| 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 |

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

| Common                Stock, par value $.02 per                share                                                                                                10,332,179                      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Class                of                Common                Stock)                                                                                                             Number of Shares                                           |

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

| Item                5  |   | Market                for Registrant’s Common Equity, Related Stockholder                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |
|------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                   |   | Matters                and Issuer Purchases of Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 9      |
| Item                6  |   | Selected                Financial                Data                                                                                       |   | 11     |
| Item                7  |   | Management’s                Discussion and Analysis of Financial Condition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |
|                   |   | and                Results of                Operation                                                                                      |   | 12     |
| Item                7A |   | Quantitative                and Qualitative Disclosures About Market Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 17     |
| Item                8  |   | Financial                Statements and Supplementary Data                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 17     |
| Item                9  |   | Changes                in and Disagreements With Accountants on Accounting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |
|                   |   | and                Financial                Disclosure                                                                                      |   | 17     |
| Item                9A |   | Controls                and                Procedures                                                                                       |   | 17     |
| Item                9B |   | Other                Information                                                                                                            |   | 17     |

| Item                10 |   | Directors,                Executive Officers and Corporate Governance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 18     |
|------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| Item                11 |   | Executive                Compensation                                                                                                                     |   | 18     |
| Item                12 |   | Security                Ownership of Certain Beneficial Owners and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
|                   |   | Management                and Related Stockholder Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 18     |
| Item                13 |   | Certain                Relationships and Related Transactions, and Director                Independence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 18     |
| Item                14 |   | Principal                Accounting Fees and                Services                                                                                      |   | 18     |

| Item                15 |   | Exhibits,                Financial Statement                Schedules                                                                                       |   | 19 |
|------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----|

| Signatures                                                                                                         |   |       21                 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                   |
| Index                to Consolidated Financial Statements and Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                       F1 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                   |

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| ·   | Smaller,                more frequent and cost-effective production                runs, |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | Identification                and elimination of manufacturing bottlenecks and                waste, |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | Employment                of statistical process control and other quality                tools, |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | Use                of cellular manufacturing in the production of components                and |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Improvement                of our relationships with suppliers by establishing primary                suppliers. |
|--------------------|------------------------------------------------------------------------------------------------------------------|

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| ·   | Our                ability to service customers could be                adversely affected and result in lower sales and                earnings. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes                in political, economic and social conditions, as well as laws and                regulations, in China |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | International                trade policies of the United States and countries from which we source                products could adversely affect                us. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                            |   |                                                    |   | Approximate                  |   | Owned  |
|---------------------------------|--------|---------------------------------------------------------|--------|------------------------------|--------|--------|
|                            |   |                                                    |   | Facility                Size |   | or     |
| Location                        |   | Primary                Use                              |   | (Square                Feet) |   | Leased |
| Stanleytown,                VA  |   | Manufacturing                and Corporate Headquarters |   | 1,721,000                    |   | Owned  |
| Martinsville,                VA |   | Manufacturing/Warehouse                (1)              |   | 300,000                      |   | Owned  |
| Lexington,                NC    |   | Manufacturing                                           |   | 635,000                      |   | Owned  |
| Robbinsville,                NC |   | Manufacturing                                           |   | 562,100                      |   | Owned  |
| High                Point, NC   |   | Showroom                                                |   | 63,000                       |   | Leased |
| Martinsville,                VA |   | Warehouse                                               |   | 243,000                      |   | Leased |

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| Name                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Age    |   | Position                                                                          |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------------------|
| Jeffrey                R.                Scheffer                                                                   |   | 52     |   | Chairman,                President and Chief Executive Officer                    |
| Douglas                I.                Payne                                                                      |   | 49     |   | Executive                Vice President – Finance and                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   | Administration                and Secretary                                       |
| R.                Glenn                Prillaman                                                                    |   | 36     |   | Senior                Vice President – Marketing and   Sales |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |                                                                              |
| Dennis                K.                Taggart                                                                     |   | 50     |   | Vice                President – Human Resources                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |                                                                              |

|                                                                          |   | 2007   |   | 2006   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   | Dividends |   |   |   |   |   | Dividends |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | High   |   | Low    |   | Paid |   | High |   | Low |   | Paid |   |
| First                          Quarter                                                                                                                                                                                                                                                                                                                                                                                                           |   | $      | 22.16  |   | $      | 19.38 |   | $ | .10 |   | $ | 29.96 |   | $ | 22.77 |   | $ | .08 |   |
| Second                          Quarter                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 23.74  |   |   | 20.20 |   |   | .10 |   |   | 29.58 |   |   | 20.00 |   |   | .08 |   |
| Third                          Quarter                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 22.25  |   |   | 15.89 |   |   | .10 |   |   | 25.57 |   |   | 20.54 |   |   | .08 |   |
| Fourth                          Quarter                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 17.38  |   |   | 10.39 |   |   | .10 |   |   | 24.06 |   |   | 19.11 |   |   | .08 |   |

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| (1)   | The                graph shows the cumulative total return on $100 invested at the market                close on December 31, 2002, the last trading day in 2002, in Common                Stock                or the specified index, including reinvestments of                dividends. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Peer                Group Index as prepared by Hemscott, Inc. consists of SIC Code 2511                Wood                Household Furniture Index and SIC code 2512 Wood Household Furniture,                Upholstered. At January 2, 2008, Hemscott reported that these two                indexes                consisted of Bassett Furniture Industries, Inc., Chromcraft Revington,                Inc., Ethan Allen Interiors, Inc., Flexsteel Industries, Inc., Furniture                Brands International, Hooker Furniture Corp., La-Z-Boy, Inc. and                Stanley                Furniture Company, Inc. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Nasdaq                Non-Financial Stock Index prepared for The Nasdaq Stock Market by                the                Center for Research in Securities Prices at the University of                Chicago. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | Number                 of shares to be issued upon exercise of outstanding options, warrants                and                rights |      |   | Weighted                average exercise price of outstanding options, warrants and                rights |   |   | Number              of shares remaining              available for future issuance under equity compensation plans |   |
|------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|-----------|--------|-----------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------|--------|
| Equity                compensation plans       |   |                                                                                                                                       |      |   |                                                                                                      |   |   |                                                                                                               |   |
| approved                by stockholders        |   |                                                                                                                                       | 840,488   |   |                                                                                                      | $      | 16.15  |                                                                                                               |   |   | 29,016 |   |
| Equity                compensation plans       |   |                                                                                                                                       |      |   |                                                                                                      |   |   |                                                                                                               |   |   |   |   |
| not                approved by stockholders(1) |   |                                                                                                                                       | 200,000   |   |                                                                                                      |   | 13.94  |                                                                                                               |   |   |   |   |
| Total                                          |   |                                                                                                                                       | 1,040,488 |   |                                                                                                      | $      | 15.73  |                                                                                                               |   |   | 29,016 |   |
|                                           |   |                                                                                                                                       |      |   |                                                                                                      |   |   |                                                                                                               |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                      |   |       |        |   |                   Years Ended December 31, |   |    |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|-------------|--------|----------------------------------------------------------------|--------|---------|--------|--------|
| Income                Statement Data:                                                                                                                                                                                                                                                                                                                                                     |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                      |   |  2007 |        |   |  2006                                                     |   |    | 2005   |   |   | 2004 |   |   |  2003 |   |
| Net                sales                                                                                    |   | $          | 282,847     |   |                                                           | $      | 307,547 |   |   | $ | 333,646 |   |   | $ | 305,815 |   |   | $ | 265,263 |   |
| Cost                of sales                (1)                                                             |   |       | 235,937     |   |                                                           |   | 242,679 |   |   |   | 251,937 |   |   |   | 230,174 |   |   |   | 203,410 |   |
| Gross                profit                                                                                           |   |       | 46,910      |   |                                                           |   | 64,868  |   |   |   | 81,709 |   |   |   | 75,641 |   |   |   | 61,853 |   |
| Selling,                general and administrative                                                                                                                                                                                                                                                                                                                                        |   |       | 39,573      |   |                                                           |   | 42,139  |   |   |   | 44,267 |   |   |   | 40,953 |   |   |   | 35,637 |   |
| Pension                plan termination charge (2)                                                                                                                                                                                                                                                                                                                                        |   |       | (6,605      | )      |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Operating                income                                                                 |   |       | 732         |   |                                                           |   | 22,729  |   |   |   | 37,442 |   |   |   | 34,688 |   |   |   | 26,216 |   |
| Income                from Continued Dumping andSubsidy Offset Act, net                                                                                                                                                                                                                                                                                                                   |   |       | 10,429      |   |                                                           |   | 4,419   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income,                net                                                             |   |       | 265         |   |                                                           |   | 297     |   |   |   | 288 |   |   |   | 188 |   |   |   | 203 |   |
| Interest                expense,                net                                                         |   |       |  2,679 |   |                                                           |   | 1,710   |   |   |   | 1,825 |   |   |   | 2,343 |   |   |   | 2,748 |   |
| Income                before income taxes                                                                                                                                                                                                                                                                                                                                                 |   |       | 8,747       |   |                                                           |   | 25,735  |   |   |   | 35,905 |   |   |   | 32,533 |   |   |   | 23,671 |   |
| Income                taxes                                                                                 |   |       | 2,845       |   |                                                           |   | 8,954   |   |   |   | 12,674 |   |   |   | 11,744 |   |   |   | 8,521 |   |
| Net                income                                                                                             |   | $          | 5,902       |   |                                                           | $      | 16,781  |   |   | $ | 23,231 |   |   | $ | 20,789 |   |   | $ | 15,150 |   |
|                                                                                                                                                                                                                                                                                                                                                                                      |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                Earnings Per Share:  (3)                                                                                                                                                                                                                                                                                                                                   |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                   |   | $          | .56         |   |                                                           | $      | 1.44    |   |   | $ | 1.82 |   |   | $ | 1.65 |   |   | $ | 1.20 |   |
| Weighted                average                shares                                                       |   |       | 10,478      |   |                                                           |   | 11,649  |   |   |   | 12,766 |   |   |   | 12,574 |   |   |   | 12,651 |   |
|                                                                                                                                                                                                                                                                                                                                                                                      |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                Earnings Per Share: (3)                                                                                                                                                                                                                                                                                                                                            |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                   |   | $          | .55         |   |                                                           | $      | 1.41    |   |   | $ | 1.77 |   |   | $ | 1.59 |   |   | $ | 1.17 |   |
| Weighted                average                shares                                                       |   |       | 10,677      |   |                                                           |   | 11,924  |   |   |   | 13,154 |   |   |   | 13,099 |   |   |   | 12,923 |   |
|                                                                                                                                                                                                                                                                                                                                                                                      |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                dividends paid per share                                                                                                                                                                                                                                                                                                                                              |   | $          | .40         |   |                                                           | $      | .32     |   |   | $ | .24 |   |   | $ | .20 |   |   | $ | .10 |   |
|                                                                                                                                                                                                                                                                                                                                                                                      |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                Sheet and Other Data:                                                                                                                                                                                                                                                                                                                                              |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                                        |   | $          | 31,648      |   |                                                           | $      | 6,269   |   |   | $ | 12,556 |   |   | $ | 7,632 |   |   | $ | 2,509 |   |
| Inventories                                                                                                 |   |       | 58,086      |   |                                                           |   | 59,364  |   |   |   | 69,961 |   |   |   | 73,658 |   |   |   | 54,638 |   |
| Working                capital                                                                              |   |       | 91,852      |   |                                                           |   | 72,036  |   |   |   | 91,200 |   |   |   | 88,567 |   |   |   | 64,455 |   |
| Total                assets                                                                                 |   |       | 173,731     |   |                                                           |   | 162,678 |   |   |   | 190,488 |   |   |   | 188,888 |   |   |   | 164,203 |   |
| Long-term                debt including                                                                                                                                                                                                                                                                                                                                                   |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| current                maturities                                                                                     |   |       | 30,714      |   |                                                           |   | 8,571   |   |   |   | 11,428 |   |   |   | 15,685 |   |   |   | 22,700 |   |
| Stockholders’                equity                                                                   |   |       | 102,851     |   |                                                           |   | 109,647 |   |   |   | 132,749 |   |   |   | 127,265 |   |   |   | 102,558 |   |
| Capital                expenditures                                                                         |   | $          | 3,951       |   |                                                           | $      | 4,196   |   |   | $ | 4,986 |   |   | $ | 1,718 |   |   | $ | 1,243 |   |
| Stock                repurchases:                                                                                                                                                                                                                                                                                                                                                         |   |       |        |   |                                                           |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                (3)                                                                                             |   |       | 639         |   |                                                           |   | 1,423   |   |   |   | 1,057 |   |   |   |   |   |   |   | 1,132 |   |
| Total                cost                                                                                             |   | $          | 13,557      |   |                                                           | $      | 33,576  |   |   | $ | 22,993 |   |   |   |   |   |   | $ | 14,788 |   |

