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Stanley Furniture Co. Inc.

stly · NASDAQ Financial Services
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FY2016 Annual Report · Stanley Furniture Co. Inc.
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STANLEY FURNITURE COMPANY, INC.
2016
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TROPERLAUNNA

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To Our Owners: 

Our struggles to establish a differentiated strategic alliance with a single source in Vietnam greatly hindered last 
year’s expected progress. If overseas production had fulfilled order backlog with the timeliness customers expect, 
we feel confident we would have shown the revenue growth necessary to have already experienced the change in 
revenue trajectory and resulting earnings we now expect to begin in the second quarter of 2017. We did, 
however, achieve important cost reductions to limit losses in the current year as we approach this important 
inflection point in our business.    

We are well underway with the necessary shifts in production to other existing overseas suppliers. In the second 
quarter, we should begin to service backlog and leverage several of the achievements accomplished last year in 
other areas of our business which have yet to materialize into financial results due to our missteps overseas. I 
review some of those achievements in the body of my letter below. 

Our Board remains engaged and focused on generating shareholder value and returned excess capital through 
special dividends this past year. Our company remains debt free with the cash we need to grow our business. 
The Board’s experience from retail, securities investment, manufacturing and service sectors remains paired with 
management's industry expertise and relationships with vendors and customers. 

Looking Forward

Overseas production plans are now better aligned with customer demand. Our operations strategy 
returns to using a small group of overseas vendors with whom we have an average tenure of more than 
six years. Almost all of our production now fully sourced from overseas, we believe the Company will 
be profitable and cash generative beginning with second quarter 2017 results. 

Can we grow our business? Yes. Our overseas operations performing at normal levels, we will serve 
current order backlog and build upon our introduction of more marketable products developed in prior 
years but not yet serviced at retail. Improved backlog service highlights our renewed value proposition 
at retail, which is driven by the discipline we have instilled throughout our company to lower costs while 
still serving our customers’ needs. Once our value proposition is realized at retail through order 
fulfillment, we will grow revenues and expand margins. 

Areas of Focus 

Product 

The Stanley and Coastal LivingTM brands represent our adult offerings, and Stone & Leigh is our brand 
for nursery and youth.  
(cid:2)(cid:2) The value proposition of our Stanley product line is as competitively well-positioned as it has been in  
several years. Although a limited number of newer introductions reached retail displays last year, we 
have established an improved value proposition through styling paired with more aggressive wholesale 
pricing. This has enhanced our position with customers in the eCommerce channel, and we believe 

 
 
   
 
 
 
 
 
 
 
 
 
 
 
the move will open new doors for major brick-&-mortar distribution opportunities in the latter part 
of this year. 

(cid:2)(cid:2) Our licensing effort with Coastal LivingTM magazine continues to be one of the longest running, most 

successful arrangements in our industry. It began in 2008 and continues to occupy the top spot on the 
company’s sales rankings by design. The majority of our nation’s wealth and second home market is 
associated with living and/or vacationing near large bodies of water, and the lifestyle driven by this 
relaxed, casual way of living for the American consumer can continually be reinterpreted by our 
creative staff, as well as the licensor’s. We are currently in development of our fourth major 
introduction. 

(cid:2)(cid:2) The nursery and youth furniture market continues to be open to additional choices for Millennials 

who are having children, and the success of Stone & Leigh, despite our inability to adequately service 
demand, shows the company’s potential to re-establish meaningful sales in the product category. As an 
experienced leader in the category, management expects to significantly grow this part of our business 
in 2017.  

Distribution 

The relative value in the marketplace of our product lines provides us with a renewed flexibility to grow 
revenues in multiple established and emerging distribution channels.  
(cid:2)(cid:2) Our work in information systems to utilize web and eCommerce strategies to promote an omni-

channel distribution approach enables increased sales through progressive b2b customer relationships 
in more traditional channels such as brick-&-mortar.  

(cid:2)(cid:2) Our creative focus on fashion and styling supported by a b2b website that serves as a one-stop-shop 
for all products and sales aides provides the designs our customers in the interior design community 
desire combined with highly personalized customer care 24/7.   

(cid:2)(cid:2) We are a company with a strong heritage as a dependable source of well-designed, quality furniture 

with compelling visual creative assets. Our brands have potential in an online age, and our presence in 
the eCommerce channel is growing even as we maintain the necessary channel parity that must exist 
in order to maximize sales yet protect retail margins for all customers who participate in our growth. 

Sourcing 
In 2017, we need to satisfy customers through stable, relatively predictable overseas operations. 
(cid:2)(cid:2) We have successfully sourced case goods from overseas with most of our current suppliers before. 
(cid:2)(cid:2) Our staff is anxious to show what they can achieve under a more traditional sourcing model than we 

attempted to execute this past year.  

These three major areas of focus guided by the creation of shareholder value top of mind, we expect to 
continue to maintain a healthy balance sheet, grow revenues and expand margins by leveraging lower 
costs as we demonstrate positive net income in the coming year without major capital expenditures.  

We thank you for your support. 

Sincerely, 

Glenn Prillaman 
President & Chief Executive Officer 

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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
Commission file number 0-14938 

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

Delaware 
(State or other jurisdiction of incorporation or organization) 

        54-1272589 
         (I.R.S. Employer Identification No.) 

200 North Hamilton Street, No. 200, High Point, North Carolina, 27260  

     (Address of principal executive offices, Zip Code) 

Registrant’s telephone number, including area code:  (336) 884-7700 
Securities registered pursuant to Section 12(b) of the Act: 

                 Title of each class 
Common Stock, par value $.02 per share 
Preferred Stock Purchase Rights 

         Name of each exchange on which registered 

             Nasdaq Stock Market 
             Nasdaq Stock Market 

Securities registered pursuant to Section 12(g) of the Act:  None 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ( )  No 
(x) 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes ( )  No 
(x) 

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  has  submitted  electronically  and  posted  on  its  corporate  website,  if  any,  every 
Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.504 of this chapter) 
during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  Yes (X)  
No ( ) 

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller 
reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-
2 of the Exchange Act, (check one):  
Large accelerated filer ( )        Accelerated filer  ( )     Non-accelerated filer    ( )      Smaller reporting company (x) 
                                                                                                           (Do not check if a smaller reporting company) 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ( ) No (x)

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant based on the closing
price on June 30, 2016:  $30 million. 

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of February 17, 2016:

Common Stock, par value $.02 per share  

                             14.730,805 

(Class of Common Stock)                                          Number of Shares 

Documents incorporated by reference:  Portions of the Registrant’s Proxy Statement for our Annual Meeting of Stockholders 
scheduled for May 25, 2017 are incorporated by reference into Part III. 

 
 
 
 
 
 
 
 
 
 
 
         
 
 
 
 
 
 
Part I 

Page 

TABLE OF CONTENTS 

Item 1 
Item 1A 
Item 1B 
Item 2 
Item 3 
Item 4 

  Business .........................................................................................  
  Risk Factors ...................................................................................  
  Unresolved Staff Comments ..........................................................  
  Properties .......................................................................................  
  Legal Proceedings .........................................................................  
  Mine Safety Disclosures ................................................................  

  3 
  6 
  6 
  6
  6
  6

Part II 

Item 5 

Item 6 
Item 7 

Item 7A 
Item 8 
Item 9 

Item 9A 
Item 9B 

  Market for Registrant’s Common Equity, Related Stockholder 
  Matters and Issuer Purchases of Equity Securities .......................  
  Selected Financial Data .................................................................  
  Management’s Discussion and Analysis of Financial Condition 
  and Results of Operation ...............................................................  
  Quantitative and Qualitative Disclosures About Market Risk ........  
  Financial Statements and Supplementary Data ............................  
  Changes in and Disagreements With Accountants on Accounting 
  and Financial Disclosure ................................................................  
  Controls and Procedures ...............................................................  
  Other Information ...........................................................................  

  7 
  8 

  8 
  13 
  13 

  14 
  14 
  14 

Part III   

Item 10 
Item 11 
Item 12 

Item 13 

Item 14 

  Directors, Executive Officers and Corporate Governance .............  
  Executive Compensation ...............................................................  
  Security Ownership of Certain Beneficial Owners and                    
  Management and Related Stockholder Matters ............................  
  Certain Relationships and Related Transactions, and Director 

  14 
  14

  15

Independence ................................................................................  
  Principal Accounting Fees and Services .......................................  

15
  15

Part IV   

  Exhibits, Financial Statement Schedules .......................................  
Item 15 
Item 16 
  10-K Summary ...............................................................................  
 Signatures .............................................................................................................  

15 
18 
  19 

 Index to Consolidated Financial Statements and Schedule  ................................  

  F-1 

2

 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stanley Furniture Company, Inc.    

Item 1.  Business 

General 

PART I 

Incorporated in Delaware in 1924, we are a leading design, marketing and distribution resource in the upscale 
segment of the wood residential furniture market.  We offer a diversified product line supported by an overseas 
sourcing model.  We market our brands through a network of brick-and-mortar furniture retailers, online retailers and 
interior designers worldwide.  We also market and sell directly to the consumer through an omni-channel approach to 
e-commerce.   

Products

Our products are marketed as fashionable wood residential home furnishings which differentiate from other products 
in the market through styling execution as well as wide selections for the entire home including dining, bedroom, living 
room, home office, home entertainment, accent items and nursery and youth furniture.  Our target consumer ranges 
from an affluent, discerning consumer utilizing the talents of an interior designer, to a more practical consumer driven 
to purchase by convenience, immediate gratification from stock availability or a particular retail event.  Regardless, we 
target a consumer who values the interior aesthetics of the home.  

We believe that our products represent good value and that the quality and design of our furniture, combined with our 
broad selection and dependable service, differentiates our products in the marketplace. 

We provide products in a variety of wood species and finishes.  Our products are designed to appeal to a broad range 
of consumer tastes in the upscale segment and cover all major style categories. 

We continually design and develop new styles to replace those we discontinue and to expand our product lines into 
markets where opportunity for growth exists.  Our in-house product development process, which normally spans 
approximately one year but can be shorter or longer based upon the complexity of the concept, begins with identifying 
customer preferences and marketplace trends and conceptualizing product ideas. Company designers produce a 
variety of sketches from which prototype furniture pieces are built for review prior to full-scale engineering and 
production.  We consult with our marketing and operations personnel, core suppliers, independent sales 
representatives and selected customers throughout this process and introduce our new product designs primarily at 
international furniture markets in High Point, North Carolina and Las Vegas, Nevada, which are each held two times 
per year for a total of four markets.   

Marketing/Brands

We believe that the diversity of our product offerings enables us to anticipate and address changing consumer 
preferences and provide retailers a complete wood furniture resource in the upscale segment.  Our products are 
marketed under the Stanley Furniture and Stone & Leigh brands, but also under a licensing agreement with Coastal 
Living® magazine.  We market our brand through a series of efforts targeted both to the wholesale trade and directly 
to the consumer.  Coastal Living® is a registered trademark of Time Inc. Lifestyle Group and is used under license. 

Distribution

We have developed a broad domestic and international customer base.  We sell our furniture mainly through 
independent sales representatives to a variety of wholesale customers such as owner-operated furniture stores, 
interior design & architecture professionals, decorators, smaller specialty retailers, regional furniture chains, buying 
clubs and e-commerce retailers.  We also market and sell directly to the consumer through an omni-channel approach 
to eCommerce.  We believe this broad network reduces exposure to fluctuations in regional economic conditions, 
places our brand in as many venues as possible where the consumer may shop and allows us to capitalize on 
emerging channels of distribution.  We offer tailored marketing programs to address each specific distribution channel. 
Our independent sales representatives along with our customer care managers sell and support our products.  

In 2016, we sold product to approximately 2,600 customers and recorded approximately 11% of our sales from 
international customers.  No single customer accounted for more than 10% of our sales in 2016 and no part of the 
business is dependent upon a single customer, the loss of which would have a material effect on our business.  The 
loss of several major customers could have a material impact on our business. 

