                            =======   =======   =======

  Diluted - as reported .................   $  1.85   $  1.21   $  2.63
                                            =======   =======   =======
  Diluted - pro forma ...................   $  1.60   $  0.93   $  2.52
                                            =======   =======   =======
</TABLE>

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


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

2.    Restructuring and Related Charges

The Company approved a plan in the fourth quarter of 2001 to close its former
West End, North Carolina facility and consolidate production from this facility
into other Company facilities as a result of excess capacity created by expanded
offshore sourcing. Manufacturing operations were phased out during the first
half of 2002, including the sale of real estate. As a result of the above, the
Company recorded net restructuring and related charges of $3.5 million in 2002
and $3.0 million in 2001. The restructuring accrual at December 31, 2002,
consists of a lease obligation and severance cost.

The following summarizes the 2002 and 2001 restructuring and related charges (in
thousands):
<TABLE>

                                   2001                                  2002
                         ----------------------------  -------------------------------------
                                              Reserve                      Total     Reserve
                          Total   Non-cash    Balance   Total   Non-cash    Cash     Balance
                         Charges   Charges   12/31/01  Charges   Charges  Payments  12/31/02
  <S>                   <C>      <C>          <C>      <C>      <C>      <C>         <C>
Inventory write-down .   $  300    $  300
Increased depreciation
  due to shorter lives    1,990     1,990              $1,755    $1,755
Other exit costs .....      733               $733      1,793              $2,076     $450
                         ------    ------     ----     ------    ------    ------     ----
  Total ..............   $3,023    $2,290     $733     $3,548    $1,755    $2,076     $450
                         ======    ======     ====     ======    ======    ======     ====
</TABLE>
3.    Unusual Charge

      An unusual charge of $1.8 million ($2.8 million pretax) or $.26 per
diluted share was recorded in the second quarter of 2001 to write off amounts
due from a major customer, which declared bankruptcy and closed its stores.

4.    Property, Plant and Equipment
<TABLE>
                                          Depreciable
                                             lives       (in thousands)
                                          (in years)    2002        2001
                                           --------     ----        ----
<S>                                       <C>        <C>        <C>
Land and buildings .....................   20 to 50   $ 38,237   $ 42,763
Machinery and equipment ................    5 to 12     74,204     79,139
Office furniture and equipment .........    3 to 10      1,710      1,829
                                                      --------   --------
  Property, plant and equipment, at cost               114,151    123,731
Less accumulated depreciation ..........                54,612     57,023
                                                      --------   --------
  Property, plant and equipment, net ...              $ 59,539   $ 66,708
                                                      ========   ========

</TABLE>
<PAGE>


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

5.    Debt
<TABLE>
                                                      (in thousands)
                                                      2002      2001
                                                      ----      ----
<S>                                                <C>       <C>
7.28% Senior notes due March 15, 2004 ...........   $ 8,571   $12,857
7.57% Senior note due June 30, 2005 .............     3,900     5,025
7.43% Senior notes due November 18, 2007 ........     7,143     8,571
6.94% Senior notes due May, 2011 ................    10,000    10,000
Revolving credit facility .......................                 600
                                                    -------   -------
  Total .........................................    29,614    37,053
Less current maturities .........................     6,914     6,839
                                                    -------   -------
  Long-term debt, exclusive of current maturities   $22,700   $30,214
                                                    =======   =======

</TABLE>

      In August 2002, the revolving credit facility was amended to decrease
available borrowings from $35.0 million to $25.0 million through August 2003,
automatically renewable thereafter for one year periods unless terminated by
either party. Interest under the facility is payable monthly at prime (4.25% on
December 31, 2002) or, at the Company's option, the reserve adjusted LIBOR plus
..75% per annum (1.38% on December 31, 2002). The Company utilizes letters of
credit to collateralize certain insurance policies and inventory purchases.
Outstanding letters of credit at December 31, 2002, were $1.1 million. At
December 31, 2002, $24.2 million of additional borrowings were available under
the revolving credit facility, after adjusting for a $780,000 letter of credit.

