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Stanley Furniture Reports Second Quarter Net Loss

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Stanley Furniture Company, Inc. reported sales and operating results for the second quarter of 2010.

Net sales of $37.9 million declined 10.5% from the second quarter of 2009 and increased 3.8% from the first quarter of 2010. Net loss for the quarter was $11.5 million, or $1.11 per share, compared to a net loss of $3.0 million, or $.29 per share, in the second quarter of 2009. The 2010 second quarter loss includes accelerated depreciation of $2.1 million and $1.2 million of charges related to the Company’s restructuring plan announced in May 2010.

Operating loss amounted to $11.4 million, compared to operating loss of $4.1 million in the second quarter of 2009. The higher operating loss is primarily due to accelerated depreciation and charges related to the restructuring plan, manufacturing inefficiencies and the increased cost of transitioning approximately one- third of the Young America product line revenues from overseas into domestic operations, and lower overall sales across the Company’s various product lines. These factors were partially mitigated by lower expenses from previous restructuring and on-going cost reduction efforts.

Cash on hand amounted to $18.9 million and total debt was $15.0 million at July 3, 2010. As previously announced, during the second quarter the Company repaid $12.9 million of debt, received tax refunds of $6.6 million, and received net proceeds of $1.0 million from sale of assets. Working capital, excluding cash and current maturities of long-term debt, decreased $14.1 million (27.5%) from the second quarter of 2009 primarily due to lower inventories and accounts receivable in response to lower sales.

“As expected, our second quarter operating results excluding special items were similar to the first quarter,” said Glenn Prillaman, President and Chief Executive Officer. “Business conditions in the second quarter remained sluggish with a downturn in sales for June showing that today’s consumer continues to take a cautious approach toward the purchase of wood furniture in our price segment.”

“We are making good progress on the restructuring plan announced in May 2010 setting our path towards profitability. We continue to transition our two major product lines in opposite operational directions to better align operations with the factors which drive demand for each product line”, said Prillaman.

“The majority of the transition of our Young America product line is now complete. The increase in prices on this product line is now in effect and sales have stabilized after an anticipated initial drop. We expect to narrow our operating losses in the second half of this year due to this pricing action and improved operating efficiencies at our Robbinsville, NC plant. On the other hand, most of the transition related to the movement of our Stanley Furniture adult product line from a domestic to a global sourcing model lies ahead of us and we expect to complete this transition over the remainder of 2010. The overseas factories to which we are
moving product are already making a significant portion of this product line, and while there is heavy lifting yet to be done, we anticipate a smooth transition as we become increasingly important to these existing overseas suppliers,” he added.

The Company also announced today the hiring of Micah Goldstein as Chief Operating Officer. He plans to join the Company on August 23, 2010. Mr. Goldstein brings extensive operational experience to this position, currently serving as President and Chief Executive Officer of Bri-Mar Manufacturing, a manufacturer of hydraulic equipment trailers.

The Company also announced today that Douglas I. Payne will retire as Executive Vice President- Finance and Administration in January 2011. Following an appropriate transition period between now and then, the Company plans for Mr. Goldstein to become Chief Financial Officer in addition to his duties as Chief Operating Officer. “I am confident in the Company’s strategy with the restructuring plan announced in May 2010 and look forward to effecting a smooth transition to Micah," said Douglas Payne.

Established in 1924, Stanley Furniture Company, Inc. is a leading manufacturer of wood furniture targeted at the upper-medium price range of the residential market. Its common stock is traded on the Nasdaq stock market under the symbol STLY.

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