3

 
     
Overseas Sourcing 

Our product is currently sourced from independently owned factories in Southeast Asia, primarily in Vietnam and 
Indonesia. We operate a support organization in each country to manage partner-vendor relationships.  In early 2016, 
we established a strategic manufacturing alliance with one such source in Vietnam outside of Ho Chi Minh City: 
Starwood Manufacturing VN Corporation.  This strategic alliance allowed for the utilization of a stand-alone, dedicated 
manufacturing facility.  While the agreement did not obligate us to utilize the facility should certain market-driven 
and/or other factors not make this facility our best choice, it did establish clear goals for differentiation in overseas 
sourcing for our company related to production lead times and delivery and warehouse and logistics.  Our intentions 
were to eventually transition substantially all of our overseas production to this facility in order to differentiate in the 
marketplace through several competitive operational advantages. 

As the year progressed, both parties realized that the alliance would not be able to provide the production 
requirements previously agreed upon.  The facility’s capacity was unable to keep up with growing demand for more 
recently introduced products.  Throughout the year, we continued sourcing from the same small group of established 
vendors with which we have conducted business for several years.  Over the course of the first half of 2017, we will be 
utilizing available capacity at these vendors’ factories to align overseas supply with the demand for our newer, more 
marketable products.  Although the facility making our products at Starwood will not be our only supplier, we plan for 
them to remain a vendor going forward. 

Generally, we enter into standard purchase arrangements for finished goods inventory with our overseas vendors.  
The terms of these arrangements are customary for our industry and do not contain any long-term purchase 
obligations.  We generally negotiate firm pricing with our foreign suppliers in U.S. Dollars for a term of one year. We 
accept exposure to exchange rate movement after this period and do not use any derivative instruments to manage or 
hedge currency risk. We generally expect to recover any substantial price increases from these suppliers in the price 
we charge our own customers for these goods.  

Logistics 

We warehouse our products primarily in domestic warehouses with some warehousing abroad. We consider our 
facilities to be generally modern, well equipped and well maintained.  We use a small group of furniture specific 
transportation providers for delivery.  While most of our products are delivered to retailers from our warehouses, we 
also ship directly to wholesale customers from Asia.  Our transportation vendor base includes white-glove delivery 
services which deliver directly from our domestic warehouses to the retail consumer. 

Products are ordered from overseas suppliers based upon both actual and forecasted demand.  Because long lead 
times are generally associated with overseas operations, we strive to maintain inventory levels that will service most 
of our wholesale customers’ orders within a maximum of 30 days from receipt of their order.  Our backlog of 
unshipped orders was $6.3 million at December 31, 2016 and $6.2 million at December 31, 2015.     

Competition

The furniture industry is highly competitive, fragmented, and includes a large number of competitors. The barriers to 
entry are very low, and there is little feasible intellectual property protection in our industry to prevent competitors from 
imitating furniture designs of another manufacturer.  Very few of our competitors manufacture residential wood  
furniture in the United States. 

We compete with a host of varying business models within the industry including, but not limited to, former 
manufacturers who have adopted a strictly pass-through model from overseas vendor to wholesale customers; 
national lifestyle retailers who sell directly to the retail consumer through a vertical model; and overseas vendors who 
sell directly to wholesale customers.  Some competitors have greater financial resources and often offer extensively 
advertised, highly promoted product.   

Competitive factors in the upscale segment of the industry include design, quality, service, selection and price.  We 
believe the flexibility and relative influence we maintain with overseas vendors, the continued diversification of our 
distribution strategy, our long-standing customer relationships, our responsiveness to customers, our consistent 
support of high-quality and diverse product lines, the heritage of our brand and our experienced management team 
are all competitive advantages. 

4

 
     
Associates 

At December 31, 2016, we employed approximately 70 associates domestically and 48 associates overseas, all of 
which are full-time employees.  We consider our relationship with our associates to be very good.  None of our 
associates are represented by a labor union.   

Trademarks 

Our trade names represent many years of continued business, and we believe these names are well recognized and 
associated with excellent quality and styling in the furniture industry.  We own a number of trademarks and design 
patents, none of which are considered to be material. 

Governmental Regulations 

We are subject to federal, state and local laws and regulations in the areas of safety, health and environmental 
protection.  Compliance with these laws and regulations has not in the past had any material effect on our earnings, 
capital expenditures or competitive position.  However, the impact of such compliance in the future cannot be 
predicted.  We believe that we are in material compliance with applicable federal, state and local safety, health and 
environmental regulations. 

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,” “could,” 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 disruptions in foreign sourcing including those 
arising from supply or distribution disruptions or those arising from changes in political, economic and social 
conditions, as well as laws and regulations, in countries from which we source products, international trade policies of 
the United States and countries from which we source products, the inability to raise prices in response to inflation 
and increasing costs, lower sales due to worsening of current economic conditions, the cyclical nature of the furniture 
industry, business failures or loss of large customers, failure to anticipate or respond to changes in consumer tastes, 
fashions and perceived values in a timely manner, competition in the furniture industry, environmental, health, and 
safety  compliance costs, and failure or interruption of our information technology infrastructure.  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. 

Available Information 

Our principal Internet address is www.stanleyfurniture.com.  We make available free of charge on this web site our 
annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practicable after we 
electronically file such material with, or furnish it to, the Securities and Exchange Commission. 

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

Stanley Furniture Company, Inc. 
200 North Hamilton Street, No. 200 
High Point, North Carolina 27260 
Attention: Ms. Anita W. Wimmer 
Telephone: 336-884-7698, Fax: 336-884-7760 
Or e-mail your request to: Investor@Stanleyfurniture.com 

5

 
     
Item 1A.  Risk Factors 

Not required to be provided by a smaller reporting company. 

Item 1B.  Unresolved Staff Comments 

None. 

Item 2.      Properties 

Set forth below is certain information with respect to our principal properties.  We believe that all these properties are 
well maintained and in good condition.  A majority of our distribution facilities are equipped with automatic sprinkler 
systems and modern fire protection equipment, which we believe are adequate.  All facilities set forth below are active 
and operational.   

Location 
Martinsville, VA 
High Point, NC 
Las Vegas, NV 
Vietnam 
Mocksville, NC 

  Primary Use 
Distribution 
Showroom/Office 
Showroom 
Distribution 
Distribution 

Approximate 
Facility Size 
(Square Feet) 
300,000 
56,000 
11,500 
115,000(1)
50,000(1)

Owned 
or 
Leased 
Leased 
Leased 
Leased 
Leased 
Leased 

(1)  Estimated space as of December 31, 2016.  Leased footage is a function of amount of product held with no minimum space 

commitments.

Item 3.  Legal Proceedings 

In the normal course of business, we are involved in claims and lawsuits none of which currently, in our opinion, will 
have a material adverse effect on our consolidated financial statements. 

Item 4.  Mine Safety Disclosures 

Not Applicable. 

Executive Officers of the Registrant 

Our executive officers who are elected annually and their ages as of January 1, 2017 are as follows: 

Name 
Glenn Prillaman ...................................................  

  Age   Position 
  45 

  President and Chief Executive Officer 

Anita W. Wimmer ................................................  

  53 

  Vice President - Finance/Corporate Controller 

Glenn Prillaman has been President and Chief Executive Officer since February 2010.  Mr. Prillaman was President 
and Chief Operating Officer from August 2009 until February 2010.  He was our Executive Vice President – Marketing 
and Sales from September 2008 until August 2009.  He held the position of Senior Vice President – Marketing and 
Sales from September 2006 until September 2008 and was our Senior Vice President – Marketing/Sales – Young 
America® from August 2003 to September 2006.  Mr. Prillaman held various management positions in product 
development from June 1999 to August 2003.  Prior to this Mr. Prillaman represented the company as a sales agent 
from 1993 to 1996. 

Anita W. Wimmer has been principal financial and accounting officer and Secretary since August 2014 and has also 
served as Vice President – Finance/Corporate Controller since April 2014 and Assistant Secretary from April 1999 
until August 2014.  She served as Vice President – Corporate Controller from April 2012 until April 2014 and as Vice 
President – Controller and Treasurer from April 2005 until April 2012.  Prior to this, Mrs. Wimmer held various financial 
positions since her employment with Stanley in March 1993. 

6

 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer 
                Purchases of Equity Securities 

Market Prices 

PART II 

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

2016 

2015 

First Quarter .....................................  
Second Quarter ................................  
Third Quarter ....................................  
Fourth Quarter ..................................  

High 
$2.88 
  2.90 
  3.65 
  1.99 

Low 
$2.25 
  2.42 
  1.66 
  0.86 

High 
$3.64 
  3.39 
  3.31 
  3.04 

Low 
$2.71 
  2.62 
  2.75 
  2.60 

As of February 10, 2016, we have approximately 1,762 beneficial stockholders.  In August 2016, our Board of 
Directors authorized the payment of two special dividends totaling up to $1.50 per share.  The initial special dividend 
of $1.25 per share was paid on August 19, 2016.  The second special dividend of $0.25 per share was paid on 
November 18, 2016.  Our revolving credit facility prohibits the declaration or payment of additional dividends. 

Issuer Purchases of Equity Securities 

The following table summarizes the repurchases of our equity securities during the 12-month period ended 

December 31, 2016:  

Average 
Price
Paid per 
Share

2.53

0.98

Total
Number of 
Shares
Purchased
- 
405,468(2)
- 
405,468(2)
- 
- 

1,394(2)

1,394(2)

406,862(2)

Approximate 
Dollar Value 
of Shares 
that May Yet 
be Purchased 
under the 
Plans or 
Programs(1) 
3,981,271
2,969,271
2,969,271

2,969,271
2,969,271
2,969,271

Total Number 
of Shares 
Purchased as 
Part of 
Publicly 
Announced 
Plans or 
Programs(1) 
- 
400,000 
- 
400,000 
- 
- 
- 

-

400,000 

Period

January 1 to February 6, 2016 

  February 7 to March 5, 2016  
  March 6 to April 2, 2016 
Three months ended April 2, 2016 
  October 3 to November 5, 2016 
  November 6 to December 3, 2016  
  December 4 to December 31, 2016 
Three months ended December 31, 

2016 

Twelve months ended December 31, 

2016 

(1)

(2)

In July 2012, the Board of Directors authorized the purchase of up to $5.0 million of our common stock.  These 
repurchases may be made from time to time in the open market, in privately negotiated transactions, or otherwise, at 
prices the company deems appropriate. 
Includes 5,468 shares and 1,394 shares tendered by recipients of restricted stock awards on March 1, 2016 and 
December 20, 2016, respectively, to satisfy tax withholding obligations on vested restricted stock. 

7

 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Compensation Plan Information 

  The following table summarizes our equity compensation plans as of December 31, 2016: 

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 

1,129,582 

$5.35 

1,482,510 

Item 6.      Selected Financial Data 

Not required to be provided by a smaller reporting company.      

Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operation 

Overview 

We have taken a number of strategic steps over the last several years to reposition our company.  We have closed 
domestic manufacturing facilities and moved to an overseas sourcing model.  We discontinued an unprofitable 
product line, and we are in the process of launching a new one.  We implemented a new enterprise operating system, 
opened new trade showrooms and consolidated corporate offices.  We attempted to establish a strategic overseas 
manufacturing alliance that did not meet our immediate demands for product, so we have reverted back to a multi-
sourcing model that is meeting our costs and quality requirements.  In addition, we have taken strategic steps to align 
our cost structure in response to lower sales volume related to these changes.   

In January 2015, we announced our re-entry into the nursery and youth product category with the launch of a new 
brand, Stone & Leigh.  New designs were introduced to the trade at the High Point Market in April 2015.  Our 
experience developing and marketing nursery and youth product, our relationships with wholesale customers within 
the nursery and youth furniture segment and the minimal investment required for the launch should allow us to reenter 
this part of the market successfully.  This product line began shipping in late 2015, but due to production delays, we 
did not realize the product line’s expected growth potential in 2016.  Once we begin to properly service this product 
line, we expect it to be a source of growth in 2017. 