      The above loan agreements require the Company to maintain certain
financial covenants. The Company's ability to pay dividends with respect to its
common stock and to repurchase its common stock is restricted to $25.0 million
plus 50% of the Company's consolidated net earnings, adjusted for net cash
proceeds received by the Company from the sale of its stock and the amount of
payments for redemption, purchase or other acquisition of its capital stock,
subsequent to January 1, 1999. At December 31, 2002, these covenants limit funds
available to pay dividends and repurchase the Company's common stock to $29.4
million.

      Annual debt service requirements are $6.9 million in 2003, $7.0 million in
2004, $4.3 million in 2005, $2.9 million in 2006 and $2.9 million in 2007.
<PAGE>


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

6.    Goodwill

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

                                         2002     2001     2000
                                        ------   ------   ------
Net income:
<S>                                   <C>       <C>      <C>
  As reported ......................   $12,571   $8,321   $19,540
  Goodwill amortization (net of tax)                336       336
                                       -------   ------   -------
    Adjusted net income ............   $12,571   $8,657   $19,876
                                       =======   ======   =======

Basic earnings per share:
  As reported ......................   $  1.90   $ 1.26   $  2.76
                                       =======   ======   =======
  As adjusted ......................   $  1.90   $ 1.31   $  2.81
                                       =======   ======   =======

Diluted earnings per share:
  As reported ......................   $  1.85   $ 1.21   $  2.63
                                       =======   ======   =======
  As adjusted ......................   $  1.85   $ 1.25   $  2.68
                                       =======   ======   =======
</TABLE>

7.    Income Taxes

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

                              2002       2001         2000
                              ----       ----         ----
Current:
<S>                         <C>        <C>         <C>
  Federal ................   $4,515     $3,980      $10,623
  State ..................      294        554        1,116
                             ------     ------      -------
    Total current ........    4,809      4,534       11,739
                             ------     ------      -------
Deferred:
  Federal ................    1,973       (228)        (233)
  State ..................      137        (20)         (30)
                             ------     ------      -------
    Total deferred .......    2,110       (248)        (263)
                             ------     ------      -------
      Income taxes .......   $6,919     $4,286      $11,476
                             ======     ======      =======
</TABLE>
<PAGE>


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

7.    Income Taxes (continued)

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

                                           2002     2001     2000
                                           ----     ----     ----
<S>                                       <C>      <C>      <C>
Federal statutory rate ...............     35.0%    35.0%    35.0%
State tax, net of federal benefit ....      2.8      2.1      3.0
State tax credits and adjustments ....     (1.6)    (2.7)     (.7)
Goodwill .............................                .9       .4
Life insurance .......................     (1.1)    (1.5)     (.6)
Other, net ...........................       .4       .2      (.1)
                                           ----     ----     ----
  Effective income tax rate ..........     35.5%    34.0%    37.0%
                                           ====     ====     ====
</TABLE>

      The income tax effects of temporary differences that comprise deferred tax
assets and liabilities at December 31 follow (in thousands):
<TABLE>
                                                  2002       2001
                                                  ----       ----
Current deferred tax assets (liabilities):
 <S>                                           <C>        <C>
  Accounts receivable .......................   $ 1,007    $   774
  Inventory .................................       (31)       110
  Employee benefits .........................     1,721      2,247
  Other accrued expenses ....................       179         22
                                                -------    -------
    Net current deferred tax asset ..........   $ 2,876    $ 3,153
                                                =======    =======

Noncurrent deferred tax liabilities:
  Property, plant and equipment .............   $11,687    $10,241
  Employee benefits .........................     1,397      1,010
                                                -------    -------
    Net noncurrent deferred tax liability ...   $13,084    $11,251
                                                =======    =======
</TABLE>

8.    Stockholders' Equity

        The Company used $3.1 million of cash to purchase 158,500 shares of its
stock on the open market at an average price of $19.34 in 2002. For the three
years ending December 31, 2002, the Company has used $24.8 million of cash to
purchase 1.1 million shares of its common stock on the open market at an average
price of $22.26. At December 31, 2002, approximately $4.9 million remains under
the current Board of Directors authorization to repurchase shares of the
Company's common stock.