| (1)   | Included                in cost of sales in 2007 is $3.6 million pretax ($2.4 million after                tax),                or $.23 per diluted share, for the conversion of one of our manufacturing                facilities to a warehouse                operation. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | We                terminated our defined benefit pension plan in 2007, resulting in                a charge                to earnings of $6.6 million pretax (4.5 million after tax), or $.42                per                diluted share. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Amounts                have been retroactively adjusted to reflect the two-for-one stock                split,                distributed in the form of a stock dividend, on June 6,                2005. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | For                the Years                Ended |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | December                31,                       |      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2007                                              |      |   | 2006 |   |   |                      2005 |   |
| Net                sales                                                                                                                                            |   |                                              | 100.0     | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Cost                of                sales                                                                                                                         |   |                                              | 83.4      |   |   |   | 78.9 |   |   |   | 75.5 |   |
| Gross                profit                                                                                                                                              |   |                                              | 16.6      |   |   |   | 21.1 |   |   |   | 24.5 |   |
| Selling,                general and administrative expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                              | 14.0      |   |   |   | 13.7 |   |   |   | 13.3 |   |
| Pension                plan termination                charge                                                                                                       |   |                                              | 2.3       |   |   |   |   |   |   |   |   |   |
| Operating                income                                                                                                                                          |   |                                              | .3        |   |   |   | 7.4 |   |   |   | 11.2 |   |
| Income                from Continued Dumping and SubsidyOffset                Act,                net                                                                    |   |                                              | 3.7       |   |   |   | 1.4 |   |   |   |   |   |
| Other                income,                net                                                                                                                     |   |                                              | .1        |   |   |   | .1 |   |   |   | .1 |   |
| Interest                expense,                net                                                                                                                 |   |                                              |  1.0 |   |   |   |  .5 |   |   |   |  .5 |   |
| Income                before income                taxes                                                                                                                 |   |                                              | 3.1       |   |   |   | 8.4 |   |   |   | 10.8 |   |
| Income                taxes                                                                                                                                         |   |                                              | 1.0       |   |   |   |  2.9 |   |   |   |  3.8 |   |
| Net                income                                                                                                                                                |   |                                              | 2.1       | % |   |   | 5.5 | % |   |   | 7.0 | % |

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|                                                          |                          |  Payment              due              or commitment expiration |                              |
|---------------------------------------------------------------|-------------------------------|----------------------------------------------------------------------|-----------------------------------|
|                                                          |                          | Less                Than                                             |                              | Over |
|                                                          | Total                         | 1                year                                                | 1-3                years          |  3-5                years |  5                years |
| Contractual                cash obligations:                  |                          |                                                                 |                              |   |   |
| Long-term                debt                                 | $30,714                       | $1,428                                                               | $2,857                            | $  8,571 | $17,857 |
| Postretirement                benefits other than pensions(1) | 2,784                         | 295                                                                  | 577                               | 551 | 1,362 |
| Fixed                interest payment on long-term debt       | 11,720                        | 2,030                                                                | 3,761                             | 2,934 | 2,995 |
| Operating                leases                               |     1,356 |      743                                    |      613 |   |   |
| Total                contractual cash obligations             | $46,574                       | $4,496                                                               | $7,808                            | $12,056 | $22,214 |
| Other                commercial commitments:                  |                          |                                                                 |                              |   |   |
| Letters                of credit                              | $  1,610            | $1,610                                                               |                              |   |   |

| (1)   | The                1983 Group Annuity Mortality tables were used in estimating future                benefit                payments, and the health care cost trend rate for determining payments                is                8.0% for 2007 and gradually declines to 5.5% in 2010 where it is                assumed                to remain constant for the remaining                years. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        | Not                included in the above table is unrecognized tax benefits of $899,000. |
|--------------------------------------|------------------------------------------------------------------------------------------|

| ·   | the                annual administrative review process which can retroactively increase                or                decrease the actual duties owed on entries secured by cash deposits                and                bonds, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                percentage allocation which is based on our qualifying expenditures                in                relation to the qualifying expenditures of other eligible domestic                producers requesting distribution for the relevant time periods under                CDSOA, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                ultimate resolution of the legal appeals discussed above,                and |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | other                administrative and legal challenges that may be                instituted. |
|--------------------|-------------------------------------------------------------------------------------------------|

