Stanley Furniture Company, Inc. Second Quarter 2005 Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

[X]

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

For the quarterly period ended July 2, 2005

[ ]

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

for the transition period from to .

Commission file number: 0-14938

STANLEY FURNITURE COMPANY, INC.

(Exact name of registrant as specified in its charter)

	Delaware		54-1272589
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1641 Fairystone Park Highway, Stanleytown, Virginia 24168

(Address of principal executive offices, Zip Code)

(276) 627- 2000

(Registrant’s telephone number, including area code)

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

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

As of July 15, 2005, 12,742,254 shares of common stock of Stanley Furniture Company, Inc., par value $.02 per share were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

STANLEY FURNITURE COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	(unaudited)
	July 2,			December 31,
	2005			2004
ASSETS
Current assets:
Cash	$	13,586		$	7,632
Accounts receivable, less allowances of $2,260 and $1,961		39,132			36,036
Inventories:
Finished goods		53,660			52,646
Work-in-process		8,072			8,449
Raw materials		10,551			12,563
Total inventories		72,283			73,658

Prepaid expenses and other current assets		1,745			1,585
Deferred income taxes		2,404			2,414
Total current assets		129,150			121,325

Property, plant and equipment, net		51,290			51,342
Goodwill		9,072			9,072
Other assets		6,560			7,149
Total assets	$	196,072		$	188,888

LIABILITIES
Current liabilities:
Current maturities of long-term debt	$	2,857		$	4,257
Accounts payable		19,549			16,056
Accrued salaries, wages and benefits		10,873			10,573
Other accrued expenses		2,063			1,872
Total current liabilities		35,342			32,758

Long-term debt, exclusive of current maturities		10,000			11,428
Deferred income taxes		10,218			10,742
Other long-term liabilities		6,619			6,695
Total liabilities		62,179			61,623

STOCKHOLDERS’ EQUITY
Common stock, $.02 par value, 25,000,000 shares authorized12,742,254 and 12,830,004 shares issued and outstanding		255			257
Capital in excess of par value		6,810			10,207
Retained earnings		126,979			116,952
Accumulated other comprehensive loss		(151	)		(151	)
Total stockholders’ equity		133,893			127,265
Total liabilities and stockholders’ equity	$	196,072		$	188,888

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

STANLEY FURNITURE COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share data)

	Three Months				Six Months
	Ended				Ended
	July 2,		June 26,		July 2,		June 26,
	2005		2004		2005		2004

Net sales	$	83,635	$	72,223	$	166,585	$	143,743

Cost of sales		63,003		53,977		125,488		108,276

Gross profit		20,632		18,246		41,097		35,467

Selling, general and administrative expenses		11,239		9,539		22,290		18,956

Operating income		9,393		8,707		18,807		16,511

Other income, net		54		42		119		95
Interest income		102		10		154		16
Interest expense		545		587		1,115		1,219

Income before income taxes		9,004		8,172		17,965		15,403

Income taxes		3,177		2,961		6,378		5,585

Net Income	$	5,827	$	5,211	$	11,587	$	9,818

Earnings per share:

Basic	$	.45	$	.42	$	.90	$	.79
Diluted	$	.44	$	.40	$	.87	$	.76

Weighted average shares outstanding:

Basic		12,905		12,485		12,908		12,458
Diluted		13,255		13,031		13,316		12,970

Cash dividend declared per common share	$	.06	$	.05	$	.12	$	.10

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

STANLEY FURNITURE COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

(in thousands)

	Six Months Ended
	July 2,			June 26,
	2005			2004
Cash flows from operating activities:
Cash received from customers	$	163,434		$	139,410
Cash paid to suppliers and employees		(138,696	)		(128,046	)
Interest paid, net		(1,519	)		(715	)
Income taxes paid, net		(6,350	)		(4,067	)
Net cash provided by operating activities		16,869			6,582

Cash flows from investing activities:
Capital expenditures		(2,721	)		(200	)
Purchase of other assets		(33	)		(88	)
Net cash used by investing activities		(2,754	)		(288	)