In addition to the consumer marketing efforts to launch our new Stone & Leigh youth and nursery furniture brand, we 
are beginning new consumer advertising and wholesale customer support plans to increase revenue and more 
effectively reach target consumers of the Stanley adult product lines.  These efforts, along with more valuable product 
should produce growth for the adult furniture product lines under the Stanley and Coastal Living® brands. 

In the first quarter of 2016, we made the decision to liquidate our twenty-seven corporate-owned life insurance policies 
with a $28.1 million cash surrender value.  We received $22.4 million in proceeds, comprised of the cash surrender 
value net of outstanding loans and accrued interest.  The decision to liquidate was made after continued review of the 
financial stability of the issuer of the policies and the limited risk we were willing to accept.   

During 2016, the Board of Directors engaged Stephens Inc. as financial advisor to assist with its consideration of 
potential strategic and capital allocation opportunities.  As part of this strategic review, the Board decided to return 
excess cash to shareholders and that the company leverage its operating assets to fund fluctuations in working 
capital.  As a result, the Board declared an initial special dividend of $1.25 per share which was distributed to 
shareholders in August 2016.  A second dividend of $.25 per share was distributed to shareholders in November 2016 
after a revolving credit facility was obtained to fund potential fluctuations in working capital. 

8

 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results of Operations 

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

For the Years Ended 
December 31, 

Net sales ...............................................................  
Cost of sales .........................................................  
  Gross profit  .........................................................  
Selling, general and administrative expenses ......  
  Operating (loss) income ......................................  

CDSOA income, net ..............................................
Other income, net .................................................  
Interest expense, net ............................................  
(Loss) income from continuing operations before 

income taxes ......................................................  
Income tax expense ..............................................  

(Loss) income from continuing operations ............  
 Loss from discontinued operations ......................  

2016 
100.0% 
81.1 
18.9 
31.4 
(12.5) 

2.4
.1
.2

(10.2) 
1.6

(11.8) 
-

  Net (loss) income ................................................  

(11.8)%

2015 
100.0% 
76.1 
23.9 
22.1 
1.8 

9.2 
.1 
1.7 

9.4 
     .1 

9.3
-

9.3%

2016 Compared to 2015 

Net sales decreased $12.8 million, or 22.3%, in 2016 compared to 2015.  The decrease was due to lower unit volume 
and lower average selling prices.  Lower unit volume was primarily a result of delays in shipping new product 
introduced in 2015 as the production ramp up of the new factory in Vietnam dedicated solely to our new product has 
taken longer than originally anticipated.  The initial orders of 2015 introductions are shipping and should begin to 
generate orders on retail floors in the near term.  Lower average selling prices were the result of aggressive 
discounting to move older discontinued product.  Additionally, inline product was discounted to achieve additional floor 
space to fuel future sales and generate cash.   

Gross profit decreased to $8.4 million, or 18.9% of net sales, from $13.7 million, or 23.9% of net sales, in 2015.  The 
decrease in gross profit and gross margin was driven by lower sales volume, higher discounting, higher quality costs, 
and the decrease in cash surrender value growth on corporate owned life insurance policies.  Partially offsetting the 
impact of these items was lower ocean freight costs.  The prior year contained higher freight costs resulting from West 
Coast port issues.     

Selling, general and administrative expenses for 2016 were $14.0 million, or 31.4% of net sales, compared to $12.7 
million, or 22.1% of net sales, in 2015.  Higher expenses in the current year were primarily due to the decline in cash 
surrender value growth of corporate-owned life insurance policies as we continued to pay down policy loans 
throughout 2015 and then the surrendering of these polices in the first quarter of 2016.  The decline in cash surrender 
value growth of corporate-owned life insurance policies, net of expenses, was $1.3 million in 2016. Approximately 
60% of the cash surrender value growth was in selling, general and administrative expenses and the remaining 40% 
was in cost of goods sold.  The elimination of this cash surrender value growth was partially offset by the elimination 
of interest expense on the policy loans taken against the cash surrender value.  Selling, general and administrative 
expenses also increased as a result of fees related to the engagement of Stephens, Inc. to review strategic and 
capital allocation opportunities for the company, increased advertising cost and the cost related to adopting a 
stockholder’s right plan.  The higher selling, general and administrative percentages in the current year were due to 
higher expenditures and lower sales impairing absorption for fixed costs. 

As a result of the above, our operating loss was $5.6 million, or (12.5%) of net sales, in 2016, compared to operating 
income of $1.0 million, or 1.8% of net sales, in 2015. 

During the current year we received $1.1 million in funds under the CDSOA compared to $5.3 million in 2015. 

9

 
     
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for 2016 decreased $846,000 from the comparable 2015 period.  Interest expense is composed of 
interest on loans against cash surrender value of insurance policies used to fund our legacy deferred compensation 
plan.  The decrease in expense was due to paying down these outstanding loans with excess cash starting in late 
2015 and eventually paying them off when we liquidated our corporate-owned life insurance policies in the first quarter 
of 2016. 

Our 2016 effective tax rate was negative 15.8%.  As indicated above, we surrendered our corporate-owned life 
insurance policies during the first quarter of 2016, which resulted in taxable income.  The premiums paid and the 
growth in surrender value of these policies were excludable from taxable income over the life of these polices when 
held until death of the covered lives, but this growth, net of premiums paid, became taxable when we surrendered the 
policies.  The aggregate impact of the surrender of these policies in the first quarter of this year was $24.0 million in 
taxable income.  Most of this income was offset by net operating loss carryforwards.  The income tax expense 
associated with the surrender of the corporate-owned life insurance policies was largely recognized during the first 
quarter when the policies were surrendered. The income tax expense recognized was the result of alternative 
minimum tax liability associated with the surrender of the corporate-owned life insurance policies and state income 
taxes.  The alternative minimum tax limits our ability to offset all of our income with net operating loss carryforwards.  
Our 2015 effective tax rate expense was 1.4% and was primarily generated from the federal alternative minimum tax. 

Financial Condition, Liquidity and Capital Resources 

Sources of liquidity include cash on hand, revolving credit facility and cash generated from operations. While we 
believe that our business strategy will be successful, we cannot predict with certainty the ultimate impact on our 
revenues, operating costs and cash flow from operations.  We expect cash on hand and borrowings under the 
revolving credit facility to be adequate for ongoing operational and capital expenditures over the next twelve months.  
At December 31, 2016, we had $4.2 million in cash and $663,000 in restricted cash. 

Working capital, excluding cash on hand and restricted cash, decreased during 2016 to $18.8 million from $21.2 million 
at December 31, 2015.  The decrease was primarily the result of a decrease in accounts receivable as a result of our 
lower sales volumes, increase in accounts payable as our vendor terms improved and increase in deferred revenue. 
Partially offsetting these factors was an increase in inventories.  Inventories have increased even as sales have 
decreased mainly due to the receipt of partial orders from overseas. As a result, customer orders cannot be shipped if 
all items are not received, resulting in higher inventories until these delinquent items have been received.       

Cash used by operating activities was $2.6 million in 2016 compared to cash generated from operations of $4.6 million 
in 2015.  The cash use in 2016 was due to lower sales volumes, elimination of cash surrender value from company-
owned life insurance policies, decrease in CDSOA proceeds and higher tax payments on the taxable income from the 
surrender of our corporate-owned life insurance policies.   These were partially offset by lower freight costs and lower 
interest payments on loans against corporate owned life insurance policies. The cash provided by operations in 2015 
was mostly from the receipt of $5.3 million in proceeds from the CDSOA, partially offset by $988,000 of interest paid on 
loans against corporate-owned life insurance policies. 

Cash generated from investing activities in 2016 was due to $28.1 million in proceeds from the surrender of corporate-
owned life insurance policies.  Cash provided by investing activities of $516,000 in the prior year was the result of 
restricted cash decreasing due to a reduction in outstanding letters of credit required by our insurance company for 
potential workers compensation claims.   

Net cash used by financing activities in 2016 was $27.8 million compared to $5.5 million in 2015.  During the current 
year we used $21.3 million for a special dividend, $5.5 million to pay off the remaining outstanding life insurance 
policy loans in conjunction with our decision to surrender these corporate-owned life insurance policies and $1.0 
million for the repurchase and retirement of 400,000 shares of our common stock.  In 2015 we used $5.5 million to 
pay-down life insurance policy loans. 

We have a secured $6 million revolving credit facility with Wells Fargo Bank, National Association with an excess 
availability requirement of $2 million resulting in maximum borrowings of $4.0 million under the facility, subject to 
borrowing base eligibility requirements.  The credit facility matures in October 2018 and is secured by our accounts 
receivable, inventory and certain other assets. Borrowings under the credit facility bear interest at a variable per 
annum rate equal to the daily three month London Bank Interbank Offered Rate plus 3.5%.   

The credit facility contains covenants that, among other things limits our ability to incur certain types of debt or liens, 
pay dividends, enter into mergers and consolidations or use proceeds of borrowing for other than permitted uses.  The 
credit facility also includes a covenant requiring us to maintain a minimum fixed charge ratio of not less than 1.10 to 
10

 
     
1.0 with an initial compliance date at December 31, 2017. We were in compliance with all covenants under the credit 
facility as of December 31, 2016.   

Continued Dumping and Subsidy Offset Act (“CDSOA”) 

The CDSOA provides for distribution of monies collected by U.S. Customs and Border Protection (“Customs”) for 
imports covered by antidumping duty orders entering the United States through September 30, 2007 to eligible 
domestic producers that supported a successful antidumping petition (“Supporting Producers”) for wooden bedroom 
furniture imported from China. Antidumping duties for merchandise entering the U.S. after September 30, 2007 have 
remained with the U.S. Treasury.  

In November 2015 and 2016, Customs distributed $1.2 million and $3.3 million in collected duties that were available 
for distribution in 2015 and 2016, respectively.  Our portion of these distributions were $412,000 and $1.1 million, 
respectively, representing 33.6% of the balance available for distribution in 2015 and 33.5% of the balance available 
for distribution in 2016.  As of October 1, 2016, Customs reported that approximately $1.4 million in cash deposits or 
other security paid at the time of import on subject entries remains in a clearing account balance, which potentially 
may become available for distribution under the CDSOA to eligible domestic manufacturers in connection with the 
case involving bedroom furniture imported from China.  The final amounts available for distribution may be higher or 
lower than the preliminary amounts reported in the clearing account due to liquidations, reliquidations, protests, and 
other events affecting entries.  Assuming that our percentage allocation in the future is the same as it was for the 2016 
distribution (approximately 33.5% of the funds distributed) and that the $1.4 million collected by the government as of 
October 1, 2016 does not change, we could receive approximately $460,000 in CDSOA funds at some point in the 
future.

Due to the uncertainty of the administrative processes, we cannot provide assurances as to future amounts of 
additional CDSOA funds that ultimately will be received, if any, and we cannot predict when we may receive any 
additional CDSOA funds.   

New Accounting Pronouncements 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of 
Credit Losses on Financial Instruments (“ASU 2016-13”).  The amendments in ASU 2016-13 require the 
measurement of all expected credit losses for financial assets held at the reporting date based on historical 
experience, current conditions, and reasonable and supportable forecasts.  In addition, ASU 2016-13 amends the 
accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit 
deterioration.  The amendment is effective for public entities for annual reporting periods beginning after December 
15, 2019, however early application is permitted for reporting periods beginning after December 15, 2018.  The 
Company does not anticipate ASU 2016-13 to have a material impact to the consolidated financial statements. 