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| (1)    | The                following consolidated financial statements are included in this                report on                Form 10-K:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Report                of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Consolidated                Balance Sheets as of December 31, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Consolidated                Statements of Income for each of the three years in the period ended                December 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Consolidated                Statements of Changes in Stockholders’ Equity for each of the three years                in the period ended December 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Consolidated                Statements of Cash Flow for each of the three years in the period                ended                December 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 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, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (b)    | Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1    | The                Restated Certificate of Incorporation of the Registrant (incorporated                by                reference to Exhibit 3.1 to the Registrant’s Form 10-Q (Commission File                No. 0-14938) for the quarter ended July 2, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.2    | By-laws                of the Registrant as amended (incorporated by reference to Exhibit                3 to                the Registrant’s Form 8-K (Commission File No. 0-14938) filed December 7,                2007).                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 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    | Amended                and Restated Note Purchase and Private Shelf Agreement dated as of                January                26, 2007, among the Registrant, The Prudential Insurance Company                of                America, the other purchasers named therein and the affiliates of                Prudential who became purchasers as defined therein (incorporated                by                reference to Exhibit 4.1 to the Registrant’s Form 8-K (Commission File No                0-14938) filed February 1, 2007).                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.3    | Amendment                to Amended and Restated Note Purchase and Private Shelf Agreements                dated                as of October 12, 2007, among the Registrant, The Prudential Insurance                Company of America (“Prudential”), Hartford Life Insurance Company, Medica                Health Plans, Pruco Life Insurance Company of New Jersey, Prudential                Retirement Insurance and Annuity Company, Mutual of Omaha Insurance                Company. (incorporated by Reference to Exhibit 4.1 to the Registrant’s                Form 10-Q (Commission File No 0-17938) for the quarter ended September                29,                2007). |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.4    | Certain                instruments with respect to long-term debt of the Registrant and                it’s                consolidated subsidiaries are not filed herewith pursuant to Item                601(b)(4)(iii) of Regulation S-K since the total amount of securities                authorized under each such instrument does not exceed 10% of the                total                assets of the Registrant and its subsidiaries on a consolidated basis.                The                Registrant agrees to furnish a copy of any such instrument to the                Securities and Exchange Commission upon                request.                                          |

| 10.1   | 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)                                                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                         |
| 10.2   | 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) |
|   |
| (2)    | Management                contract or compensatory plan                                                                                                                                                                                                                                                                                                                      |

----

|   |
|--------|
| 10.3   | 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) |
|   |   |
| 10.4   | 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) |
|   |   |
| 10.5   | 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) |
|   |   |
| 10.6   | 2000                Incentive Compensation Plan (incorporated by reference to Exhibit                A to the                Registrant’s Proxy Statement (Commission File No. 0-14938) for the special                meeting of stockholders held on August 24, 2000).(2) |
|   |   |
| 10.7   | Amendment                No. 1 to The Stanley Furniture Company, Inc. 1994 Stock Option Plan                dated                as of July 1, 2000 (incorporated by reference to Exhibit 10.3 to                the                Registrant’s Form 10-Q (Commission File No. 0-14938) for the quarter ended                September 30, 2000).(2) |
|   |   |
| 10.8   | 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) |
|   |   |
| 10.9   | Option                Agreement, dated April 30, 2001, between the Registrant and Jeffrey                R.                Scheffer (incorporated by reference to Exhibit 10.1 to the Registrant’s                Form 10-Q (Commission File No. 0-14938) for the quarter ended September                29, 2001).(2) |

| 10.10                 | Second                Amendment to Supplemental Retirement Plan of Stanley Furniture Company,                Inc. effective January 1, 2002 (incorporated by reference to Exhibit                10.33                to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year                ended December 31, 2002).(2)                                        |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.11                 | First                Amendment, dated March 1, 2003, to the Employment Agreement, dated                April                9, 2001, between the Registrant and Jeffrey R. Scheffer (incorporated                by                reference to Exhibit 10.2 to the Registrant’s Form 10-Q (Commission File                No. 0-14938) for the quarter ended March 29, 2003).(2) |
|                  |                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.                12 | Credit                Agreement, dated August 29, 2003, between the Registrant and SouthTrust                Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Form                10-Q (Commission File No. 0-14938) for the quarter ended September                27,                2003).                                                                  |
|                  |                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.13                 | First                Amendment, dated April 23, 2004, to the revolving credit facility                dated                August 29, 2003, between the registrant and SouthTrust Bank (incorporated                by reference to Exhibit 10.1 to the Registrant’s Form 10-Q (Commission                File No. 0-14938) for the quarter ended June 26, 2004).                 |
|                  |                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.14                 | 2005                Incentive Compensation Award, dated as of December 15, 2004, from                the                Registrant to Jeffrey R. Scheffer (incorporated by reference to Exhibit                10.21 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the                year ended December 31, 2004).(2)                                         |
|                  |
| 10.15                 | 2005                Incentive Compensation Award, dated as of December 15, 2004, from                the                Registrant to Douglas I. Payne (incorporated by reference to Exhibit                10.22                to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year                ended December 31, 2004). (2)                            |
|                  |                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.16                 | Form                of Stock Option Award under 2000 Incentive Plan (ISO) (incorporated                by                reference to Exhibit 10.23 to the Registrant’s Form 10-K (Commission File                No. 0-14938) for the year ended December 31, 2004). (2)                                                                                                         |
|                  |                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.17                 | Form                of Stock Option Award under 2000 Incentive Plan (ISO/NSO) (incorporated                by                reference to Exhibit 10.24 to the Registrant’s Form 10-K (Commission File                No. 0-14938) for the year ended December 31, 2004). (2)                                                                                                |
| (2)                   | Management                contract or compensatory plan                                                                                                                                                                                                                                                                                                                            |

----

|   |                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.18  | Form                of Stock Option Award under 2000 Incentive Plan (Directors) (incorporated                by reference to Exhibit 10.25 to the Registrant’s Form 10-K (Commission                File No. 0-14938) for the year ended December 31, 2004).                (2)                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 10.19  | Second                Amendment dated June 15, 2005, to the revolving credit facility dated                August 29, 2003, between the Registrant and Wachovia Bank (incorporated                by                reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File                No. 0-14938) filed on June 16, 2005).             |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 10.20  | Non-Competition                Agreement, dated as of December 14, 2005, between the Registrant                and                Albert L. Prillaman (incorporated by reference to Exhibit 10.1 to                the                Registrant’s Form 8-K (Commission File No. 0-14938) filed on December 19,                2005). (2)                    |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 10.21  | Third                Amendment, dated July 14, 2006, to the revolving credit facility                dated                August 29, 2003, between the Registrant and Wachovia Bank (incorporated                by                reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File No                0-14938) filed July 18, 2006).  |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 10.22  | Fourth                Amendment dated July 13, 2007, to the Revolving Credit Facility dated                August 29, 2003, between the Registrant and Wachovia Bank (incorporated                by                reference to Exhibit 10.1 to the Registrant’s Form 10-9 (Commission File                No 0-14938) for the quarter ended June 30, 2007. |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 21     | List                of Subsidiaries(1)                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 23     | Consent                of PricewaterhouseCoopers LLP(1)                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 31.1   | Certification                by Jeffrey R. Scheffer, our Chief Executive Officer, pursuant to                Rule                13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended                (1)                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 31.2   | Certification                by Douglas I. Payne, our Chief Financial Officer, pursuant to Rule                13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended                (1)                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 32.1   | Certification                by Jeffrey R. Scheffer, our Chief Executive Officer, pursuant to                18 U.S.C.                Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley                Act                of 2002.(1)                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                               |
| 32.2   | Certification                by Douglas I. Payne, our Chief Financial Officer, pursuant to 18                U.S.C.                Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley                Act                of 2002.(1)                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                               |
|   |
| (1)    | Filed                Herewith                                                                                                                                                                                                                                                                                                                                      |
| (2)    | Management                contract or compensatory plan                                                                                                                                                                                                                                                                                                            |

----

|                                                |   | STANLEY                FURNITURE COMPANY, INC.                      |
|------------------------------------------------|--------|---------------------------------------------------------------------|
|                                           |   |                                                                |
| February                4,                2008 |   | By: /s/Jeffrey                R.                Scheffer       |
|                                           |   | Jeffrey                R.                Scheffer                   |
|                                           |   | Chairman                                                            |
|                                           |   | President                and                Chief Executive Officer |

| Signature                                                                                                               |   | Title                                                                                                                                                                                |   | Date                                               |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|
|                                                                                                                    |   |                                                                                                                                                                                 |   |                                               |
| /s/Jeffrey                  R.                  Scheffer(Jeffrey                  R.                  Scheffer)         |   | Chairman                  and                  President and Chief  Executive                  Officer(Principal                  Executive Officer)                            |   | February                  4,                  2008 |
|                                                                                                                    |   |                                                                                                                                                                                 |   |                                               |
| /s/Douglas                  I.                  Payne(Douglas                  I.                  Payne)               |   | Executive                  Vice President - Finance and                  Administration and Secretary                  (Principal Financial and                  Accounting Officer) |   | February                  4,                  2008 |
|                                                                                                                    |   |                                                                                                                                                                                 |   |                                               |
| /s/Robert                  G. Culp,                  III(Robert                  G.                  Culp, III)         |   | Director                                                                                                                                                                             |   | February                  4,                  2008 |
|                                                                                                                    |   |                                                                                                                                                                                 |   |                                               |
| /s/Michael                  P.                  Haley(Michael                  P.                  Haley)               |   | Director                                                                                                                                                                             |   | February                  4,                  2008 |
|                                                                                                                    |   |                                                                                                                                                                                 |   |                                               |
| /s/Thomas                  L.                  Millner(Thomas                  L.                  Millner)             |   | Director                                                                                                                                                                             |   | February                  4,                  2008 |
|                                                                                                                    |   |                                                                                                                                                                                 |   |                                               |
| /s/T.                  Scott McIlhenny,                  Jr.(T.                  Scott                  McIlhenny, Jr.) |   | Director                                                                                                                                                                             |   | February                  4,                  2008 |
|                                                                                                                    |   |                                                                                                                                                                                 |   |                                               |
| /s/Albert                  L.                  Prillaman(Albert                  L.                  Prillaman)         |   | Director                                                                                                                                                                             |   | February                  4,                  2008 |