      In 2002, the Company contributed 49,000 shares of its common stock, with a
fair value of $1.2 million, to the Stanley Retirement Plan.

      During 2002, approximately 86,000 shares of the Company's common stock was
surrendered by an executive officer to the Company in payment of a $2.6 million
outstanding loan plus accrued interest. As of December 31, 2002, approximately
$16,000 in stock option loans are outstanding, none of which are loans to
executive officers of the Company.

      On January 28, 2003, the Company's Board of Directors approved a dividend
policy of $.20 per share per year, payable quarterly. The aggregate payments for
2003 are expected to be approximately $1.3 million.

<PAGE>


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

8.    Stockholders' Equity (continued)

      In addition to its common stock, the Company's authorized capital includes
1,000,000 shares of "blank check" preferred stock. None was outstanding during
the three years ended December 31, 2002. The Board of Directors is authorized to
issue such stock in series and to fix the designation, powers, preferences,
rights, limitations and restrictions with respect to any series of such shares.
Such "blank check" preferred stock may rank prior to common stock as to dividend
rights, liquidation preferences or both, may have full or limited voting rights
and may be convertible into shares of common stock.

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

                                          2002     2001    2000
                                          ----     ----    ----
<S>                                      <C>     <C>     <C>
Weighted average shares outstanding
    for basic calculation .............   6,609   6,610   7,076
Effect of stock options ...............     173     290     353
                                          -----   -----   -----
    Weighted average shares outstanding
         for diluted calculation ......   6,782   6,900   7,429
                                          =====   =====   =====
</TABLE>

9.  Employee Stock Plans

      The Company's stock option plans provide for the granting of stock options
up to an aggregate of 2,500,000 shares of common stock to key employees. The
exercise price may not be less than the fair market value of the Company's
common stock on the grant date. Granted options generally vest 20% annually. At
December 31, 2002, 185,002 shares were available for grant.

Activity for the three years ended December 31, 2002 follows:
<TABLE>
                                           Number   Weighted-Average
                                         of shares   Exercise Price
<S>                                      <C>           <C>
Outstanding at January 1, 2000 .....      763,816       $ 5.82
  Lapsed ...........................       (5,000)       18.75
  Exercised ........................     (352,352)        4.98
  Granted ..........................      400,000        24.88
                                        ---------

Outstanding at December 31, 2000 ...      806,464        15.56
  Lapsed ...........................      (13,000)       26.03
  Exercised ........................     (132,952)        6.19
  Granted ..........................      550,000        27.88
                                        ---------

Outstanding at December 31, 2001 ...    1,210,512        22.07
  Lapsed ...........................      (62,000)       26.18
  Exercised ........................     (120,756)        9.88
  Granted ..........................       45,000        26.48
                                        ---------
Outstanding at December 31, 2002 ...    1,072,756       $20.73
                                        =========
</TABLE>
<PAGE>




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

9.  Employee Stock Plans (continued)

      Summarized information regarding stock options outstanding and exercisable
at December 31, 2002 follows:
<TABLE>


                                    Outstanding                         Exercisable
                        -----------------------------------        ---------------------
    Range of                           Average      Average                      Average
 Exercise Price            Shares       Life         Price          Shares        Price
 --------------         ----------     ------       -------        -------       -------
<S>                      <C>            <C>        <C>            <C>          <C>
   Up to $10              157,156        2.9        $ 5.09         157,156       $ 5.09
  $10 to $20               15,600        6.2         18.53          10,320        18.34
  $20 to $35              900,000        8.7         26.67         364,000        26.77
                        ---------        ---        ------         -------      -------
                        1,072,756        7.8        $23.39         531,476       $20.20
                        =========        ===        ======         =======       ======
</TABLE>

10.   Employee Benefit Plans

Defined Contribution Plan

      The Company maintains a defined contribution plan covering substantially
all of its employees and makes discretionary matching and profit sharing
contributions. The total plan cost, including employer contributions, was $1.4
million in 2002, $1.5 million in 2001 and $1.6 million in 2000.