Cash flows from financing activities:
Repayment of senior notes		(2,828	)		(4,286	)
Purchase and retirement of common stock		(9,993	)
Proceeds from insurance policy loans		1,110
Dividends paid		(1,560	)		(1,246	)
Proceeds from exercised stock options		5,110			651
Net cash used by financing activities		(8,161	)		(4,881	)

Net increase in cash		5,954			1,413
Cash at beginning of period		7,632			2,509
Cash at end of period	$	13,586		$	3,922

Reconciliation of net income to net cash provided by operating activities:
Net income	$	11,587		$	9,818
Depreciation		2,815			2,830
Deferred income taxes		(514	)		(1,569	)
Changes in assets and liabilities:
Accounts receivable		(3,096	)		(4,603	)
Inventories		1,375			(13,802	)
Prepaid expenses and other current assets		(323	)		1,732
Accounts payable		3,493			6,234
Accrued salaries, wages and benefits		544			3,730
Other accrued expenses		1,431			689
Oher assets		(367	)		491
Other long-term liabilities		(76	)		1,032
Net cash provided by operating activities	$	16,869		$	6,582

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

STANLEY FURNITURE COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

1.	Preparation of Interim Unaudited Consolidated Financial Statements

The consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain amounts in 2004 have been reclassified to conform to the 2005 presentation. Certain information and footnote disclosures prepared in accordance with generally accepted accounting principles have been either condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of results of operations and financial position. Operating results for the interim periods reported herein may not be indicative of the results expected for the year. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and accompanying notes included in our latest Annual Report on Form 10-K.

On April 26, 2005, the Board of Directors declared a two-for-one stock split effected in the form of a 100% stock dividend distributed on June 6, 2005. All share and per share amounts for all periods presented have been adjusted to reflect the stock split. At the April 26, 2005 stockholders meeting, stockholders approved an amendment to the Company’s certificate of incorporation increasing the number of authorized shares of common stock from 10 million to 25 million.

2.	Stock Compensation

We apply the provisions of Accounting Principles Board Opinion No. 25 in accounting for our stock options and no compensation cost has been recognized in the financial statements. Had we determined compensation cost based on the fair value method as defined in Statement of Financial Accounting Standards (SFAS) No. 123, and as amended by SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS Statement No. 123”, the impact on our net earnings on a pro forma basis is indicated below:

	Three Months				Six Months
	Ended				Ended
	July 2,		June 26,		July 2,		June 26,
		2005		2004		2005		2004
Net income as reported	$	5,827	$	5,211	$	11,587	$	9,818
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		187		432		476		825
Pro forma net income	$	5,640	$	4,779	$	11,111	$	8,993

Earnings per share:
Basic - as reported	$	0.45	$	0.42	$	.90	$	.79
Basic - pro forma	$	0.44	$	0.38	$	.86	$	.72

Diluted - as reported	$	0.44	$	0.40	$	.87	$	.76
Diluted - pro forma	$	0.43	$	0.38	$	.84	$	.72

3.	Property, Plant and Equipment

	July 2,		December 31,
		2005		2004
Land and buildings	$	38,823	$	38,775
Machinery and equipment		75,636		74,846
Office furniture and equipment		4,160		2,386
Property, plant and equipment, at cost		118,619		116,007
Less accumulated depreciation		67,329		64,665
Property, plant and equipment, net	$	51,290	$	51,342

Debt

	July 2,		December 31,
		2005		2004
7.57% senior note due through June 30, 2005			$	1,400
7.43% senior notes due through November 18, 2007	$	4,286		4,285
6.94% senior notes due through May 3, 2011		8,571		10,000
Total		12,857		15,685
Less current maturities		2,857		4,257
Long-term debt, exclusive of current maturities	$	10,000	$	11,428

5.	Employee Benefits Plans

Components of pension cost:

	Three Months						Six Months
	Ended						Ended
	July 2,			June 26,			July 2,			June 26,
		2005			2004			2005			2004
Interest cost	$	242		$	244		$	485		$	487
Expected return on plan assets		(257	)		(242	)		(513	)		(484	)
Net amortization and deferral		111			115			222			230
Net cost		96			117			194			233
Settlement expense		333			217			573			435
Total expense	$	429		$	334		$	767		$	668

The Plan is fully funded; therefore, no contributions are required to be deposited in 2005. However, we plan to make a discretionary contribution of approximately $1 million to $2 million in 2005.