----

| Consolidated                Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Page   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Report                of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | F2     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Consolidated                Balance Sheets as of December 31, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | F3     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Consolidated                Statements of Income for each of the three years in the                period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
| ended                December 31,                2007                                                                                                                               | F4     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Consolidated                Statements of Changes in Stockholders’ Equity for each of                the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| three                years in the period ended December 31,                2007                                                                                                     | F5     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Consolidated                Statements of Cash Flows for each of the three years in                the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
| period                ended December 31,                2007                                                                                                                        | F6     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Notes                to Consolidated Financial                Statements                                                                                                       | F7     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Financial                Statement Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| Schedule                II – Valuation and Qualifying Accounts for each of                the  three                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| years                in the period ended December 31,                2007                                                                                                           | S1     |

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  December                31, |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 2007 |   | 2006 |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Current                assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |
| Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $ | 31,648 |   | $ | 6,269 |   |
| Accounts                receivable, less allowances of $1,482 and $1,554                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 25,393 |   |   | 32,260 |   |
| Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |
| Finished                goods                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 46,250 |   |   | 45,172 |   |
| Work-in-process                                                                                                                                                                     |   | 4,432 |   |   | 5,183 |   |
| Raw                materials                                                                                                                                                        |   |  7,404 |   |   | 9,009 |   |
| Total                inventories                                                                                                                                                              |   | 58,086 |   |   | 59,364 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
| Prepaid                expenses and other current                assets                                                                                    |   | 1,767 |   |   | 2,085 |   |
| Deferred                income                taxes                                                                                                        |   | 3,381 |   |   | 3,928 |   |
| Total                current                assets                                                                                                                        |   | 120,275 |   |   | 103,906 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
| Property,                plant and equipment,                net                                                                                           |   | 43,898 |   |   | 49,159 |   |
| Goodwill                                                                                                                                                   |   | 9,072 |   |   | 9,072 |   |
| Other                assets                                                                                                                                |   | 486 |   |   | 541 |   |
| Total                assets                                                                                                                                               | $ | 173,731 |   | $ | 162,678 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
| LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |
| Current                liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |
| Current                maturities of long-term                debt                                                                                                        | $ | 1,428 |   | $ | 2,857 |   |
| Accounts                payable                                                                                                                                           |   | 16,106 |   |   | 17,789 |   |
| Accrued                salaries, wages and                benefits                                                                                                        |   | 7,108 |   |   | 9,868 |   |
| Other                accrued                expenses                                                                                                                      |   |  3,781 |   |   | 1,356 |   |
| Total                current                liabilities                                                                                                                             |   | 28,423 |   |   | 31,870 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
| Long-term                debt, exclusive of current maturities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 29,286 |   |   | 5,714 |   |
| Deferred                income                taxes                                                                                                        |   | 4,824 |   |   | 7,422 |   |
| Other                long-term                liabilities                                                                                                  |   | 8,347 |   |   | 8,025 |   |
| Total                liabilities                                                                                                                                                    |   | 70,880 |   |   | 53,031 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
| Commitments                and Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
| STOCKHOLDERS’                EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |
| Common                stock, $0.02 par value, 25,000,000 shares authorized,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |
| 10,332,179                 shares issued and outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 207 |   |   | 219 |   |
| Capital                in excess of par                value                                                                                               |   | 591 |   |   | 59 |   |
| Retained                earnings                                                                                                                           |   | 102,999 |   |   | 114,189 |   |
| Accumulated                other comprehensive                loss                                                                                         |   | (946 | ) |   | (4,820 | ) |
| Total                stockholders’                equity                                                                                                            |   | 102,851 |   |   | 109,647 |   |
| Total                liabilities and stockholders’                equity                                                                                                      | $ | 173,731 |   | $ | 162,678 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | For                the Years Ended December 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 2007                                            |    |   | 2006 |   |   | 2005 |   |
| Net                sales                                                                                                                                   |   | $                                               | 282,847 |   |   | $ | 307,547 |   |   | $ | 333,646 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Cost                of                sales                                                                                                                |   |                                            | 235,937 |   |   |   | 242,679 |   |   |   | 251,937 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Gross                profit                                                                                                                                     |   |                                            | 46,910  |   |   |   | 64,868 |   |   |   | 81,709 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Selling,                general and administrative expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                            | 39,573  |   |   |   | 42,139 |   |   |   | 44,267 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Pension                plan termination                charge                                                                                         |   |                                            | (6,605  | ) |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Operating                income                                                                                                                                 |   |                                            | 732     |   |   |   | 22,729 |   |   |   | 37,442 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Income                from Continued Dumping and SubsidyOffset                Act,                net                                                                     |   |                                            | 10,429  |   |   |   | 4,419 |   |   |   |   |   |
| Other                income,                net                                                                                                            |   |                                            | 265     |   |   |   | 297 |   |   |   | 288 |   |
| Interest                income                                                                                                                             |   |                                            | 556     |   |   |   | 383 |   |   |   | 358 |   |
| Interest                expense                                                                                                                            |   |                                            | 3,235   |   |   |   | 2,093 |   |   |   | 2,183 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Income                before income                taxes                                                                                                        |   |                                            | 8,747   |   |   |   | 25,735 |   |   |   | 35,905 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Income                taxes                                                                                                                                |   |                                            | 2,845   |   |   |   | 8,954 |   |   |   | 12,674 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                                                       |   | $                                               | 5,902   |   |   | $ | 16,781 |   |   | $ | 23,231 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Earnings                per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                            |    |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                           |   | $                                               | .56     |   |   | $ | 1.44 |   |   | $ | 1.82 |   |
| Diluted                                                                                                                                                         |   | $                                               | .55     |   |   | $ | 1.41 |   |   | $ | 1.77 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                            |    |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                           |   |                                            | 10,478  |   |   |   | 11,649 |   |   |   | 12,766 |   |
| Diluted                                                                                                                                                         |   |                                            | 10,677  |   |   |   | 11,924 |   |   |   | 13,154 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                            |    |   |   |   |   |   |   |   |   |   |
| Cash                dividends declared and paid                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                            |    |   |   |   |   |   |   |   |   |   |
| per                common                share                                                                                                                  |   | $                                               | .40     |   |   | $ | .32 |   |   | $ | .24 |   |