In February 2016, the FASB issued its final lease accounting standard, FASB Accounting Standard Codification 
("ASC"), Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize a right-of-use asset and a lease 
liability for virtually all of their leases (other than leases that meet the definition of a short-term lease).  The lease 
liability will be equal to the present value of lease payments and the right-of -use asset will be based on the lease 
liability, subject to adjustment such as for initial direct costs.  For income statement purposes, the new standard 
retains a dual model similar to ASC 840, requiring lases to be classified as either operating or finance.  For lessees, 
operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases 
under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by 
lessees for capital leases under ASC 840).  Our leases as of December 31, 2016, principally relate to real estate 
leases for corporate office, showrooms and warehousing.  The new standard will be effective for the first quarter of our 
fiscal year ending December 31, 2019. Early adoption is permitted. We are evaluating the effect that ASU 2016-02 by 
reviewing all long-term leases and determining the potential impact it will have on our consolidated financial 
statements and related disclosures. The standard is to be applied under the modified retrospective method, with 
elective reliefs, which requires application of the new guidance for all periods presented. 

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 
2016-09”).  The amendments in ASU 2016-09 simplify several aspects of the accounting for share-based payment 
transactions.  The new guidance requires that excess tax benefits (which represent the excess of actual tax benefits 
receive at the date of vesting or settlement over the benefits recognized over the vesting period or upon issuance of 
share-based payments) be recorded in the income statement as a reduction of income or income taxes when the 
awards vest or are settled.  The new guidance also requires excess tax benefits to be classified as an operating 
activity in the statement of cash flows rather than as a financing activity.   The new standard will be effective for the 

11

 
     
   
first quarter of our fiscal year ending December 31, 2017.  The adoption of this new standard will reduce our reported 
income taxes and will increase cash flows from operating activities; however, the amounts of that reduction/increase is 
dependent upon the underlying vesting or exercise activity and related future stock prices. 

In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230).  The guidance is intended to 
reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the 
statement of cash flows.  This standard will be effective for the first quarter of our fiscal year ending December 31, 
2018.  Early adoption is permitted, provided all amendments are adopted in the same period.  In November 2016, 
FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.  We have reviewed the standard 
and determined that our statement of cash flows will include changes in restricted cash with related disclosures.  The 
guidance requires application using a retrospective transition method.  We do not anticipate ASU 2016-15 or ASU 
2016-18 to have a material impact to our consolidated financial statements. 

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 
2015-11”). The amendments in ASU 2015-11 require an entity to measure in scope inventory at the lower of cost and 
net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less 
reasonable predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for 
inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. The amendments do not apply to 
LIFO or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is 
measured using first-in, first-out (“FIFO”) or average cost.  The amendment is effective for public entities for fiscal 
years beginning after December 15, 2016 and should be applied prospectively, however early adoption is permitted. 
The Company does not anticipate ASU 2015-11 to have a material impact to the consolidated financial statements. 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  This standard is 
intended to improve, and converge with international standards, the financial reporting requirements for revenue from 
contracts with customers.  The new standard will be effective for the first quarter of our fiscal year ending December 
31, 2018.  Early adoption is permitted but we do not expect to early adopt this new accounting pronouncement.  In 
preparation for this new standard, we are identifying all forms of agreements with our customers and will begin to 
evaluate the provisions in such agreements in light of the five-step model specified by the new guidance.  The five-
step model includes: 1) determination of whether a contract – an agreement between two or more parties that creates 
legally enforceable rights and obligations exists; 2) identification of the performance obligations in the contract; 3) 
determination of the transaction price; 4) allocation of the transaction price to the performance obligations in the 
contract; and 5) recognition of revenue when (or as) the performance obligation is satisfied.  We are also evaluating 
the impact of the new standard on certain common practices currently employed by us and others in our industry, 
such as co-operative advertising, pricing allowances and consumer coupons.  We are in the initial phases and have 
not yet determined the impact of the new standard on our financial statements or whether we will adopt on a full or 
modified retrospective basis in the first quarter of our fiscal year ending December 31, 2018. 

Critical Accounting Policies 

We have chosen accounting policies that are necessary to accurately and fairly report our operational and financial 
position.  Below are the critical accounting policies that involve the most significant judgments and estimates used in 
the preparation of our consolidated financial statements. 

Revenue Recognition - Sales are recognized when title and risk of loss pass to the customer, which typically 

occurs at the time of shipment.  In some cases, however, title does not pass until the shipment is delivered to the 
customer.  Revenue includes amounts billed to customers for shipping.  Provisions are made at the time revenue is 
recognized for estimated product returns and for incentives that may be offered to customers.  Amounts collected in 
advance of shipment are reflected as deferred revenue on the consolidated balance sheet and then recognized as 
revenue as the risk of loss passes to the customer. 

Allowance for doubtful accounts – We maintain an allowance for doubtful accounts for estimated losses 

resulting from the failure of our customers to make required payments.  We perform ongoing credit evaluations of our 
customers and monitor their payment patterns.  Should the financial condition of our customers deteriorate, resulting 
in an impairment of their ability to make payments, additional allowances may be required which would reduce our 
earnings. 

Inventory valuation – Inventory is valued at the lower of cost or market.  Cost for all inventories is 
determined using the first-in, first-out (FIFO) method.  We evaluate our inventory to determine excess or slow moving 
items based on current order activity and projections of future demand.  For those items identified, we estimate our 
market value based on current trends.  Those items having a market value less than cost are written down to their 

12

 
     
 
 
market value.  If we fail to forecast demand accurately, we could be required to write off additional non-saleable 
inventory, which would also reduce our earnings. 

Deferred taxes - We recognize deferred tax assets and liabilities based on the estimated future tax effects of 
differences between the financial statements and the tax basis of assets and liabilities given the enacted tax laws.  We 
evaluate the need for a deferred tax asset valuation allowance by assessing whether it is more likely than not that the 
company will realize its deferred tax assets in the future.  The assessment of whether or not a valuation allowance is 
required often requires significant judgment, including the forecast of future taxable income.  Adjustments to the 
deferred tax valuation allowance are made to earnings in the period when such assessment is made. 

In preparation of our consolidated financial statements, we exercise judgment in estimating the potential exposure to 
unresolved tax matters and apply a more likely than not criteria approach for recording tax benefits related to 
uncertain tax positions. While actual results could vary, we believe we have adequate tax accruals with respect to the 
ultimate outcome of such unresolved tax matters.   

Long-lived assets – Property, plant and equipment is reviewed for possible impairment when events indicate 

that the carrying amount of an asset may not be recoverable.  Assumptions and estimates used in the evaluation of 
impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future 
periods that would lower our earnings.  Our depreciation policy reflects judgments on the estimated remaining useful 
lives of assets.   

Accruals for self-insurance reserves – Accruals for self-insurance reserves (including workers’ 
compensation and employee medical) are determined based on a number of assumptions and factors, including 
historical payment trends and claims history, actuarial assumptions and current and estimated future economic 
conditions.  These estimated liabilities are not discounted.  If actual trends differ from these estimates, the financial 
results could be impacted.  Historical trends have not differed materially from these estimates. 

Actuarially valued benefit accruals and expenses – We maintain three actuarially valued benefit plans.  

These are our deferred compensation plan, our supplemental employee retirement plan and our postretirement health 
care benefits program.  The liability for these programs and the majority of their annual expense are developed from 
actuarial valuations.  Inherent in these valuations are key assumptions, including discount rates and mortality 
projections, which are usually updated on an annual basis near the beginning of each year.  We are required to 
consider current market conditions, including changes in interest rates in making these assumptions.  Changes in 
projected liability and expense may occur in the future due to changes in these assumptions.  The key assumptions 
used in developing the projected liabilities and expenses associated with the plans are outlined in Note 7 of the 
consolidated financial statements. 

Stock-Based Compensation - We record share-based payment awards at fair value on the grant date of the 

awards, based on the estimated number of awards that are expected to vest, over the vesting period.  The fair value 
of stock options was determined using the Black-Scholes option-pricing model.  The fair value of the restricted stock 
awards was based on the closing price of the Company’s common stock on the date of the grant.  For awards with 
performance conditions, we recognize compensation cost over the expected period to achieve the performance 
conditions, provided achievement of the performance conditions are deemed probable. 

Off-Balance Sheet Arrangements 

We do not have transactions or relationships with “special purpose” entities, and we do not have any off-balance 
sheet financing other than normal operating leases primarily for warehousing, showroom and office space, and certain 
technology equipment. 

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk 

Not required to be provided by a smaller reporting company. 

Item 8. 

Financial Statements and Supplementary Data 

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

13

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

None. 

Item 9A.  Controls and Procedures 

Conclusion Regarding the Effectiveness 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 annual report. 

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as 
such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of our 
management, including our principal executive officer and principal financial officer, we conducted an evaluation of the 
effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated 
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our 
evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our 
internal control over financial reporting was effective as of December 31, 2016.  

Changes in Internal Control over Financial Reporting 

There were no changes in our internal control over financial reporting that occurred during the fourth quarter that have 
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.  Other Information 

None. 

Item 10.  Directors, Executive Officers and Corporate Governance   

PART III 

Information related to our directors is set forth under the caption “Election of Directors” of our proxy statement (the 
“2017 Proxy Statement”) for our annual meeting of shareholders scheduled for May 25, 2017.  Such information is 
incorporated herein by reference. 

Information relating to compliance with section 16(a) of the Exchange Act is set forth under the caption “Section 16(a) 
Beneficial Ownership Reporting Compliance” of our 2017 Proxy Statement and is incorporated herein by reference. 

Information relating to the Audit Committee and Board of Directors’ determinations concerning whether a member of 
the Audit Committee of the Board is a “financial expert” as that term is defined under Item 407(d) (5) of Regulation S-K 
is set forth under the caption “Board and Board Committee Information” of our 2017 Proxy Statement and is 
incorporated herein by reference. 

Information concerning our executive officers is included in Part I of this report under the caption “Executive Officers of 
the Registrant.” 

We have adopted a code of ethics that applies to our associates, including the principal executive officer, principal 
financial officer, principal accounting officer or controller, or persons performing similar functions.  Our code of ethics 
is posted on our website at www.stanleyfurniture.com.  Amendments to and waivers from our code of ethics will be 
posted to our website when permitted by applicable SEC and NASDAQ rules and regulations. 

Item 11. 

Executive Compensation 

Information relating to our executive compensation is set forth under the caption “Executive Compensation” of our 
2017 Proxy Statement.  Such information is incorporated herein by reference. 

14

 
     
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 

Our information relating to this item is set forth under the caption “Security Ownership of Certain Beneficial Owners 
and Management” of our 2017 Proxy Statement.  Such information is incorporated herein by reference. 

Information concerning our equity compensation plan is included in Part II of this report under the caption “Equity 
Compensation Plan Information.” 

Item 13.  Certain Relationships and Related Transactions, and Director Independence 

Our information relating to this item is set forth under the captions “Corporate Governance – Review of Transactions 
with Related Persons” and “Corporate Governance - Board and Board Committee Information” of our 2017 Proxy 
Statement.  Such information is incorporated herein by reference. 

Item 14.  Principal Accounting Fees and Services 

Our information relating to this item is set forth under the caption “Independent Public Auditors” of our 2017 Proxy 
Statement.  Such information is incorporated herein by reference. 

Item 15.  Exhibits, Financial Statement Schedules 

(a) 

   Documents filed as a part of this Report: 

PART IV 

(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, 2016 and 2015
Consolidated Statements of Operations for each of the two years in the period ended December 31, 
2016
Consolidated Statements of Comprehensive (Loss) Income for each of the two years ended in the 
period ended December 31, 2016 
Consolidated Statements of Changes in Stockholders’ Equity for each of the two years in the period 
ended December 31, 2016 
Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 
2016
Notes to Consolidated Financial Statements

(2)  Financial Statement Schedule: 

Schedule II – Valuation and Qualifying Accounts for each of the two years in the period ended 
December 31, 2016

(b)

3.1 

3.2 

3.3 

4.1 

Exhibits:

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). 

By-laws of the Registrant as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s 
Form 8-K (Commission File No. 0-14938) filed December 11, 2015). 

Certificate of Designation of Series A Participating Preferred Stock of Stanley Furniture Company, 
Inc. (incorporated by reference to Exhibit 3.1 to Registrant’s Form 8-K (Commission Rule No. 0-
14938) filed December 6, 2016). 