Pension Plans

      Benefits do not accrue under the Company's pension plans after 1995. The
financial status of the plans at December 31 follows (in thousands):
<TABLE>
                                                      2002                  2001
                                              -------------------    ------------------
                                               Stanley    Supple-    Stanley    Supple-
                                             Retirement   mental    Retirement  mental
                                                Plan        Plan      Plan       Plan
                                              --------    -------    -------    -------
Change in benefit obligation:
<S>                                           <C>        <C>        <C>        <C>
   Beginning benefit obligation ............   $14,722    $ 1,499    $14,407    $ 1,541
   Interest cost ...........................     1,042        110      1,091        104
   Actuarial loss (gain) ...................     1,692        202        675       (104)
   Benefits paid ...........................    (3,126)       (61)    (1,853)       (42)
   Settlement cost .........................       585                   402
                                               -------    -------    -------    -------
       Ending benefit obligation ...........    14,915      1,750     14,722      1,499
                                               -------    -------    -------    -------
Change in plan assets:
   Beginning fair value of plan assets .....    15,423                16,558
   Actual return on plan assets ............    (1,598)                  718
   Employer contributions ..................     4,250         61                    42
   Benefits paid ...........................    (3,126)       (61)    (1,853)       (42)
                                               -------    -------    -------    -------
       Ending fair value of plan assets ....    14,949                15,423
                                               -------    -------    -------    -------
Funded status ..............................        34     (1,750)       701     (1,499)
Unrecognized loss (gain) ...................     7,658                 4,444
                                               -------    -------    -------    -------
    Prepaid (accrued) pension costs ........   $ 7,692    $(1,750)   $ 5,145    $(1,499)
                                               =======    =======    =======    =======
</TABLE>
<PAGE>

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

10.   Employee Benefit Plans (continued)

      The Company made contributions totaling $4.3 million to the Stanley
Retirement Plan during 2002. The contributions included $1.2 million in Company
stock. At December 31, 2002, and 2001, the Stanley Retirement Plan assets
included Company stock with a fair value of $1.2 million and $580,000,
respectively.

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

                                       2002       2001       2000
                                       ----       ----       ----
<S>                                 <C>        <C>        <C>
Interest cost ....................   $ 1,152    $ 1,195    $ 1,231
Expected return on plan assets ...    (1,117)    (1,247)    (1,334)
Net amortization and deferral ....       307         45         57
                                     -------    -------    -------
   Net (credit) cost .............       342         (7)       (46)
Settlement expense ...............     1,674        468        492
                                     -------    -------    -------
   Total expense .................   $ 2,016    $   461    $   446
                                     =======    =======    =======
</TABLE>


The assumptions used to determine the plans' financial status and pension cost
were:
<TABLE>
                                                  2002         2001         2000
                                                  ----         ----         ----
<S>                                               <C>          <C>          <C>
Discount rate for funded status.............      6.50%        7.25%        7.60%
Discount rate for pension cost..............      7.25%        7.60%        8.00%
Return on assets............................      7.50%        7.50%        7.50%
</TABLE>

Postretirement Benefits Other Than Pensions

      The Company provides health care benefits to eligible retired employees
between the ages of 55 and 65 and provides life insurance benefits to eligible
retired employees from age 55 until death. The plan's financial status at
December 31 follows (in thousands):
<TABLE>
                                                 2002       2001
                                                ------     ------
<S>                                            <C>        <C>
Change in benefit obligation:
  Beginning benefit obligation ..............   $3,026     $3,152
  Service cost ..............................       48         40
  Interest cost .............................      211        222
  Actuarial loss ............................      276
  Plan participants' contributions ..........      187        149
  Benefits paid .............................     (611)      (537)
                                                ------     ------
      Ending benefit obligation .............    3,137      3,026
                                                ------     ------
Change in plan assets:
  Beginning fair value of plan assets
  Employer contributions ....................      424        388
  Plan participants' contributions ..........      187        149
  Benefits paid .............................     (611)      (537)
                                                ------     ------
      Ending fair value of plan assets
                                                ------     ------
Funded status ...............................   (3,137)    (3,026)
Unrecognized net loss .......................    1,087        858
Unrecognized transition obligation ..........    1,304      1,434
                                                ------     ------
  Accrued benefit cost ......................   $ (746)    $ (734)
                                                ======     ======
</TABLE>