----

|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   | Accumulated  |    |   |          |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------|--------|--------|----------------------|--------|--------|-------------------------------------------|----------------|--------|--------|---------------------|--------|--------|-------------------|---------|--------|---------------|---------|
|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   | Capital                          in  |           |   |   |                |   |   | Other        |    |   |          |    |
|                                                                                                                                                                                  |   |   | Common                        Stock     |   |   | Excess of  |   |   |                                      | Retained  |   |   | Comprehensive  |   |   |              |    |
|                                                                                                                                                                                  |   |   | Shares                                                 |   |   | Amount          |   |   | Par                          Value   |           |   |   | Earnings       |   |   | Loss         |    |   | Total    |    |
|                                Balance at December 31, 2004                                                                                        |   |   | 12,830                                                      |   | $      | 257                  |   | $      | 10,207                                    |           |   | $      | 116,952             |   | $      | (151              | )       | $      | 127,265       |    |
|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
| Netincome                                                                                                                                                                        |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   | 23,231              |   |   |              |    |   | 23,231        |    |
| Minimum                          pension liability, net of                                                                                                                            |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
| deferred                          income tax benefit of                          $17                                                                                             |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   | (27               | )       |   | (27           | )       |
| Comprehensive                          income                                                                                                                                    |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   | 23,204        |    |
| Exercise                          of                          stock options                                                                                                      |   |   | 469                                                         |   |   | 9                    |   |   | 6,353                                     |           |   |   |                |   |   |              |    |   | 6,362         |    |
|                                Stock awards                                                                                                        |   |   | 10                                                     |   |   |                 |   |   | 244                                  |           |   |   |                |   |   |              |    |   | 244      |    |
| Tax                          benefit on                          exercise of stock options                                                                                       |   |   |                                                        |   |   |                 |   |   | 1,748                                     |           |   |   |                |   |   |              |    |   | 1,748         |    |
| Purchase                          and                          retirement of stock                                                                                                    |   |   | (1,057                                                 | )      |   | (21             | )      |   | (18,552                              | )              |   |   | (4,420         | )      |   |              |    |   | (22,993       | )       |
| Dividends                          paid, $0.24 per share                                                                                                                         |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   | (3,081              | )      |   |              |    |   | (3,081        | )       |
| Balance                          at                          December 31, 2005                                                                                                   |   |   | 12,252                                                      |   |   | 245                  |   |   |                                      |           |   |   | 132,682             |   |   | (178              | )       |   | 132,749       |    |
|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
|  Net                          income                                                                                                                                        |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   | 16,781              |   |   |              |    |   | 16,781        |    |
| Minimum                          pension liability, net of                                                                                                                            |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
|   deferred                          income tax                          benefit of $2,361                                                                                   |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   | (3,812            | )       |   | (3,812        | )       |
| Comprehensive                          income                                                                                                                                         |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   | 12,969        |    |
|                                Adjustment to initially apply SFAS No. 158 net of deferred                        income                        tax |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
|                                        benefit of $514                                                     |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   | (830         | )       |   | (830     | )       |
| Exercise                          of                          stock options                                                                                                      |   |   | 90                                                          |   |   | 2                    |   |   | 1,109                                     |           |   |   |                |   |   |              |    |   | 1,111         |    |
|                              Stock awards                                                                                                                         |   |   | 10                                                          |   |   |                 |   |   | 247                                       |           |   |   |                |   |   |              |    |   | 247           |    |
|                                Stock based compenssation                                                                                           |   |   |                                                        |   |   |                 |   |   | 357                                  |           |   |   |  (30      | )      |   |              |    |   | 327      |    |
|                              Tax benefit on exercise of stock options                                                                                             |   |   |                                                        |   |   |                 |   |   |  386                                 |           |   |   |                |   |   |              |    |   | 386           |    |
| Purchase                          and                          retirement of stock                                                                                               |   |   | (1,423                                                      | )      |   | (28                  | )      |   | (2,040                                    | )              |   |   | (31,508             | )      |   |              |    |   | (33,576       | )       |
| Dividends                          paid, $0.32 per share                                                                                                                         |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   | (3,736              | )      |   |              |    |   | (3,736        | )       |
| Balance                          at December 31, 2006                                                                                                                                 |   |   | 10,929                                                      |   |   | 219                  |   |   | 59                                   |           |   |   | 114,189             |   |   | (4,820            | )       |   | 109,647       |    |
|                                Cumulative effect of adoption                        of                        FIN48                                |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   | 21             |   |   |              |    |   | 21       |    |
|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
|                                 Adjusted balance, January 1, 2007                                                                             |   |   | 10,929                                                 |   |   | 219             |   |   | 59                                   |           |   |   | 114,210        |   |   | (4,820       | )       |   | 109,668  |    |
|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
| Net                          income                                                                                                                                              |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   | 5,902               |   |   |              |    |   | 5,902         |    |
|                                Prior service cost, net of deferrd income tax benefit of                        $1                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   | (2           | )       |   | (2       | )       |
|                              Actuarial                        loss, net of deferred income tax benefit of $136                                               |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |  (141        |  ) |   |  (141    |  ) |
| Comprehensive                          income                                                                                                                                         |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   | 5,759         |    |
|                              Termination                        of defined benefit pension plan, net of                                                      |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
|                                deferred income tax benefit of $2,488                                                                                         |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   | 4,017        |    |   | 4,017         |    |
|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
| Exercise                          of stock                          options                                                                                                      |   |   | 43                                                          |   |   | 1                    |   |   | 531                                       |           |   |   |                |   |   |              |    |   | 532           |    |
|    Stock-based                          compensation                                                                                                              |   |   |                                                        |   |   |                 |   |   | 534                                       |           |   |   |                |   |   |              |    |   | 534           |    |
| Tax                          benefit on exercise of                          stock options                                                                                       |   |   |                                                        |   |   |                 |   |   | 92                                        |           |   |   |                |   |   |              |    |   | 92            |    |
| Purchase                          and retirement of                          stock                                                                                               |   |   | (640                                                        | )      |   | (13                  | )      |   | (625                                      | )              |   |   | (12,919             | )      |   |              |    |   | (13,557       | )       |
| Dividends                          paid, $0.40 per                          share                                                                                                |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   | (4,194              | )      |   |              |    |   | (4,194        | )       |
|                                                                                                                                                                                  |   |   |                                                        |   |   |                 |   |   |                                      |           |   |   |                |   |   |              |    |   |          |    |
| Balance                          at December 31,                          2007                                                                                                   |   |   | 10,332                                                      |   | $      | 207                  |   | $      | 591                                       |           |   | $      | 102,999             |   | $      | (946              | )       | $      | 102,851       |    |

----

|                                                                                 |   |                                                                               1, |     |
|--------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                 |   | 2007                                                                                                                                                                                                                                                                                                                   |     |   | 2006 |   |   | 2005 |   |
| Cash                flows from operating activities:                                 |   |                                                                                                                                                                                                                                                                                                                   |     |   |   |   |   |   |   |
| Cash                received from customers                                          |   | $                                                                                                                                                                                                                                                                                                                      | 289,951  |   |   | $ | 311,726 |   |   | $ | 333,233 |   |
| Cash                paid to suppliers and employees                                  |   |                                                                                                                                                                                                                                                                                                                   | (269,795 | ) |   |   | (268,787 | ) |   |   | (287,559 | ) |
| Cash                from Continued Dumping and SubsidyOffset                Act, net |   |                                                                                                                                                                                                                                                                                                                   | 9,986    |   |   |   | 4,419 |   |   |   |   |   |
| Interest                paid, net                                                    |   |                                                                                                                                                                                                                                                                                                                   | (2,359   | ) |   |   | (1,651 | ) |   |   | (1,792 | ) |
| Income                taxes paid                                                     |   |                                                                                                                                                                                                                                                                                                                   | (4,775   | ) |   |   | (10,383 | ) |   |   | (11,080 | ) |
| Net                cash provided by operating activities                             |   |                                                                                                                                                                                                                                                                                                                   | 23,008   |   |   |   | 35,324 |   |   |   | 32,802 |   |
|                                                                                 |   |                                                                                                                                                                                                                                                                                                                   |     |   |   |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                                 |   |                                                                                                                                                                                                                                                                                                                   |     |   |   |   |   |   |   |   |   |   |
| Capital                expenditures                                                  |   |                                                                                                                                                                                                                                                                                                                   | (3,951   | ) |   |   | (4,196 | ) |   |   | (4,986 | ) |
| Other,                net                                                            |   |                                                                                                                                                                                                                                                                                                                   | (20      | ) |   |   |   |   |   |   | (33 | ) |
| Net                cash used by investing activities                                 |   |                                                                                                                                                                                                                                                                                                                   | (3,971   | ) |   |   | (4,196 | ) |   |   | (5,019 | ) |
|                                                                                 |   |                                                                                                                                                                                                                                                                                                                   |     |   |   |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                                 |   |                                                                                                                                                                                                                                                                                                                   |     |   |   |   |   |   |   |   |   |   |
| Proceeds                from senior notes                                            |   |                                                                                                                                                                                                                                                                                                                   | 25,000   |   |   |   |   |   |   |   |   |   |
| Purchase                and retirement of common stock                               |   |                                                                                                                                                                                                                                                                                                                   | (13,557  | ) |   |   | (33,576 | ) |   |   | (22,993 | ) |
| Repayment                of senior notes                                             |   |                                                                                                                                                                                                                                                                                                                   | (2,857   | ) |   |   | (2,857 | ) |   |   | (4,257 | ) |
| Dividends                paid                                                        |   |                                                                                                                                                                                                                                                                                                                   | (4,194   | ) |   |   | (3,736 | ) |   |   | (3,081 | ) |
| Proceeds                from exercise of stock options                               |   |                                                                                                                                                                                                                                                                                                                   | 532      |   |   |   | 1,111 |   |   |   | 6,362 |   |
|   Tax                benefit from exercise of stock options                |   |                                                                                                                                                                                                                                                                                                                   | 32       |   |   |   | 402 |   |   |   |   |   |
| Proceeds                from insurance policy loans                                  |   |                                                                                                                                                                                                                                                                                                                   | 1,386    |   |   |   | 1,241 |   |   |   | 1,110 |   |
| Net                cash provided (used) by financing activities                      |   |                                                                                                                                                                                                                                                                                                                   | 6,342    |   |   |   | (37,415 | ) |   |   | (22,859 | ) |
|                                                                                 |   |                                                                                                                                                                                                                                                                                                                   |     |   |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in cash                                       |   |                                                                                                                                                                                                                                                                                                                   | 25,379   |   |   |   | (6,287 | ) |   |   | 4,924 |   |
| Cash                at beginning of year                                             |   |                                                                                                                                                                                                                                                                                                                   | 6,269    |   |   |   | 12,556 |   |   |   | 7,632 |   |
|                                                                                 |   |                                                                                                                                                                                                                                                                                                                   |     |   |   |   |   |   |   |   |   |   |
| Cash                at end of year                                                   |   | $                                                                                                                                                                                                                                                                                                                      | 31,648   |   |   | $ | 6,269 |   |   | $ | 12,556 |   |