Components of other postretirement benefit cost:

	Three Months				Six Months
	Ended				Ended
	July 2,		June 26,		July 2,		June 26,
		2005		2004		2005		2004
Service Cost	$	22	$	17	$	44	$	34
Interest Cost		46		43		92		86
Amortization of transitions obligation		33		33		66		66
Amortization of net actuarial loss		17		10		34		20
Net periodic postretirement benefit cost	$	118	$	103	$	236	$	206

6.	Stockholders’ Equity

Basic earnings per common share are based upon the weighted average shares outstanding. Outstanding stock options are treated as potential common stock for purposes of computing diluted earnings per share. Basic and diluted earnings per share are calculated using the following share data:

Three Months

Six Months

Ended

July 2,

June 26,

July 2,

June 26,

2005

2004

2005

2004

Weighted average shares outstanding for basic calculation

12,905

12,485

12,908

12,458

Add: Effect of dilutive stock options

350

546

408

512

Weighted average shares outstanding, Adjusted for diluted calculation

13,255

13,031

13,316

12,970

A reconciliation of the activity in Stockholders’ Equity accounts for the quarter ended July 2, 2005 is as follows:

Accumulated

Capital in

Other

Common

Excess of

Retained

Comprehensive

Stock

Par Value

Earnings

Loss

Balance, December 31, 2004

257

10,207

116,952

(151

)

Net income

11,587

Exercise of stock options

5,106

Tax benefit on exercise of stock options

1,240

Stock repurchases

)

(9,987

)

Stock awards

244

Cash dividends paid, $.12 per share

(1,560

)

Balance, July 2, 2005

255

6,810

126,979

(151

)

7.	New Accounting Standards

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 151, “Inventory Costs”. The new Statement amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. This Statement requires that those items be recognized as current-period charges and requires that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. This statement is effective for fiscal years beginning after June 15, 2005. We do not expect adoption of this statement to have a material impact on our financial condition or results of operations.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. This Statement replaces FASB Statement No. 123 and supersedes APB Opinion No. 25. Statement No. 123(R) will require the fair value of all stock option awards issued to employees to be recorded as an expense over the related vesting period. The Statement also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at the date of adoption. We are evaluating these new rules, but expect no material impact upon adoption relating to outstanding options since a majority of the awards under the existing incentive stock option plan will be fully vested prior to the effective date of the revised rules. The Securities and Exchange Commission has ruled that FAS 123(R) is now effective for public companies for annual, rather than interim, periods that begin after June 15, 2005.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The execution of our blended strategy of combining domestic manufacturing capabilities with an offshore sourcing program continues to produce positive results. We incorporate selected imported component parts and finished items in our product line to lower cost, provide design flexibility and offer a better value to our customers. Sourced product represented approximately 31% of sales during the first half of 2005 compared to 28% in 2004. We anticipate sourced product to remain about 30% of sales for the remainder of 2005.

During the first half our manufacturing plants operated at approximately 75% to 80% of their estimated capacity. We are maintaining our manufacturing capacity at current levels to provide protective capacity for improved demand. We will continue to evaluate our manufacturing capacity needs considering offshore sourcing opportunities, current and anticipated demand for our products, overall market conditions and other factors we consider relevant. Should capacity reductions become necessary, this could cause asset impairment or other restructuring charges in the future.

The following table sets forth the percentage relationship to net sales of certain items included in the Consolidated Statements of Income.