<PAGE>

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

10.   Employee Benefit Plans (continued)

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

                                                       2002     2001     2000
                                                       ----     ----     ----
<S>                                                   <C>      <C>      <C>
Service cost .....................................     $ 48     $ 40     $ 51
Interest cost ....................................      211      222      234
Amortization of transition obligation ............      130      130      130
Amortization and deferral ........................       47       40       25
                                                       ----     ----     ----
      Net periodic postretirement benefit cost ...     $436     $432     $440
                                                       ====     ====     ====
</TABLE>

      The weighted-average discount rates used in determining the actuarial
present value of the projected benefit obligation were 6.50% in 2002, 7.25% in
2001 and 7.60% in 2000. The rate of increase in future health care benefit cost
used in determining the obligation for 2002 was 10.0% gradually decreasing to
5.0% beginning in 2011, for 2001 was 11.0% gradually decreasing to 5.0%
beginning in 2011 and for 2000 was 7.5% gradually decreasing to 5.5% beginning
in 2004.

      An increase or decrease in the assumed health care cost trend rate of one
percentage point in each future year would affect the accumulated postretirement
benefit obligation at December 31, 2002, by approximately $80,000 and the annual
postretirement benefit cost by approximately $12,000.

Deferred Compensation

      The Company has a deferred compensation plan, funded with life insurance
policies, which permits certain management employees to defer portions of their
compensation and earn a fixed rate of return. The accrued liabilities relating
to this plan of $1.6 million at December 31, 2002 and $1.5 million at December
31, 2001 are included in accrued salaries, wages and benefits and other
long-term liabilities. The cash surrender value, net of policy loans, is
included in other assets. Policy loan interest of $789,000, $703,000 and
$616,000 was charged to interest expense in 2002, 2001 and 2000 respectively.

11.   Commitments and Contingencies

      The Company leases showroom space and certain technology equipment. Rental
expenses charged to operations were $1.2 million, $1.4 million and $1.6 million
in 2002, 2001 and 2000, respectively. Future minimum lease payments are
approximately as follows: 2003 - $780,000; 2004 - $607,000; 2005 - $59,000; 2006
- $7,000 and 2007 - $0.

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




<PAGE>


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

12.    Supplemental Cash Flow Information
<TABLE>
                                                            (in thousands)
                                                     2002        2001         2000
                                                     ----        ----         ----
<S>                                               <C>         <C>         <C>
Net income .....................................   $12,571     $ 8,321     $ 19,540
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation ................................     5,724       5,900        7,546
   Amortization ................................       214         565          595
   Unusual charge ..............................                 2,800
   Restructuring charge ........................     1,755       1,990
   Deferred income taxes .......................     2,110        (248)        (263)
   Other, net ..................................        34          29           86
   Changes in assets and liabilities:
     Accounts receivable .......................    (3,970)      6,563       (1,091)
     Inventories ...............................    (4,636)      4,600      (10,842)
     Prepaid expenses and other current assets .      (418)     (2,300)      (1,852)
     Accounts payable ..........................     1,545      (7,666)      (3,629)
     Accrued salaries, wages and benefits ......       721      (1,719)        (999)
     Other accrued expenses ....................       544       1,313          564
     Other assets ..............................        40          49           27
     Other long-term liabilities ...............      (115)       (394)       2,163
                                                   -------     -------     --------
       Net cash provided by operating activities   $16,119     $19,803     $ 11,845
                                                   =======     =======     ========
</TABLE>