| Net                income                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                                                                                                                            | 5,902  |   |   | $      | 16,781 |   |   | $      | 23,231 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Adjustments                to reconcile net income to net cash                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| provided                by operating activities:                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Pension                plan termination charge                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                         | 6,605  |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                                                                         | 8,982  |   |   |   | 5,759  |   |   |   | 5,582  |   |
| Amortization                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                                                                         | 72     |   |   |   | 78     |   |   |   | 88     |   |
| Deferred                income taxes                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                         | (4,083 | )      |   |   | (1,331 | )      |   |   | (609   | )      |
|     Stock-based                compensation                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                                                                         | 534    |   |   |   | 327    |   |   |   |   |   |
|     Tax                benefit from exercise of stock options                                                                                                                                                                                                                                                                                                                                                |   |                                                                                                                         | (32    | )      |   |   | (402   | )      |   |   |   |   |
| Other,                net                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                         | 220    |   |   |   | 23     |   |   |   | 2      |   |
| Changes                in assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Accounts                receivable                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                         | 6,867  |   |   |   | 4,697  |   |   |   | (921   | )      |
| Inventories                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                         | 1,278  |   |   |   | 10,597 |   |   |   | 3,697  |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                                                                         | (1,142 | )      |   |   | (600   | )      |   |   | (1,415 | )      |
| Accounts                payable                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                                                                         | (1,783 | )      |   |   | 1,384  |   |   |   | 349    |   |
| Accrued                salaries, wages and benefits                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                         | (3,028 | )      |   |   | (1,075 | )      |   |   | 815    |   |
| Other                accrued expenses                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                         | 2,528  |   |   |   | 22     |   |   |   | 1,641  |   |
| Other                assets                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                         | 88     |   |   |   | 379    |   |   |   | 248    |   |
| Other                long-term liabilities                                                                                                                                                                                                                                                                                                                                                                                       |   | _______                                                                                                                      |   |   |   | (1,315 | )      |   |   | 94     |   |
| Net                cash provided by operating activities                                                                                                                                                                                                                                                                                                                                                                         |   | $                                                                                                                            | 23,008 |   |   | $      | 35,324 |   |   | $      | 32,802 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Supplemental                disclosure of cash flow information:                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Non-cash                financing activities:                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Stock                awards                                                                              . |   |                                  ______ |   |   | $      | 247    |   |   | $      | 244    |   |

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                             | Depreciable               |   |                          |    |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|--------|-------------------------------|---------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                             | lives                     |   | (in                thousands) |    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             | (in                years) |   | 2007                          |    |   | 2006   |   |
| Land                and                buildings                                                                           | 20                to 50   |   | $                             | 41,874  |   |   | $      | 40,887 |   |
| Machinery                and                equipment                                                                      | 5                to 12    |   |                          | 80,589  |   |   |   | 79,051 |   |
| Office                furniture and                equipment                                                               | 3                to 10    |   |                          | 1,377   |   |   |   | 1,452 |   |
| Construction                in                progress                                                                     |                      |   |                          | 61      |   |   |   | 2,071 |   |
| Property,                plant and equipment, at cost                                                                                                                                                                                                                                                                                                                                                                                            |                      |   |                          | 123,901 |   |   |   | 123,461 |   |
| Less                accumulated                depreciation                                                                |                      |   |                          | 80,003  |   |   |   | 74,302 |   |
| Property,                plant and equipment, net                                                                                                                                                                                                                                                                                                                                                                                                |                      |   | $                             | 43,898  |   |   | $      | 49,159 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | (in                thousands) |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2007                          |   |   | 2006 |   |
| 6.73%                Senior notes due through May 3,                2017                                                                                      |   | $                             | 25,000 |   |   |   |   |
| 7.43%                Senior notes due through November 18, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                          |   |   |   | $ | 1,428 |   |
| 6.94%                Senior notes due through May 3,                2011                                                                                      |   |                          | 5,714  |   |   |   | 7,143 |   |
| Total                                                                                                                                                              |   |                          | 30,714 |   |   |   | 8,571 |   |
| Less                current                maturities                                                                                                         |   |                          | 1,428  |   |   |   | 2,857 |   |
| Long-term                debt, exclusive of current maturities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $                             | 29,286 |   |   | $ | 5,714 |   |

----

| 3.             | Debt                (continued) |
|----------------------------------------------------------------------------|---------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Current:                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |
| Federal                                                                          |   | $      | 5,730  |   |   | $      | 9,440  |   |   | $ | 12,198 |   |
| State                                                                            |   |   | 1,072  |   |   |   | 845    |   |   |   | 1,101 |   |
| Total                current                                                               |   |   | 6,802  |   |   |   | 10,285 |   |   |   | 13,299 |   |
| Deferred:                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                                                          |   |   | (3,439 | )      |   |   | (1,158 | )      |   |   | (543 | ) |
| State                                                                            |   |   | (517   | )      |   |   | (174   | )      |   |   | (82 | ) |
| Total                deferred                                                              |   |   | (3,957 | )      |   |   | (1,332 | )      |   |   | (625 | ) |
| Income                taxes                                                                          |   | $      | 2,845  |   |   | $      | 8,954  |   |   | $ | 12,674 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                   2007 |      |   |                   2006 |   |      |                  2005 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|--------|----------------------------------|--------|-----------|----------------------------|--------|
| Federal                statutory                rate                                                                            |   |                             | 35.0      | %      |                             |   | 35.0      | %                          |   |   | 35.0 | % |
| State                tax, net of federal                benefit                                                                 |   |                             | 4.9       |   |                             |   | 3.0       |                       |   |   | 2.5 |   |
| State                tax credits and                adjustments                                                                 |   |                             |      |   |                             |   | (.8       | )                          |   |   | (.7 | ) |
| Increase                in cash surrender value                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                             |      |   |                             |   |      |                       |   |   |   |   |
| of                life insurance                policies                                                                                  |   |                             | (4.7      | )      |                             |   | (1.4      | )                          |   |   | (.9 | ) |
| Deduction                for qualified domestic                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                             |      |   |                             |   |      |                       |   |   |   |   |
| production                activities                                                                                                      |   |                             | (.8       | )      |                             |   | (.4       | )                          |   |   | (.5 | ) |
| Tax-exempt                interest                income                                                                        |   |                             | (1.4      | )      |                             |   | (.5       | )                          |   |   |   |   |
| Other,                net                                                                                                       |   |                             |  (.5 | )      |                             |   |  (.1 | )                          |   |   | (.1 | ) |
| Effective                income tax                rate                                                                              |   |                             | 32.5      | %      |                             |   | 34.8      | %                          |   |   | 35.3 | % |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2007   |   |   | 2006   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Current                deferred tax assets (liabilities):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |
| Accounts                receivable                                                                                                          |   | $      | 421    |   |   | $      | 594 |   |
| Employee                benefits                                                                                                            |   |   | 2,872  |   |   |   | 3,226 |   |
| Other                accrued                expenses                                                                                        |   |   | 88     |   |   |   | 108 |   |
| Net                current deferred tax                asset                                                                                          |   | $      | 3,381  |   |   | $      | 3,928 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Noncurrent                deferred tax liabilities (assets):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |
| Property,                plant and                equipment                                                                                 |   | $      | 7,225  |   |   | $      | 9,334 |   |
| Employee                benefits                                                                                                            |   |   | (1,913 | )      |   |   | (1,912 | ) |
|   Other                accrued expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | (488   | )      |   |   |   |   |
| Net                noncurrent deferred tax                liability                                                                                   |   | $      | 4,824  |   |   | $      | 7,422 |   |

|  A                reconciliation of the beginning and ending amount of unrecognized                tax                benefits is as                follows:                                                                                                                                                                           |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|                      Unrecognized tax benefits balance at January 1, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $ | 1,027 |   |
|                     Gross increases for tax positions of prior years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 7 |   |
|                     Gross decreases for tax positions of prior years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |
|                     Settlements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |
|                     Lapse of statute of                limitations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | (43 | ) |
| Unrecognized                tax benefits balance at December 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $ | 991 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Weighted                average shares outstanding                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |
| for                basic                calculation                                                                                |   |   | 10,478 |   |   |   | 11,649 |   |   |   | 12,766 |   |
| Effect                of stock                options                                                                    |   |   | 199    |   |   |   | 275    |   |   |   | 388 |   |
| Weighted                average shares outstanding                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| for                diluted calculation……………………………….                                                                                                                                                                                                                                                                                                                                             |   |   | 10,677 |   |   |   | 11,924 |   |   |   | 13,154 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                     2005 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
| Net                income as                reported                                                                                         |   | $                                            | 23,231 |   |
| Deduct:                Total stock-based compensation expense determined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                         |   |   |
| under                fair value based method for all awards, net of                related                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                         |   |   |
| tax                effects                                                                                                                                  |   |                                         | 628    |   |
| Pro                forma net                income                                                                                           |   | $                                            | 22,603 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                         |   |   |
| Earnings                per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                         |   |   |
| Basic                – as                reported                                                                                                     |   | $                                            | 1.82   |   |
| Basic                – pro                forma                                                                                                       |   | $                                            | 1.77   |   |
| Diluted                – as                reported                                                                                                   |   | $                                            | 1.77   |   |
| Diluted                – pro                forma                                                                                                     |   | $                                            | 1.72   |   |

| Expected                price                volatility                                                                 |   |   | 35.55 | %      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| Risk-free                interest                rate                                                                   |   |   | 3.47  | %      |
| Weighted                average expected life in years                                                                                                                                                                                                                                                                                                                                                                                                  |   |   | 5.45  |   |
| Dividend                yield                                                                                           |   |   | 3.51  | %      |
| Forfeiture                rate                                                                                          |   |   | 6.69  | %      |