The Certificate of Incorporation, By-laws and Certificate of Designation of Series A Participating 
Preferred Stock of the Registrant as currently in effect (incorporated by reference to Exhibits 3.1, 3.2 
and 3.3 hereto). 

15

 
     
4.2

4.3

10.1 

10.2 

10.3 

10.4 

10.5 

10.6 

10.7 

10.8 

10.9 

10.10 

10.11 

10.12 

Rights Agreement, dated as of December 5, 2016, between Stanley Furniture Company, Inc. and 
Continental Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 
4.1 to Registrant’s Form 8-K (Commission Rule No. 0-14938) filed December 6, 2016). 

Amendment No. 1, dated as of January 30, 2017, to the Rights Agreement, dated as of December 5, 
2016, between Stanley Furniture Company, Inc. and Continental Stock Transfer & Trust Company, 
as Rights Agent (incorporated by reference to Exhibit 4.1 to Registrant’s Form 8-K (Commission 
Rule No. 0-14938) filed January 30, 2017). 

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).(1)

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).(1)

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 
10.1 to the Registrant’s Form 8-K (Commission File No. 0-14938), filed December 10, 2014.(1)

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).(1)

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).(1)

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).(1)

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).(1)

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).(1)

Form of Indemnification Agreement between the Registrant and each of its Directors (incorporated by 
reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed on 
September 25, 2008). 

Change in Control Protection Agreement, originally dated December 11, 2009, by and between 
Stanley Furniture Company, Inc. and Glenn Prillaman and amended and restated effective 
December 11, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K 
(commission File No. 0-14938) filed on December 11, 2015). (1)

Change in Control Protection Agreement, dated December 11, 2015, by and between Stanley 
Furniture Company, Inc. and Anita Wimmer (incorporated by reference to Exhibit 10.2 to the 
Registrant’s Form 8-K (commission File No. 0-14938) filed on December 11, 2015). (1)
2008 Incentive Compensation Plan (incorporated by reference to Exhibit A to the Registrant’s Proxy 
Statement (Commission File No. 0-14938) for the annual meeting of stockholders held on April 15, 
2008).(1)

(1)

Management contract or compensatory plan

16

 
     
10.13 

10.14 

10.15 

10.16 

10.17 

10.18 

10.19 

10.20 

10.21 

10.22 

10.23 

10.24 

10.25 

10.26 

Form of Stock Option Award under 2008 Incentive Plan (Officers) (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, 2008).(1)

Form of Stock Option Award under 2008 Incentive Plan (Directors) (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, 2008).(1)

Form of Restricted Stock Grant under 2008 Incentive Plan (Officers) (incorporated by reference to 
Exhibit 10.16 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended 
December 31, 2012.(1)

Form of Restricted Stock Award under 2008 Incentive Plan (Directors) (incorporated by reference to 
Exhibit 10.17 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended 
December 31, 2012). (1)

2012 Incentive Compensation Plan (incorporated by reference to Exhibit A to the Registrant’s Proxy 
Statement (Commission File No. 0-14938) for the annual meeting of stockholders held on April 18, 
2012). (1)

Form of Stock Option Award under 2012 Incentive Plan (Officers) (incorporated by reference to 
Exhibit 10.19 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended 
December 31, 2012). (1) 

Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (time vesting) (incorporated by 
reference to Exhibit 10.20 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year 
ended December 31, 2012). (1)

Form of Restricted Stock Award under 2012 Incentive Plan (Directors) (incorporated by reference to 
Exhibit 10.21 to Registrant’s Form 10-K (Commission File No. 0-14938) for year ended 
December 31, 2014). (1)

Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (time and performance vesting) 
(incorporated by reference to Exhibit 10.22 to Registrant’s Form 10-K (Commission File No. 0-14938) 
for year ended December 31, 2014).(1)

Form  of  Restricted  Stock  Award  under  2012  Incentive  Plan  (Officers)  (performance  vesting) 
(incorporated by reference to Exhibit 10.23 to Registrant’s Form 10-K (Commission File No. 0-14938) 
for year ended December 31, 2014).(1)

Agreement dated February 12, 2015 by and among Stanley Furniture Company, Inc. and the entities 
and  natural  persons  listed  on  Exhibit A  thereto  (incorporated  by  reference  to  Exhibit  99.1  to 
Registrant’s Form 8-K (Commission File No. 0-14938) filed February 12, 2015). 

Agreement dated January 7, 2016 by and among Stanley Furniture Company, Inc. and the entities 
and  natural  persons  listed  on  Exhibit  A  thereto  (incorporated  by  reference  to  Exhibit  10.1  to 
Registrant’s Form 8-K (Commission File No. 0-14938) filed January 8, 2016). 

Credit Agreement, dated as of October 25, 2016, by and between Stanley Furniture Company, Inc. 
and Well Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 to Registrant’s 
Form 10-Q (Commission Rule No. 0-14938) for the quarter ended October 1, 2016). 

Security Agreement, dated as of October 25, 2016, by and among Stanley Furniture Company, Inc., 
Stanley  Furniture  Company  2.0,  LLC  and  Wells  Fargo  Bank,  National  Association  (incorporated  by 
reference to Exhibit 10.2 to Registrant’s Form 10-Q (Commission Rule No. 0-14938) for the quarter 
ended October 1, 2016). 

(1)

Management contract or compensatory plan

17

 
     
10.27 

10.28 

10.29 

10.30 

Amendment  effective  as  of  November  30,  2016  to  Employment  Agreement  between  Stanley 
Furniture  Company,  Inc.  and  Glenn  Prillaman  dated  July 22,  2016  (incorporated  by  reference  to 
Exhibit 10.1 to Registrant’s Form 8-K (Commission Rule No. 0-14938) filed December 2, 2016).(1)

Amendment effective as of November 30, 2016 to Change in Control Protection Agreement between 
Stanley Furniture Company, Inc. and Anita Wimmer effective as of December 11, 2015 (incorporated 
by  reference  to  Exhibit  10.2  to  Registrant’s  Form  8-K  (Commission  Rule  No.  0-14938)  filed 
December 2, 2016).(1)

Agreement, dated as of January 30, 2017, by and among Stanley Furniture Company, Inc. and the 
entities and natural persons listed on Exhibit A thereto (incorporated by reference to Exhibit 10.1 to 
Registrant’s Form 8-K (Commission Rule No. 0-14938) filed January 30, 2017). 

Amendment No. 1, dated as of January 30, 2017, to the Agreement, dated as of January 7, 2016, by 
and among Stanley Furniture Company, Inc. and the entities and natural persons listed on Exhibit A 
thereto (incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K (Commission Rule No. 0-
14938) filed January 30, 2017). 

21 

List of Subsidiaries. (2)

23.1 

Consent of BDO USA, LLP. (2)

31.1 

31.2 

32.1 

32.2 

101 

Certification by Glenn Prillaman, our Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) of 
the Securities Exchange Act of 1934, as amended. (2)

Certification by Anita W. Wimmer, our Principal Financial Officer, pursuant to Rule 13a-14(a)/15d-
14(a) of the Securities Exchange Act of 1934, as amended. (2)

Certification by Glenn Prillaman, 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.(3)

Certification by Anita W. Wimmer, our Principal Financial Officer, pursuant to 18 U.S.C. Section 
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(3)

The following financial statements from the Company's Annual Report on Form 10-K for the year 
ended December 31, 2016, formatted in Extensible Business Reporting Language (“XBRL”): (i) 
consolidated balance sheets, (ii) consolidated statements of operations, (iii) condensed consolidated 
statements of comprehensive (loss) income, (iv) condensed consolidated statements of cash flows, 
(v) the notes to the consolidated financial statements, and (vi) document and entity information. (2)

(1) 
(2) 
(3) 

Management contract or compensatory plan  
Filed Herewith 
Furnished Herewith 

Item 16.  10-K Summary 

None.

18

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

SIGNATURES 

February 22, 2017 

STANLEY FURNITURE COMPANY, INC. 

By: 

/s/Glenn Prillaman 
Glenn Prillaman 
President and Chief Executive Officer 

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

Signature 

Title 

Date 

/s/John D. Lapey 
(John D. “Ian” Lapey) 

/s/Glenn Prillaman 
(Glenn Prillaman) 

/s/Anita W. Wimmer 
(Anita W. Wimmer) 

/s/Michael P. Haley 
(Michael P. Haley) 

/s/T. Scott McIlhenny, Jr. 
(T. Scott McIlhenny, Jr.) 

/s/Jeffrey S. Gilliam 
(Jeffrey S. Gilliam) 

/s/Justyn R. Putnam 
(Justyn R. Putnam) 

/s/Steven A. Hale 
(Steven A. Hale) 

Chairman and Director 

February 22, 2017 

President and Chief Executive 
Officer (Principal Executive Officer) 
and Director 

Vice-President – Finance/Corporate 
Controller (Principal Financial and 
Accounting Officer) 

Director 

Director 

Director 

Director 

Director 

February 22, 2017 

February 22, 2017 

February 22, 2017 

February 22, 2017 

February 22, 2017 

February 22, 2017 

February 22, 2017 

19

 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STANLEY FURNITURE COMPANY, INC. 
ANNUAL REPORT ON FORM 10-K 
FOR THE YEAR ENDED DECEMBER 31, 2016
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

Page 

Report of Independent Registered Public Accounting Firm ............................... 

F-2 

Consolidated Financial Statements 

Consolidated Balance Sheets as of December 31, 2016 and 2015 .................. 

F-4 

Consolidated Statements of Operations for each of the two years in the period 
  ended December 31, 2016 ...............................................................................  

Consolidated Statements of Comprehensive (Loss) Income for each of the two  
  years in the period ended December 31, 2016 ................................................  

Consolidated Statements of Changes in Stockholders’ Equity for each of the 
  two years in the period ended December 31, 2016 ......................................... 

Consolidated Statements of Cash Flows for each of the two years in the  
  period ended December 31, 2016 .................................................................... 

F-5 

F-6 

F-7 

F-8 

Notes to Consolidated Financial Statements ..................................................... 

F-9 

Financial Statement Schedule 

Schedule II – Valuation and Qualifying Accounts for each of the two 
  years in the period ended December 31, 2016 ................................................ 

S-1 

      F-1

 
 
 
 
 
 
Report of Independent Registered Public Accounting Firm 

Board of Directors and Stockholders 
Stanley Furniture Company, Inc. 
High Point, North Carolina 

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Stanley  Furniture  Company,  Inc.  as  of 
December 31, 2016 and 2015 and the related consolidated statements of operations and comprehensive (loss) 
income, stockholders’ equity, and cash flows for the years ended December 31, 2016 and 2015. In connection 
with our audits of the financial statements, we have also audited the financial statement schedule listed in the 
accompanying  index.    These  financial  statements  and  schedule  are  the  responsibility  of  the  Company’s 
management.  Our responsibility is to express an opinion on these financial statements and schedule based on 
our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board 
(United  States).   Those standards require  that  we plan  and  perform  the  audit to  obtain  reasonable  assurance 
about whether the financial statements are free of material misstatement.  The Company is not required to have, 
nor  were  we  engaged  to  perform,  an  audit  of  its  internal  control  over  financial  reporting.    Our  audits  included 
consideration  of  internal  control  over  financial  reporting  as  a  basis  for  designing  audit  procedures  that  are 
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 
Company’s  internal  control  over  financial  reporting.  Accordingly,  we  express  no  such  opinion.    An  audit  also 
includes  examining,  on  a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in  the  financial 
statements, assessing the accounting principles used and significant estimates made by management, as well 
as  evaluating  the  overall  presentation  of  the  financial  statements  and  schedule.    We  believe  that  our  audits 
provide a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the 
financial  position  of  Stanley  Furniture  Company,  Inc.  at  December  31,  2016  and  2015,  and  the  results  of  its 
operations and its cash flows for each of the two years in the period ended December 31, 2016, in conformity 
with accounting principles generally accepted in the United States of America. 