	Three Months						Six Months
	Ended						Ended
	July 2,			June 26,			July 2,			June 26,
		2005			2004			2005			2004
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		75.3			74.7			75.3			75.3
Gross profit		24.7			25.3			24.7			24.7
Selling, general and administrative expenses		13.4			13.2			13.4			13.2
Operating income		11.2			12.1			11.3			11.5
Other income, net		.1						.1			.1
Interest income		.1						.1
Interest expense		.6			.8			.7			.9
Income before income taxes		10.8			11.3			10.8			10.7
Income taxes		3.8			4.1			3.8			3.9
Net income		7.0	%		7.2	%		7.0	%		6.8	%

Net sales increased $11.4 million, or 15.8%, for the three month period ended July 2, 2005, from the comparable 2004 period. For the six month period, net sales increased $22.8 million, or 15.9% from the 2004 six month period. The increase was primarily due to higher unit volume and to a lesser extent higher average selling prices. Industry sales growth appears to have slowed during the first half of 2005 compared to the trends reported in 2004.

Gross profit margins for both the three and six month periods of 2005 was 24.7% compared to 25.3% and 24.7% for the three and six month periods of 2004, respectively. Gross profit margins were negatively impacted by inflation in raw materials, wages, employee benefits, energy, freight costs and tariffs imposed on wooden bedroom furniture imported from China. Offsetting these higher costs were increased prices, higher production levels and improved operating efficiencies. We continue to experience inflationary pressures in raw materials, compensation cost, energy and freight costs. However, we anticipate higher selling prices and improved operating efficiencies to offset these cost increases in the second half of 2005.

Selling, general and administrative expenses for the three and six month periods as a percentage of net sales increased slightly to 13.4% from 13.2% for the comparable 2004 periods. Selling, general and administrative expenditures increased $1.7 million and $3.3 million for the three and six month period, respectively, primarily as a result of higher selling expenses directly attributable to the increase in sales and additional warehousing expense. Also contributing to the lower selling, general and administrative expenses in the 2004 periods was a reversal of bad debt expense, as a result of a decrease in accounts receivable from certain customers experiencing financial difficulties.

As a result of the above, operating income as a percentage of net sales was 11.2% and 11.3% for the three and six month period, respectively compared to 12.1% and 11.5%, for the comparable 2004 periods.

Interest expense for the six month period of 2005 decreased primarily due to lower average debt levels. Interest income increased during the period due to higher amounts of cash.

The effective tax rate for 2005 is expected to be 35.5%, compared to 36.1% for the total year 2004. The decrease in the effective tax rate is a result of the “American Jobs Creation Act of 2004” which allows for a deduction based on qualified domestic production activities. We expect a modest decline in our effective tax rate as this deduction is phased in over the next six years.

Financial Condition, Liquidity and Capital Resources

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

Working capital, excluding cash and current maturities of long-term debt, decreased $2.1 million during the first half of 2005 to $83.1 million from $85.2 million at year end. The decrease was primarily due to lower inventories and an increase in accounts payable; partially offset by an increase in accounts receivable resulting from higher sales.

Cash generated from operations was $16.9 million in the first six months of 2005 compared to $6.6 million in the 2004 period. The increase was due to higher receipts from customers due to higher sales, partially offset by higher payments to suppliers and employees. Payments to suppliers and employees increased primarily to fund higher production, increased purchases of sourced product and higher selling and administrative expenses. We anticipate making a discretionary contribution of approximately $1.0 million to $2.0 million to our defined benefit plan in 2005.

Net cash used by investing activities was $2.8 million in the 2005 period compared to $288,000 in 2004 and consisted of normal capital expenditures. Capital expenditures in 2005 have returned to more historic levels. Over the past three years, capital expenditures were lower due to the relocation of a significant portion of machinery and equipment from a closed facility to other facilities in lieu of normal replacements. Capital expenditures for 2005 are anticipated to be approximately $5.5 million to $6.5 million for normal replacements and improvements, including approximately $1.0 million to expand warehouse space and improve manufacturing flow at one of our facilities. As both our sales and the proportion of sourced goods increased, our need for additional warehouse space has increased. We are currently renting space to accommodate our needs, but continue to evaluate long-term solutions which could result in additional future capital expenditures.