----

|                                                                                                                          |   | Number                of shares |      |   | Weighted-AverageExercise                Price |   |   | Weighted-Average                Remaining Contractual Term(in                years) |   |   | Aggregate                Intrinsic Value(in                thousands) |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|--------|-----------------------------------------------|--------|--------|-------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------|--------|
| Outstanding                at December 31, 2004                                                                               |   |                            | 1,217,400 |   |                                          | $      | 13.45  |                                                                                |   |   | 5.8                                                                   |   |   |   |   |
| Exercised                                                                                                                     |   |                            | (469,000  | )      |                                          |   | 13.57  |                                                                                |   |   |                                                                  |   |   |   |   |
| Granted                                                                                                                       |   |                            | 106,728   |   |                                          |   | 24.09  |                                                                                |   |   |                                                                  |   |   |   |   |
|                                                                                                                          |   |                            |      |   |                                          |   |   |                                                                                |   |   |                                                                  |   |   |   |   |
| Outstanding                at December 31, 2005                                                                               |   |                            | 855,128   |   |                                          |   | 14.71  |                                                                                |   |   | 5.7                                                                   |   |   |   |   |
| Lapsed                                                                                                                        |   |                            | (25,000   | )      |                                          |   | 18.05  |                                                                                |   |   |                                                                  |   |   |   |   |
| Exercised                                                                                                                     |   |                            | (90,000   | )      |                                          |   | 12.35  |                                                                                |   |   |                                                                  |   |   |   |   |
| Granted                                                                                                                       |   |                            | 185,275   |   |                                          |   | 23.65  |                                                                                |   |   |                                                                  |   |   |   |   |
|                                                                                                                          |   |                            |      |   |                                          |   |   |                                                                                |   |   |                                                                  |   |   |   |   |
| Outstanding                at December 31, 2006                                                                               |   |                            | 925,403   |   |                                          |   | 16.64  |                                                                                |   |   | 5.8                                                                   |   |   |   |   |
| Lapsed                                                                                                                        |   |                            | (30,000   | )      |                                          |   | 24.04  |                                                                                |   |   |                                                                  |   |   |   |   |
| Exercised                                                                                                                     |   |                            | (42,900   | )      |                                          |   | 12.41  |                                                                                |   |   |                                                                  |   |   |   |   |
| Granted                                                                                                                       |   |                            | 187,985   |   |                                          |   | 11.79  |                                                                                |   |   |                                                                  |   |   |   |   |
|                                                                                                                          |   |                            |      |   |                                          |   |   |                                                                                |   |   |                                                                  |   |   |   |   |
| Outstanding                at December 31, 2007                                                                               |   |                            | 1,040,488 |   |                                          | $      | 15.73  |                                                                                |   |   | 4.4                                                                   |   |   | $ | 214 |   |
|                                                                                                                          |   |                            |      |   |                                          |   |   |                                                                                |   |   |                                                                  |   |   |   |   |   |
| Exercisable                at December 31, 2007                                                                               |   |                            | 719,888   |   |                                          | $      | 15.24  |                                                                                |   |   | 4.1                                                                   |   |   | $ | 6 |   |
|                                                                                                                          |   |                            |      |   |                                          |   |   |                                                                                |   |   |                                                                  |   |   |   |   |   |
| At                December 31, 2007, 29,016 shares were available for future grants                and                awards. |   |

|                                                                    |   |                       2007 |   |   |                        2006 |   |   |                       2005 |   |
|-------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|--------|----------------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|
| Average                fair market value of options granted (per share) |   | $                                                        | 3.25   |   |                                                           | $      | 9.89   |                                                     |   | $ | 9.32 |   |
| Proceeds                from stock options exercised                    |   |                                                     | 532    |   |                                                           |   | 1,111  |                                                     |   |   | 6,362 |   |
| Tax                benefits related to stock options exercised          |   |                                                     | 92     |   |                                                           |   | 386    |                                                     |   |   | 1,748 |   |
| Intrinsic                value of stock options exercised               |   |                                                     | 246    |   |                                                           |   | 1,046  |                                                     |   |   | 4,730 |   |

----

|                                                                         |   |  2007       |          |  2006              |   |
|-------------------------------------------------------------------------|--------|------------------|---------------|-------------------------|--------|
|                                                                    |   |  Stanley    |          | Supple-                 |   | Stanley |   | Supple- |   |
|                                                                    |   |  Retirement |          | mental                  |   | Retirement |   | mental |   |
|                                                                    |   |  Plan  |          | Plan               |   | Plan  |   | Plan  |   |
| Change                  in                  benefit obligation:         |   |        |          |                    |   |   |   |   |   |
| Beginning                  benefit obligation                           |   | $                | 15,065        |                    | $      | 1,979 |   | $ | 14,197 |   | $ | 2,084 |   |
| Interest                  cost                                          |   |             | 157           |                    |   | 115 |   |   | 818 |   |   | 110 |   |
| Actuarial                  loss                                         |   |             | 408           |                    |   | (14 | ) |   | 2,479 |   |   | (57 | ) |
| Benefits                  paid                                          |   |             | (96           | )                       |   | (159 | ) |   | (2,429 | ) |   | (158 | ) |
|  Plan                termination                payments           |   |             | (15,534  |                  ) |   |   |   |   |   |   |   |   |   |
| Ending                  benefit obligation                              |   |             |          |                    |   | 1,921 |   |   | 15,065 |   |   | 1,979 |   |
| Change                  in                  plan assets:                |   |             |          |                    |   |   |   |   |   |   |   |   |   |
| Beginning                  fair value of plan assets                    |   |             | 13,914        |                    |   |   |   |   | 15,254 |   |   |   |   |
| Actual                  return                  on plan assets          |   |             | 113           |                    |   |   |   |   | 1,089 |   |   |   |   |
| Employer                  contributions                                 |   |             | 1,603    |                    |   | 159 |   |   |   |   |   | 158 |   |
| Benefits                  paid                                          |   |             | (15,630       | )                       |   | (159 | ) |   | (2,429 | ) |   | (158 | ) |
|     Ending                fair value of plan assets |   |             |          |                    |   |   |   |   | 13,914 |   |   |   |   |
| Funded                  status                                          |   | $                |          |                    | $      | (1,921 | ) |                  $ | (1,151 |                  ) |                  $ | (1,979 | ) |

| Current                  liabilities               |   | $      |   |   | $      | (159         | )       |   | (1,151  | )                       |   | (159    | ) |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------------|---------|--------|--------------|-------------------------|--------|--------------|---|
|   Non-current                liabilities |   |   |   |   |   |  (1,762 | )  |   |         |                    |   | (1,820  | ) |
| Total                                              |   | $      |   |   | $      | (1,921       | )       | $      | (1,151       |                  ) | $      | (1,979       | ) |

----

|                                          |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Interest                cost                  |   | $      | 272    |   |   | $      | 928    |   |   | $ | 939 |   |
| Expected                return on plan assets |   |   | (188   | )      |   |   | (982   | )      |   |   | (1,009 | ) |
| Net                amortization and deferral  |   |   | 219    |   |   |   | 500    |   |   |   | 437 |   |
| Net                cost                       |   |   | 303    |   |   |   | 446    |   |   |   | 367 |   |
| Settlement                expense             |   |   | 6,606  |   |   |   | 904    |   |   |   | 985 |   |
| Total                expense                  |   | $      | 6,909  |   |   | $      | 1,350  |   |   | $ | 1,352 |   |

|                                           |   |                   2007 |       |   | 2006   |   |       | 2005 |   |
|------------------------------------------------|--------|----------------------------------|------------|--------|--------|--------|------------|------|--------|
| Discount                rate for funded status |   |                             | 6.20       | %(a)   |   |   | 5.75%/5.00 | %(b) |   |   | 5.50 | % |
| Discount                rate for pension cost  |   |                             | 5.75%/5.00 | %(b)   |   |   | 5.50       | %    |   |   | 5.50 | % |
| Return                on assets                |   |                             |       |   |   |   | 6.50       | %    |   |   | 6.50 | % |

| (a)   | Rate                relates to the Supplemental Plan. |
|-----------------|-------------------------------------------------------|