Also,  in  our  opinion,  the  financial  statement  schedule,  when  considered  in  relation  to  the  basic  consolidated 
financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. 

/s/ BDO USA, LLP 
Raleigh, North Carolina  

February 22, 2017  

      F-2

 
STANLEY FURNITURE COMPANY, INC. 
CONSOLIDATED BALANCE SHEETS 
(in thousands, except share data) 

ASSETS
Current assets: 
  Cash ........................................................................................  
  Restricted cash .......................................................................  
  Accounts receivable, less allowances of $272 and $404 .......  
Inventory, net ..........................................................................  
Prepaid expenses and other current assets ...........................  
Total current assets ..............................................................  

December 31, 

2016 

2015 

$   4,212
663 
3,492 
22,951 
729 
32,047 

$   6,497 
663 
6,925 
20,934 
959 
35,978 

Property, plant and equipment, net .............................................  
Cash surrender value of life insurance policies, net ...................  
Other assets ................................................................................  
  Total assets .............................................................................  

1,606 

-
2,868     

$ 36,521 

1,787 
22,253 
        3,128 
$  63,146 

LIABILITIES
Current liabilities: 
  Accounts payable ....................................................................
  Accrued salaries, wages and benefits ....................................  
  Deferred revenue ....................................................................  
  Other accrued expenses .........................................................  
Total current liabilities ...........................................................  

$   5,674
1,371 
759 
593     

8,397 

$    5,441 
1,367 
442 
        334 
7,584 

Deferred compensation ...............................................................  
Supplemental retirement plan .....................................................  
Other long-term liabilities .............................................................
Total liabilities ..............................................................................  

4,219 
1,724 
2,199     

16,539 

4,301 
1,797 
         1,812 
15,494 

Commitments and Contingencies (Footnote 10) 

STOCKHOLDERS’ EQUITY 
Common stock, $0.02 par value, 25,000,000 shares authorized, 
  14,730,805 and 14,906,831 shares issued and outstanding 

at December 31, 2016 and 2015, respectively .......................  
Capital in excess of par value .....................................................  
Retained earnings .......................................................................  
Accumulated other comprehensive loss .....................................  
  Total stockholders’ equity .......................................................  
Total liabilities and stockholders’ equity ...............................  

275 
16,840 
5,129 
(2,262)
19,982     

$ 36,521 

283 
17,521 
32,023 
         (2,175)
        47,652 
$  63,146 

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

      F-3

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

Net sales .......................................................................

For the Years Ended 
December 31, 

2016 
$ 44,574

2015 
$ 57,364 

Cost of sales .................................................................  

36,160  

   43,679 

  Gross profit  ................................................................  

8,414

13,685 

Selling, general and administrative expenses ..............  

13,982  

   12,661 

  Operating (loss) income ..............................................  

(5,568)

1,024 

Income from Continued Dumping and Subsidy  
  Offset Act, net ...........................................................  
Other income, net .........................................................  
Interest expense, net ....................................................  

1,103
26
101  

5,308 
42 
     947 

  (Loss) income from continuing operations before income 
taxes .......................................................................  

(4,540)

5,427 

Income tax expense .....................................................  

718  

         76 

  Net (loss) income from continuing operations ............  
  Net (loss) from discontinued operations .....................  

(5,258)

-

5,351 
(11) 

  Net (loss) income ........................................................  

$  (5,258)

$  5,340 

Basic (loss) income per share: 

(Loss) income from continuing operations .... 
(Loss) from discontinued operations ............. 
Net (loss) income ...................................... 

Diluted (loss) income per share: 

(Loss) income from continuing operations .... 
(Loss) from discontinued operations ............. 
Net (loss) income ...................................... 

Weighted average shares outstanding: 
  Basic ...........................................................................  
  Diluted .........................................................................  

$      (.37)

$      .37 

-

-

$      (.37)

$      .37 

$      (.37)

-

$      (.37)

$     .37 

-

$     .37 

14,139  
14,139  

   14,273 
   14,542 

Dividend per share: 
  Special dividend………………………………………… 

$      1.50

-

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

      F-4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
STANLEY FURNITURE COMPANY, INC. 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME  
 (in thousands) 

For the Years Ended 
December 31, 

2016 

2015 

Net (loss) income ..................................................................  

  $ (5,258) 

  $ 5,340

Other comprehensive (loss) income: 

Amortization of prior service credit ..................................  
Actuarial loss (gain) .........................................................  
Amortization of actuarial loss ..........................................  
Adjustments to net periodic postretirement loss (benefit) ..  
Comprehensive (loss) income ...............................................  

-
174
(87)
87
$ (5,345)

92 
(497) 
(117) 
(522) 
$ 5,862  

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

      F-5

 
 
STANLEY FURNITURE COMPANY, INC. 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY 
For each of the two years in the period ended December 31, 2016
(in thousands) 

Common Stock 

Capital in 

Excess of 

Accumulated 

Other 

Retained 

  Comprehensive 

Shares

Amount 

  Par Value 

Earnings 

(Loss) Income 

Total 

Balance at December 31, 2014 ............................  

14,780 

283 

16,710 

26,683 

 (2,697)

40,979 

Net income ............................................................  

Other comprehensive income ...............................  

- 

- 

Restricted stock grants .........................................  

     229 

Restricted stock forfeited ......................................  
Stock purchase and retirement for tax 
withholdings on vesting of restricted awards ........  

Stock-based compensation ...................................  

    (98)

(4)

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(13)

824  

5,340 

- 

- 

- 

- 

- 

- 

522 

- 

- 

- 

- 

5,340 

522 

- 

- 

(13)

         824 

Balance at December 31, 2015 ............................  

14,907 

$    283 

$ 17,521 

$  32,023 

$    (2,175)

$ 47,652 

Net loss  ...............................................................  

Other comprehensive loss .................................  

Special dividends declared ................................  

Restricted stock grants ......................................  

Stock purchase and retirement .........................  
Stock purchase and retirement for tax 
withholdings on vesting of restricted awards .  

Stock-based compensation ...............................  

-

-

-

231   

(400)

(7)

- 

- 

- 

- 

- 

(8) 

- 

- 

- 

- 

- 

- 

(1,004)

(15)

 338 

(5,258) 

- 

(21,636) 

- 

- 

- 

- 

- 

(87) 

- 

- 

- 

- 

- 

(5,258) 

(87) 

(21,636) 

- 

(1,012)

(15)

 338   

Balance at December 31, 2016...........................  

14,731 

$   275   

$16,840 

$  5,129   

$   (2,262)  

$19,982 

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

      F-6

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

For the Years Ended 
December 31, 

2016

2015 

Cash flows from operating activities: 
  Cash received from customers .........................................  
  Cash paid to suppliers and employees .............................  
  Cash from Continued Dumping and Subsidy  

Offset Act, net .................................................................  

  Interest paid, net ...............................................................
  Income tax payments .......................................................  
  Net cash (used in) provided by operating activities ........  

Cash flows from investing activities: 
  Proceeds from surrender of corporate-owned life 

insurance policies ............................................................
  Decrease in restricted cash ..............................................  
  Proceeds from sale of assets ...........................................  
  Purchase of other assets ..................................................  
  Net cash provided by investing activities ........................  

Cash flows from financing activities: 
  Stock purchase and retirement for tax withholdings on 

vesting of restricted awards ............................................  
  Payments on insurance policy loans ................................  
  Payment of dividends .......................................................  
  Purchase and retirement of common stock ......................  
  Net cash used by financing activities .............................  

Cash flows from discontinued operations: 
  Cash (used in) provided by operating activities ................  
  Net cash (used in) provided by discontinued operations  

Net (decrease) increase cash.............................................  

Cash at beginning of year ..................................................  

$48,248   
(51,243)

1,103 
(191)
     (510)
(2,593)

28,139 

-
-
(14)
28,125

(15)
(5,495)
(21,282)
(1,012)
(27,804)

(13)
(13)

(2,285) 

6,497 

$   56,271 
(55,898) 

5,308 
(987) 
      (105) 
4,589 

- 
527 
4 
(15) 
 516 

(13) 
(5,461) 

- 
- 

(5,474) 

1,282 
1,282 

913 

5,584 

  Cash at end of year ........................................................  

$4,212   

$    6,497 

Reconciliation of net (loss) income to net cash (used in) provided by operating activities:  

Net (loss) income 
  Loss from discontinued operations .................................. 
  Depreciation ..................................................................... 
  Amortization ..................................................................... 
Stock-based compensation ............................................. 
  Other, net ......................................................................... 
  Changes in assets and liabilities: 

Accounts receivable ....................................................... 
Inventories ..................................................................... 
Prepaid expenses and other assets ............................... 
Accounts payable ........................................................... 
Accrued salaries, wages and benefits ............................ 
  Other accrued expenses ................................................ 
  Other long-term liabilities ............................................... 
Net cash (used in) provided by operating activities ......

$(5,258)   

-
181
289
338  
-

3,433
(2,017)
(176)
233
(250)
 235
399

$(2,593)  

$    5,340 
11 
185 
285 
  824 
14 

(1,072) 
3,282 
(1,747) 
(542) 
177 
  (1,109) 
(1,059) 
$   4,589 

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

      F-7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STANLEY FURNITURE COMPANY, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

1.       Summary of Significant Accounting Policies

Organization and Basis of Presentation 
The consolidated financial statements include Stanley Furniture Company, Inc. and our wholly owned subsidiaries.  
All significant inter-company accounts and transactions have been eliminated.  We are a leading design, marketing 
and sourcing resource in the middle-to-upscale segment of the wood furniture residential market. 

For financial reporting purposes, we operate in one reportable segment where substantially all revenues are from 
the sale of residential wood furniture products. 

Cash 
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash 
equivalents.  

Restricted Cash 
Restricted cash includes collateral deposits required under the Company’s line of credit agreement, to 
guarantee the Company’s workers compensation insurance policy.  The restricted cash balance is expected to 
mature over the next twelve months. 

Accounts Receivable 
Substantially all of our accounts receivable are due from retailers and dealers that sell residential home 
furnishings, which consist of a large number of entities with a broad geographic dispersion. We continually 
perform credit evaluations of our customers and generally do not require collateral. Once we have determined 
the receivable is uncollectible, it is charged against the allowance for doubtful accounts.  In the event a 
receivable is determined to be potentially uncollectible, we engage collection agencies to attempt to collect 
amounts owed to us after all internal collection attempts have ended.  

Revenue Recognition 
Sales are recognized when title and risk of loss pass to the customer, which typically occurs at the time of 
shipment.  In some cases, however, title does not pass until the shipment is delivered to the customer.  
Revenue includes amounts billed to customers for shipping.  Provisions are made at the time revenue is 
recognized for estimated product returns and for incentives that may be offered to customers.  Amounts 
collected in advance of shipment are reflected as deferred revenue on the consolidated balance sheet and then 
recognized as revenue as the risk of loss passes to the customer. 

Inventories 
Inventories are stated at the lower of cost (first-in, first-out) or market.  Cost is determined based solely on those 
charges incurred in the acquisition and production of the related inventory (i.e. material, freight, labor and 
overhead).  Management regularly examines inventory to determine if there are indicators that the carrying value 
exceeds its net realizable value.  Experience has shown that the most significant indicators of the need for 
inventory markdowns are the age of the inventory and the planned discontinuance of certain items.  As a result, we 
provide inventory valuation write-downs based upon established percentages based on age of the inventory and 
planned discontinuance of certain items.  As of December 31, 2016 and 2015, we had approximately $23.0 million 
and $20.9 million of finished goods, net of a valuation allowance of $1.3 million and $1.4 million, respectively.  