Net cash used by financing activities was $8.2 million in the 2005 period compared to $4.9 million in the 2004 period. In the 2005 period, cash from operations and proceeds from the exercise of stock options provided funds for the purchase and retirement of our common stock, senior debt payments and cash dividends. During the first half of 2005, $10.0 million was used to purchase 473,000 shares of our common stock in the open market at an average price of $21.11. Approximately $10.2 million remains authorized by our Board of Directors to repurchase shares of our common stock. In the 2004 period, cash from operations provided funds for senior debt payments and cash dividends.

At July 2, 2005, long-term debt including current maturities was $12.9 million. Debt service requirements are $1.4 million remaining in 2005, $2.9 million in 2006, $2.9 million in 2007 and $1.4 million in both 2008 and 2009. As of July 2, 2005, approximately $25 million of additional borrowings were available under the revolving credit facility and cash on hand was $13.6 million.

Forward-Looking Statements

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

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

Our revolving credit facility bears interest at a variable rate; therefore, changes in prevailing interest rates impact our borrowing costs. A one-percentage point fluctuation in market interest rates would not have a material impact on earnings during the first six months of 2005.

None of our foreign sales or purchases are denominated in foreign currency and we do not have any foreign currency hedging transactions.

ITEM 4.

Controls and Procedures

(a)

Evaluation of disclosure controls and procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

(b)	Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the second quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities:

							Maximum number (or
					Total number of		approximate dollar
	Total				shares purchased		value) of shares that
	number of		Average		as part of publicly		may yet be purchased
	shares		price paid		announced plans		under the plans or
Period	purchased		per share		or programs		programs (a)

April 3 to May 7, 2005		26,006	$	21.28		26,006	$	17,700,000
May 8 to June 4, 2005		325,892	$	20.42		325,892	$	11,100,000
June 5 to July 2, 2005		44,500	$	20.63		44,500	$	10,200,000

Total		396,398	$	20.50		396,398

(a) On April 27, 2005, we announced that our Board of Directors had authorized the use of an additional $10 million to repurchase our common stock, bringing the total amount authorized to $18.3 million. Consequently, we may purchase our common stock, from time to time, either directly or through agents, in the open market, through negotiated purchases or otherwise, at prices and on terms satisfactory to us.

Item 4.

Submission of Matters to a Vote of Security Holders

(a.)	The annual meeting of the Company’s stockholders was held on April 26, 2005.

(b.)	The stockholders of the Company elected two directors for a three-year term expiring at the annual meeting of stockholders to be held in 2008. The election was approved by the following vote:

	For	Withheld

Robert G. Culp, III	5,678,315	564,149

T. Scott McIllhenny, Jr.	5,643,970	598,494

The stockholders approved the amendment to the Company’s restated certificate of incorporation to increase the number of shares of common stock from 10,000,000 to 25,000,000. The amendment was approved with the following vote:

For	5,226,901
Against	1,012,845
Abstain	2,718

(ii)

The stockholders approved the amendment to the Company’s 2000 Incentive Compensation Plan to re-approve the performance criteria contained therein. The amendment was approved with the following vote:

For	5,146,767
Against	451,590
Abstain	5,176
Broker Non Votes	638,931

Item 6.

Exhibits and Reports on Form 8-K

(a)

Exhibits

3.1	The Restated Certificate of Incorporation of the Registrant as amended. (1)

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

10.1	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).

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

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

32.1	Certification of 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 of 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)

(b)	Reports on Form 8-K

A report on Form 8-K was filed on June 16, 2005, reporting an amendment to the revolving credit facility between the Registrant and Wachovia Bank.

A report on Form 8-K was filed on May 2, 2005, reporting the termination of the employment agreement between the Registrant and Albert L. Prillaman and disclosing compensation policy for non-employee directors.

(1) Filed herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: July 19, 2005		STANLEY FURNITURE COMPANY, INC.
		By: /s/ Douglas I. Payne
		Douglas I. Payne
		V.P. - Finance & Administration and
		Secretary
		(Principal Financial and Accounting Officer)