| (b)   | The                5.75% relates to the Supplemental Plan. The Stanley Retirement Plan                used a                discount rate of 5.00%, |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2007   |   |   | 2006   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Change                in benefit obligation:                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |
| Beginning                benefit                obligation                                                                                |   | $      | 2,876  |   |   | $      | 3,298 |   |
| Service                cost                                                                                                               |   |   | 79     |   |   |   | 71 |   |
| Interest                cost                                                                                                              |   |   | 172    |   |   |   | 155 |   |
| Actuarial                (gain)                loss                                                                                       |   |   | 141    |   |   |   | (299 | ) |
| Plan                participants’                contributions                                                                      |   |   | 193    |   |   |   | 170 |   |
| Benefits                paid                                                                                                              |   |   | (507   | )      |   |   | (435 | ) |
| Amendments                                                                                                                                |   |   |   |   |   |   | (84 | ) |
| Ending                benefit                obligation                                                                                             |   |   | 2,954  |   |   |   | 2,876 |   |
| Change                in plan assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| Beginning                fair value of plan                assets                                                                         |   |   |   |   |   |   |   |   |
| Employer                contributions                                                                                                     |   |   | 314    |   |   |   | 265 |   |
| Plan                participants’                contributions                                                                      |   |   | 193    |   |   |   | 170 |   |
| Benefits                paid                                                                                                              |   |   | (507   | )      |   |   | (435 | ) |
| Ending                fair value of plan                assets                                                                                      |   |   |   |   |   |   |   |   |
| Funded                status                                                                                                    |   | $      | (2,954 | )      |   | $      | (2,876 | ) |

| Current                liabilities                                                                                           |   | $      | 295   |   |   | $      | 251   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|--------|--------|-------|--------|
| Non                current                liabilities                                                                        |   |   | 2,659 |   |   |   | 2,625 |   |
| Total                                                                                                                                  |   | $      | 2,954 |   |   | $      | 2,876 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Service                cost                                                                                                             |   | $      | 79     |   |   | $      | 71     |   |   | $ | 88 |   |
| Interest                cost                                                                                                            |   |   | 172    |   |   |   | 155    |   |   |   | 183 |   |
| Amortization                of transition                obligation                                                                     |   |   | 122    |   |   |   | 122    |   |   |   | 130 |   |
| Amortization                of net actuarial                loss                                                                        |   |   | 39     |   |   |   | 27     |   |   |   | 66 |   |
| Net                periodic postretirement benefit cost                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $      | 412    |   |   | $      | 375    |   |   | $ | 467 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Discount                rate for funded                status                                                                                                |   |   | 6.05   | %      |   |   | 5.75   | %      |   |   | 5.50 | % |
| Discount                rate for postretirement benefit                cost                                                                                  |   |   | 5.75   | %      |   |   | 5.50   | %      |   |   | 5.50 | % |
| Health                care cost assumed trend rate for next year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   | 8.00   | %      |   |   | 9.00   | %      |   |   | 9.50 | % |
| Rate                that the cost trend rate gradually declines to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   | 5.50   | %      |   |   | 5.50   | %      |   |   | 5.50 | % |
| Year                that the rate reaches the rate it is assumed to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| remain                at                                                                                                                                          |   | 2010   |   |   | 2010   |   |   | 2010   |   |

----

|                                          |   | StanleyRetirement                Plan |   |  Supplemental                Plan |   | Other                Postretirement Benefits |   |
|------------------------------------------|--------|---------------------------------------|--------|----------------------------------------|--------|----------------------------------------------|--------|
| Net                loss                  |   | $                                     |   |                                   | $      | 207                                          |   | $ | 742 |   |
|                                          |   |                                  |   |                                   |   |                                         |   |   |   |   |
| Net                transition obligation |   |                                  |   |                                   |   |                                         |   |   | 582 |   |
| Total                                    |   | $                                     |   |                                   | $      | 207                                          |   | $ | 1,324 |   |

|                                       |   | StanleyRetirement                  Plan |   |  Supplemental                  Plan |   | Other                  Postretirement Benefits |   |
|--------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------|--------|------------------------------------------------|--------|
| Net                  loss                  |   | $                                       |   |                                     | $      |                                           |   | $ | 23 |   |
|                                       |   |                                    |   |                                     |   |                                           |   |   |   |   |
| Net                  transition obligation |   |                                    |   |                                     |   |                                           |   |   | 122 |   |
| Total                                      |   | $                                       |   |                                     | $      |                                           |   | $ | 145 |   |

----

| 2007                Quarters:                                                                                                                                                                                                                                                                                                       |   | First  |   |   | Second |   |   | Third  |   |   |                         Fourth |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------------------------------------------------------------------|--------|
| Net                Sales                                                                           |   | $      | 75,108 |   |   | $      | 67,722 |   |   | $      | 73,181                                                                 |   |   | $ | 66,836 |   |
| Gross                profit                                                                        |   |   | 13,494 |   |   |   | 13,640 |   |   |   | 12,749                                                                 |   |   |   | 7,027 |   |
| Net                income                                                                          |   |   | 1,676  |   |   |   | (2,376 | )(1)   |   |   | 1,635                                                                  |   |   |   | 4,967 | (2)(3) |
| Net                income per share:                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |                                                                   |   |   |   |   |   |
| Basic                                                                                                        |   | $      | .16    |   |   | $      | .23    |   |   | $      | .16                                                                    |   |   |   | .48 | (2)(3) |
| Diluted                                                                                                      |   |   | .15    |   |   |   | .23    |   |   |   | .16                                                                    |   |   |   | .48 | (2)(3) |
| Dividend                paid per share                                                                                                                                                                                                                                                                                              |   |   | .10    |   |   |   | .10    |   |   |   | .10                                                                    |   |   |   | .10 |   |
|                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |                                                                   |   |   |   |   |   |
| 2006                Quarters:                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |                                                                   |   |   |   |   |   |
| Net                sales                                                                           |   | $      | 83,524 |   |   | $      | 77,476 |   |   | $      | 75,911                                                                 |   |   | $ | 70,636 |   |
| Gross                profit                                                                        |   |   | 19,758 |   |   |   | 17,618 |   |   |   | 14,960                                                                 |   |   |   | 12,532 |   |
| Net                income                                                                          |   |   | 5,392  |   |   |   | 3,937  |   |   |   | 2,996                                                                  |   |   |   | 4,456 | (4) |
| Net                income per share:                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |                                                                   |   |   |   |   |   |
| Basic                                                                                                        |   | $      | .44    |   |   | $      | .33    |   |   | $      | .26                                                                    |   |   | $ | .41 | (4) |
| Diluted                                                                                                      |   |   | .43    |   |   |   | .32    |   |   |   | .26                                                                    |   |   |   | .40 | (4) |
| Dividend                paid per                share                                              |   |   | .08    |   |   |   | .08    |   |   |   | .08                                                                    |   |   |   | .08 |   |

| (1)   | Includes                pension plan termination charge of $4.5 million, or $.42 per                share. |
|-----------------|------------------------------------------------------------------------------------------------------------|

| (2)   | Includes                $7.0 million, or $.66 per share, of income from Continued Dumping                and                Subsidy Offset Act receipts. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Includes                pretax restructuring charge of $3.6 million ($2.4 million after tax)                or                $.23 per share, for the conversion of one of our manufacturing facilities                to a warehouse operation. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Includes                $2.9 million, or $.26 per share, of income from Continued Dumping                and                Subsidy Offset Act receipts. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                          |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                                          |   |  Balance              at  Beginning of Period |   |   |  Charged              (Credited) to Costs & Expenses |   |   |  Deductions |   |   |  Balance              at End of Period |   |
|  2007                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Doubtful                receivables                                                |   | $ | 715 |   |   | $ | 480 |   |   | $ | 370 | (a) |   | $ | 825 |   |
| Discounts,                returns,                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                allowances                                                                |   |   | 839 |   |   |   |  (182 | )(b) |   |   |   |   |   |   | 657 |   |
|                                                                                                                                                                                                                                                                                                                          |   | $ | 1,554 |   |   | $ | 298 |   |   | $ | 370 |   |   | $ | 1,482 |   |
|                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2006                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Doubtful                receivables                                                |   | $ | 650 |   |   | $ | 975 |   |   | $ | 910 | (a) |   | $ | 715 |   |
| Discounts,                returns,                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                allowances                                                                |   |   | 916 |   |   |   |  (77 | )(b) |   |   |   |   |   |   | 839 |   |
|                                                                                                                                                                                                                                                                                                                          |   | $ | 1,566 |   |   | $ | 898 |   |   | $ | 910 |   |   | $ | 1,554 |   |
|                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2005                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Doubtful                receivables                                                |   | $ | 1,050 |   |   | $ | (213 | ) |   | $ | 187 | (a) |   | $ | 650 |   |
| Discounts,                returns,                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and                allowances                                                                |   |   | 911 |   |   |   | 5 | (b) |   |   |   |   |   |   | 916 |   |
|                                                                                                                                                                                                                                                                                                                          |   | $ | 1,961 |   |   | $ | (208 | ) |   | $ | 187 |   |   | $ | 1,566 |   |

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