13.    Quarterly Results of Operations (Unaudited)
<TABLE>

                                    (in thousands, except per share data)
      2002 Quarters:            First       Second       Third       Fourth
                                -----       ------       -----       ------
<S>                          <C>          <C>          <C>          <C>
      Net sales ...........   $59,574      $55,268      $61,338      $63,305
      Gross profit ........    11,563(1)    12,621(2)    15,161(3)    15,687
      Net income ..........     1,867(1)     2,615(2)     4,139(3)     3,950
      Net income per share:
         Basic ............   $   .28(1)   $   .39(2)   $   .63(3)   $   .60
         Diluted ..........       .27(1)       .37(2)       .62(3)   $   .59

      2001 Quarters:
      Net sales ...........   $65,109      $52,856      $60,007      $56,350
      Gross profit ........    15,273       12,252       13,812        9,339(5)
      Net income ..........     4,066          835(4)     3,236          184(5)
Net income per share:
         Basic ............   $   .62      $   .13(4)   $   .49      $   .03(5)
         Diluted ..........       .59          .12(4)       .47          .03(5)

</TABLE>


    (1)   Includes restructuring and related charges of $2.9 million pretax
          ($1.9 million net of taxes or $.27 per diluted share) for closure of a
          manufacturing facility.  See Note 2.
    (2)   Includes restructuring and related charges of $852,000 pretax
          ($549,000 net of taxes or $.08 per diluted share) for closure of a
          manufacturing facility.  See Note 2.

<PAGE>

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

13.       Quarterly Results of Operations (Unaudited) (continued)

    (3)   Includes a restructuring credit of $209,000 pretax ($135,000 net of
          taxes or $.02 per diluted share) for closure of a manufacturing
          facility.  See Note 2.
    (4)   Includes an unusual charge of $2.8 million pretax ($1.8 million net of
          taxes or $.26 per diluted share) to write off amounts due from a major
          customer.  See Note 3.
    (5)   Includes restructuring and related charges of $3.0 million pretax
          ($2.0 million net of taxes or $.29 per diluted share) for closure of a
          manufacturing facility.  See Note 2.

14.       Recent Accounting Pronouncements

      On December 31, 2002, the Financial Accounting Standards Board (FASB)
issued SFAS No. 148, "Accounting For Stock-Based Compensation - Transition and
Disclosure". SFAS No. 148 provides additional guidance for those entities that
elect to voluntarily adopt the accounting provisions of SFAS 123, "Accounting
For Stock-Based Compensation". The Company has adopted this pronouncement for
year ending December 31, 2002 and has included the required disclosures in this
form 10K.

      In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45)
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN 45 clarifies the
requirements of FASB Statement No. 5, "Accounting for Contingencies". FIN 45
requires that upon issuances of a guarantee, the guarantor must recognize a
liability for the fair value of the obligation it assumes under that guarantee.
The Company does not anticipate the adoption of FIN 45 will have a material
impact on the Company's Consolidated Financial Statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities". SFAS No. 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the Emerging Issues Task Force
("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31,
2002. The Company does not anticipate the adoption of SFAS No. 146 will have a
material impact on the Company's Consolidated Financial Statements.



<PAGE>

<TABLE>
<CAPTION>

                         STANLEY FURNITURE COMPANY, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
        For each of the Three Years in the Period Ended December 31, 2002
                                 (in thousands)




Column A                    Column B       Column C        Column D         Column E
-------------------------------------------------------------------------------------
                                            Charged
                           Balance at      (Credited)                        Balance
                           Beginning       to Costs &                       at End of
Descriptions               of Period        Expenses      Deductions         Period
-------------------------------------------------------------------------------------
<S>                        <C>             <C>             <C>              <C>
2002
 Doubtful receivables...    $1,457          $  760          $  164(a)        $2,053
 Discounts, returns,
   and allowances.......       567              13(b)                           580
                            ------          ------          ------           ------
                            $2,024          $  773          $  164           $2,633
                            ======          ======          ======           ======


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


2000
 Doubtful receivables...    $1,177          $  549          $  449(a)        $1,277
 Discounts, returns,
   and allowances.......       873              80(b)                           953
                            ------          ------          ------           ------
                            $2,050          $  629          $  449           $2,230
                            ======          ======          ======           ======


</TABLE>

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











                                       S-1