Property, Plant and Equipment 
Depreciation of property, plant and equipment is computed using the straight-line method based upon the 
estimated useful lives.  Depreciation expense is charged to cost of sales or selling, general and administrative 
expenses based on the nature of the asset.  Gains and losses related to dispositions and retirements are included 
in income.  Maintenance and repairs are charged to income as incurred; renewals and betterments are capitalized.  
Assets are reviewed for possible impairment when events indicate that the carrying amount of an asset may not 
be recoverable.  Assumptions and estimates used in the evaluation of impairment may affect the carrying value 
of property, plant and equipment, which could result in impairment charges in future periods.  Our depreciation 
policy reflects judgments on the estimated useful lives of assets. 

      F-8

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

1.

Summary of Significant Accounting Policies (continued) 

Capitalized Software Cost 
We amortize purchased computer software costs using the straight-line method over the estimated economic lives 
of the related products.  Unamortized cost at December 31, 2016 and 2015 was approximately $2.4 million and 
$2.7 million, respectively, and is included in other assets. 

Cash Surrender Value of Life Insurance Policies 
At December 31, 2015, we owned 27 life insurance policies as a funding arrangement for our deferred 
compensation plan discussed in Note 7.  These corporate-owned policies had a net cash surrender value of $22.3 
million.  We had $5.5 million in loans and accrued interest outstanding against the cash surrender value.  The 
growth in cash surrender value of these corporate-owned policies, net of related premiums and plan administrative 
costs, is included in operating income.  Interest on the insurance policy loans is recorded as interest expense 
below operating income. In the first quarter of 2016, we liquidated the corporate-owned life insurance policies 
with cash surrender value of $28.1 million.  We received $22.4 million in proceeds, net of outstanding loans and 
accrued interest.  

Actuarially valued benefit accruals and expenses
We maintain three actuarially valued benefit plans.  These are our deferred compensation plan, our 
supplemental employee retirement plan and our postretirement health care benefits program.  The liability for 
these programs and the majority of their annual expense are developed from actuarial valuations.  Inherent in 
these valuations are key assumptions, including discount rates and mortality projections, which are usually 
updated on an annual basis near the beginning of each year.  We are required to consider current market 
conditions, including changes in interest rates in making these assumptions.  Changes in projected liability and 
expense may occur in the future due to changes in these assumptions.  The key assumptions used in 
developing the projected liabilities and expenses associated with the plans are outlined in Note 7 of the 
consolidated financial statements. 

Income Taxes 
Deferred income taxes are determined based on the difference between the consolidated financial statement and 
income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are 
expected to reverse.  Deferred tax expense represents the change in the deferred tax asset/liability balance. 
Income tax credits are reported as a reduction of income tax expense in the year in which the credits are 
generated.  A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be 
realized.  Interest and penalties on uncertain tax positions are recorded as income tax expense. 

Fair Value of Financial Instruments 
Accounting for fair value measurements requires disclosure of the level within the fair value hierarchy in which fair 
value measurements in their entirety fall, segregating fair value measurements using quoted prices in active 
markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant 
unobservable inputs (Level 3).  The fair value of receivables and payables approximate the carrying amount 
because of the short maturity of these instruments. 

Earnings per Common Share 
Basic earnings per share is computed based on the weighted average number of common shares outstanding.  
Diluted earnings per share includes any dilutive effect of outstanding stock options and restricted stock 
calculated using the treasury stock method. 

      F-9

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

1.

Summary of Significant Accounting Policies (continued) 

Stock-Based Compensation 
We record share-based payment awards at fair value on the grant date of the awards, based on the estimated 
number of awards that are expected to vest, over the vesting period.  The fair value of stock options was 
determined using the Black-Scholes option-pricing model.  The fair value of the restricted stock awards was 
based on the closing price of the Company’s common stock on the date of the grant.  For awards with 
performance conditions, we recognize compensation cost over the expected period to achieve the performance 
conditions, provided achievement of the performance conditions are deemed probable. 

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

Reclassifications 
As of December 31, 2015, the Company reclassified approximately $442,000 of amounts collected in advance 
of shipment from accounts payable to deferred revenue.  As both accounts payable and deferred revenue are 
presented as current liabilities, management does not believe there to be a material impact on the consolidated 
financial statements taken as a whole. 

New Accounting Pronouncements 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement 
of Credit Losses on Financial Instruments (“ASU 2016-13”).  The amendments in ASU 2016-13 require the 
measurement of all expected credit losses for financial assets held at the reporting date based on historical 
experience, current conditions, and reasonable and supportable forecasts.  In addition, ASU 2016-13 amends 
the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit 
deterioration.  The amendment is effective for public entities for annual reporting periods beginning after 
December 15, 2019, however early application is permitted for reporting periods beginning after December 15, 
2018.  The Company does not anticipate ASU 2016-13 to have a material impact to the consolidated financial 
statements. 

In February 2016, the FASB issued its final lease accounting standard, FASB Accounting Standard Codification 
("ASC"), Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize a right-of-use asset and a 
lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease).  The 
lease liability will be equal to the present value of lease payments and the right-of -use asset will be based on 
the lease liability, subject to adjustment such as for initial direct costs.  For income statement purposes, the new 
standard retains a dual model similar to ASC 840, requiring lases to be classified as either operating or finance.  
For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for 
operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to 
current accounting by lessees for capital leases under ASC 840).  Our leases as of December 31, 2016, 
principally relate to real estate leases for corporate office, showrooms and warehousing.  The new standard will 
be effective for the first quarter of our fiscal year ending December 31, 2019. Early adoption is permitted. We 
are evaluating the effect that ASU 2016-02 by reviewing all long-term leases and determining the potential 
impact it will have on our consolidated financial statements and related disclosures. The standard is to be 
applied under the modified retrospective method, with elective reliefs, which requires application of the new 
guidance for all periods presented. 

      F-10

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

1.

Summary of Significant Accounting Policies (continued) 

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting
(“ASU 2016-09”).  The amendments in ASU 2016-09 simplify several aspects of the accounting for share-based 
payment transactions.  The new guidance requires that excess tax benefits (which represent the excess of 
actual tax benefits receive at the date of vesting or settlement over the benefits recognized over the vesting 
period or upon issuance of share-based payments) be recorded in the income statement as a reduction of 
income or income taxes when the awards vest or are settled.  The new guidance also requires excess tax 
benefits to be classified as an operating activity in the statement of cash flows rather than as a financing activity.   
The new standard will be effective for the first quarter of our fiscal year ending December 31, 2017.  The 
adoption of this new standard will reduce our reported income taxes and will increase cash flows from operating 
activities; however, the amounts of that reduction/increase is dependent upon the underlying vesting or exercise 
activity and related future stock prices. 

In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230).  The guidance is intended to 
reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the 
statement of cash flows.  This standard will be effective for the first quarter of our fiscal year ending December 
31, 2018.  Early adoption is permitted, provided all amendments are adopted in the same period.  In November 
2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.  We have reviewed 
the standard and determined that our statement of cash flows will include changes in restricted cash with related 
disclosures.  The guidance requires application using a retrospective transition method.  We do not anticipate 
ASU 2016-15 or ASU 2016-18 to have a material impact to our consolidated financial statements. 

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory
(“ASU 2015-11”). The amendments in ASU 2015-11 require an entity to measure in scope inventory at the lower 
of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of  
business, less reasonable predictable costs of completion, disposal, and transportation. Subsequent 
measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory 
method. The amendments do not apply to LIFO or the retail inventory method. The amendments apply to all 
other inventory, which includes inventory that is measured using first-in, first-out (“FIFO”) or average cost.  The 
amendment is effective for public entities for fiscal years beginning after December 15, 2016 and should be 
applied prospectively, however early adoption is permitted. The Company does not anticipate ASU 2015-11 to 
have a material impact to the consolidated financial statements. 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  This 
standard is intended to improve, and converge with international standards, the financial reporting requirements 
for revenue from contracts with customers.  The new standard will be effective for the first quarter of our fiscal
year ending December 31, 2018.  Early adoption is permitted but we do not expect to early adopt this new 
accounting pronouncement.  In preparation for this new standard, we are identifying all forms of agreements 
with our customers and will begin to evaluate the provisions in such agreements in light of the five-step model 
specified by the new guidance.  The five-step model includes: 1) determination of whether a contract – an 
agreement between two or more parties that creates legally enforceable rights and obligations exists; 2) 
identification of the performance obligations in the contract; 3) determination of the transaction price; 4) 
allocation of the transaction price to the performance obligations in the contract; and 5) recognition of revenue 
when (or as) the performance obligation is satisfied.  We are also evaluating the impact of the new standard on 
certain common practices currently employed by us and others in our industry, such as co-operative advertising, 
pricing allowances and consumer coupons.  We are in the initial phases and have not yet determined the impact 
of the new standard on our financial statements or whether we will adopt on a full or modified retrospective basis 
in the first quarter of our fiscal year ending December 31, 2018. 

      F-11

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

2.

Property, Plant and Equipment 

Machinery and equipment .................................. 
Leasehold improvements ................................... 
Property, plant and equipment, at cost .......... 
Less accumulated depreciation ......................... 
Property, plant and equipment, net ................ 

3.       Debt

Depreciable
lives 
(in years) 
5 to 12 
15

(in thousands) 

2016 
$ 2,675 
1,833 
4,508 
2,902 
$ 1,606  

2015
$ 2,675
1,833
4,508
2,721
$  1,787

We have a secured $6.0 million revolving credit facility with Wells Fargo Bank, National Association with an 
excess availability requirement of $2.0 million resulting in maximum borrowings of $4.0 million under the facility, 
subject to borrowing base eligibility requirements.  The credit facility matures in October 2018 and is secured by 
our accounts receivable, inventory and certain other assets. Borrowings under the credit facility bear interest at 
a variable per annum rate equal to the daily three month London Bank Interbank Offered Rate plus 3.5%.   

The credit facility contains covenants that, among other things limit our ability to incur certain types of debt or 
liens, pay dividends, enter into mergers and consolidations or use proceeds of borrowing for other than 
permitted uses.  The credit facility also includes a covenant requiring us to maintain a minimum fixed charge 
ratio of not less than 1.1 to 1.0 for the trailing twelve months with an initial compliance date at December 31, 
2017.  

At December 31, 2016, no borrowings were outstanding under this revolving credit facility.   

4.

Income Taxes 

The provision for income tax expense (benefit) consists of (in thousands): 

2016 

2015 

Current:
  Federal ............................................................... 
  State ................................................................... 
  Total current ..................................................... 
Deferred:
  Federal ............................................................... 
  State ................................................................... 
  Total deferred ................................................... 
Income tax expense (benefit) ........................ 

$ 525
193 
718 

-
-
-
$ 718 

$  52
24 
76 

-
-
-
$ 76 

      F-12

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

4.

Income Taxes (continued)

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

Federal statutory rate ...........................................  
State tax, net of federal benefit ............................  
State tax credits and adjustments ........................  
Change in cash surrender value 
  of life insurance policies ....................................  
Valuation allowance increase (decrease) ............  
Other, net .............................................................  
  Effective income tax rate ....................................  

2016 

35.0%
(6.1) 
1.8

(185.1) 
143.2 
(4.6) 
  (15.8%)

2015 

35.0%
.6
(1.9) 

(9.0) 
(23.6) 
.3
  1.4%

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at December 31 
follow (in thousands): 

Noncurrent deferred tax assets (liabilities): 
  Accounts receivable .............................................................. 
  Other accrued expenses ....................................................... 
  Property, plant and equipment .............................................. 
  Employee benefits .................................................................
Contribution carryforward ...................................................... 
 AMT credit ............................................................................. 
  Net operating loss ................................................................. 
  Gross non-current deferred tax assets ............................... 
  Less valuation allowance .................................................... 
 Net noncurrent deferred tax assets  ...................................... 

2016 

2015 

$ 99  
587  
  (1,190)
3,979

181  
1,205  
7,727
12,588
(12,588)

$       150
         248
  (1,255)
4,252

278  
676  

14,845
19,194
(19,194)

$          - 

$          - 

We have U.S. federal net operating loss carryforwards of approximately $20.6 million which are available to 
reduce future taxable income.  The federal net operating loss will begin expiring in 2033.  We have combined 
state net operating loss carryforwards of $18.4 million that will expire at various times beginning in 2027. 

During 2016, we recorded a non-cash credit to our valuation allowance of $6.6 million against our December 31, 
2016 deferred tax assets.  The primary assets which are covered by this valuation allowance are employee 
benefits and net operating losses in excess of the amounts which can be carried back to prior periods. The 
valuation allowance was calculated in accordance with the provisions of ASC 740, Income Taxes, which 
requires an assessment of both positive and negative evidence when measuring the need for a valuation  
allowance.  Our results over the most recent three-year period were heavily affected by our business 
restructuring activities. Our cumulative loss, excluding income from the Continued Dumping and Subsidy Offset 
Act, in the most recent three-year period, in our view, represented sufficient negative evidence to require a 
valuation allowance.  We intend to maintain a valuation allowance until sufficient positive evidence exists to 
support its reversal, resulting in no deferred tax asset balance being recognized.  Should we determine that we 
will not be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax 
asset will be charged to income in the period such determination is made.   

      F-13

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

4.

Income Taxes (continued)

The unrecognized tax benefits activity for the year ended December 31 follows (in thousands): 

Unrecognized tax benefits balance at January 1  ............. 
Gross increases in tax positions of prior years 
Lapse of statute of limitations ............................................ 
   Unrecognized tax benefits balance at December 31  .... 

2016 
  $ 307 
164
-
  $ 471 

  2015 
$  309 
-
(2) 
$  307 

As of December 31, 2016 and 2015, we had approximately $97,000 and $76,000 of accrued interest related to 
uncertain tax positions, respectively. 

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $307,000 at 
December 31, 2016 and $200,000 at December 31, 2015. The 2010 through 2015 tax years remain open to 
examination by major taxing jurisdictions.     

5.       Stockholders’ Equity 

In addition to common stock, authorized capital includes 1,000,000 shares of “blank check” preferred stock.  
None was outstanding during the two years ended December 31, 2016.  The Board of Directors is authorized to 
issue such stock in series and to fix the designation, powers, preferences, rights, limitations and restrictions with 
respect to any series of such shares.  Such “blank check” preferred stock may rank prior to common stock as to 
dividend rights, liquidation preferences or both, may have full or limited voting rights and may be convertible into 
shares of common stock.

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

  Weighted average shares outstanding 

for basic calculation ................................................  
  Dilutive effect of stock options ..................................  
  Weighted average shares outstanding 

2016 

2015 

14,139
-

14,273 
269

for diluted calculation……………………………….. 

14,139

14,542 

In 2016, the dilutive effect of stock options and restricted shares was not recognized since we had a net loss.   
Approximately 1.1 million shares in 2016 and 1.2 million shares in 2015 that were issuable upon the exercise of 
stock options were not included in the diluted per share calculation because they were anti-dilutive.  In 2016 and 
2015, approximately 544,000 and 51,000 shares of restricted stock, respectively, were not included because 
they were anti-dilutive. 

We will repurchase common shares that are tendered by recipients of restricted stock awards to satisfy tax 
withholding obligations on vested restricted stock.  During 2016 and 2015, we repurchased 6,862 shares for 
approximately $15,000 and 4,622 shares for approximately $13,000, respectively. 

In July 2012, the Board of Directors authorized the purchase of up to $5.0 million of our common stock.  These 
repurchases may be made from time to time in the open market, in privately negotiated transactions, or 
otherwise, at prices the Company deems appropriate.  During 2016, we repurchased 400,000 shares of 
common stock for approximately $1.0 million.  In 2015, no repurchases of our common stock were made 
pursuant to this authorization.  As of December 31, 2016, we have $3.0 million remaining on this authorization to 
repurchase our common stock. 

      F-14

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

5.       Stockholders’ Equity (continued) 

During 2016, the Board of Directors declared two special dividends totaling $1.50 per share.  The first special 
dividend of $1.25 per share was distributed to shareholders on August 19, 2016 and the second special 
dividend of $.25 per share was distributed to shareholders on November 18, 2016. Approximately $354,000 in 
dividends payable relate to unvested restricted shares.  

In  the  fourth  quarter  of  2016,  the  Board  of  Directors  adopted  a  Rights  Agreement  designed  to  protect  the 
Company’s substantial net operating loss carryforwards.  Under the Rights Agreement, company stockholders 
of  record  as  of  December  15,  2016  received  one  preferred  share  purchase  right  for  each  share  of  common 
stock  they  owned  on  such  date.    If  a  person  or  group  acquires  beneficial  ownership  of  4.9%  or  more  of  the 
Company’s  outstanding  common  stock  (subject  to  certain  specified  exceptions),  the  rights  will  become 
exercisable.  The rights will also become exercisable if a person or group that already owns 4.9% or more of the 
Company’s  outstanding  common  stock  acquires  an  additional  1%  or  more  of  the  Company’s  outstanding 
common stock.  If the rights become exercisable, all holders of rights, other than the person or group triggering 
the rights, will be entitled to purchase Company common stock at a 50% discount.  Rights held by the person or 
group triggering the rights will become void and will not be exercisable.  The rights have a de minimis fair value. 

The rights trade with the Company’s common stock.  The Rights Agreement and the rights will expire on the first 
day after the Company’s 2017 annual meeting of stockholders unless the Company’s stockholders approve the 
Rights Agreement at the meeting, in which case the Rights Agreement and the rights will expire on December 5, 
2019 (unless the Company’s NOLs are utilized prior to that date).  The Board may amend the Rights Agreement 
in any way or redeem the rights at any time unless and until the rights are triggered. 

The  Rights  Agreement  includes  a  procedure  for  the  Board  to  consider  requests  to  exempt  a  particular 
transaction from triggering the exercisability of the rights under the Rights Agreement if the transaction (i) does 
not  (x)  create  a  significant  risk  of  the  Company’s  NOLs  being  impaired  or  (y)  constitute  a  default  under  the 
change-in-control covenant  included  in the  Company’s credit  facility  or (ii)  is  otherwise  in  the  best  interests of 
the Company. 

The  Company  entered  into  Amendment  No. 1,  dated  January 30,  2017,  to  the  Rights  Agreement.    This 
amendment amends the definition of Acquiring Person in the Rights Agreement to exclude any member of the 
Hale Group (Hale Partnership Fund, LP and certain affiliates that are parties to the agreement (Hale Agreement) 
dated January 30, 2017 with the Company), provided that any purchases made by members of the Hale Group 
after December 5, 2016 are made in compliance with Section 1(h) of the Hale Agreement. 

6.       Stock Based Compensation 

The Stanley Furniture Company, Inc. 2012 Incentive Compensation Plan (Incentive Compensation Plan) 
provides for the granting of performance grants, performance shares, stock options, restricted stock, restricted 
stock units, and stock appreciation rights to employees and certain service providers.  Under this plan, the 
aggregate number of common shares that may be issued through awards of any form is 1.6 million. In addition, 
shares authorized under the 2008 Incentive Compensation Plan are also available for issuance under the 
Incentive Compensation Plan if they are unissued or subsequently expire, are forfeited or terminate 
unexercised.  

Stock Options 
The options are issued at market value on the date of grant and have a term of 10 years from the grant date.   In 
general, employee grants vest ratably over a four to five-year period and Director grants vest after one year.  The 
fair value of each option is amortized into compensation expense on a straight-line basis between the grant date 
for the option and each vesting date.  We have estimated the fair value of all stock option awards as of the date of 
the grant by applying the Black-Scholes pricing valuation model.   

      F-15

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

6.       Stock Based Compensation (continued) 

The application of this valuation model involves assumptions that are judgmental and sensitive in the 
determination of compensation expense.  No options were granted in 2016 or 2015.   

Stock option activity for the two years ended December 31, 2016, follows: 

Outstanding at December 31, 2014 ....................  
   Forfeited………………………………………... 
   Expired …………………………………………... 

  Weighted-
Average
Remaining 
Contractual 
Term  
(in years) 
5.7 

Aggregate 
Intrinsic 
Value
(in
thousands) 

Number 
of shares 
1,371,354  
 (184,798)   
(20,364)

Weighted-
Average 
Exercise 
Price 
$  5.97 
4.31 
23.41 

Outstanding at December 31, 2015…………… 

 1,166,192  

$  5.93 

4.7 

   Expired …………………………………………... 

(36,610)

23.88 

Outstanding at December 31, 2016…………… 

1,129,582 

$  5.35   

Exercisable at December 31, 2016 ..................  

1,129,582 

$  5.35

There were no stock options exercised in 2016 and 2015. 

3.8 

3.8

$     - 

$     - 

Restricted Stock 
The restricted stock awards are accounted for as “non-vested equity shares” until the awards vest or are 
forfeited.  In general, restricted stock awards for employees are time vested or performance vested and for non-
employee directors vest at the end of their current term on the Board.  The fair value of each share of restricted 
stock is the market price of our stock on the grant date.  The fair value of each time vested award is amortized 
into compensation expense on a straight-line basis between the award date and the vesting date. Performance 
based awards are amortized into compensation expense based on the probability of meeting the performance 
criteria.   In 2016 and 2015, 221,745 and 140,442 of restricted stock awards vested and were released, 
respectively.   

The following table summarizes information about restricted stock awards for the two years ended December 
31, 2016:

Outstanding at December 31, 2014 .................... 
Forfeited ........................................................... 
Vested .............................................................. 
Granted ............................................................ 

Outstanding at December 31, 2015 .................... 
Vested ............................................................. 
Granted ........................................................... 

Number  
of shares 
   544,248 
(97,549)
(140,442)
   228,676 

534,933 
(221,745)
230,836      

Outstanding at December 31, 2016 ................. 

544,024 

      F-16

Weighted-
Average 
Grant Date 
Fair Value 
$ 3.74 
$ 3.45 
$ 3.29 
$ 2.86 

$ 3.53 
$ 4.01  
$ 2.52  

$ 2.89  

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

6. 

  Stock Based Compensation (continued) 

As of December 31, 2016, there was $379,000 of total unrecognized compensation cost related to non-vested 
restricted stock awards, which is expected to be recognized over a weighted-average remaining vesting period 
of 2.4 years. 

7.     Employee Benefits Plans

Defined Contribution Plan 

We maintain a defined contribution plan covering substantially all of our employees and make discretionary 
matching and profit sharing contributions.  The total plan cost, including employer contributions, was $16,000 in 
2016 and $34,000 in 2015.  Employer contributions were suspended to the plan beginning in 2015. 

Deferred Compensation Plan 

Effective January 1986, we established an unfunded, nonqualified deferred compensation plan for select key 
executives (the “Plan”).  The Plan allowed participants to defer a portion of their compensation and, upon 
retirement, receive an annual payment for life with a minimum of 15 payments.  The Plan was frozen to new 
participants in 1991 and there are no active employees in the plan.  The Plan is accounted for in accordance 
with ASC 715, Pension Plans, which results in an accrued liability based on future benefit payments owed to 
each participant under the Plan, utilizing mortality assumptions and a high quality corporate bond discount rate. 

Corporate-owned life insurance policies were purchased as a potential funding source for this Plan.  The 
Company had the ability to borrow against these policies or cash them in at any time.  The balance sheet  
reflected a cash surrender value asset of $22.3 million (net of $5.5 million in loans and accrued interest) at 
December 31, 2015.  Interest was paid on the borrowings at a rate of 13.13%, offset by a fixed rate of return of 
12.63% on the borrowed portion of the cash surrender value of these policies, resulting in a net borrowing cost 
of 0.50%.  The fixed return on the non-borrowed cash surrender value of these policies is 4%.  In the first 
quarter of 2016, we liquidated the corporate-owned life insurance policies with cash surrender value of $28.1 
million.  We received $22.4 million in proceeds, net of outstanding loans and accrued interest.  The decision to 
liquidate was made after continued review of the financial stability of Genworth Life Insurance Company, the 
issuer of the policies.   

The growth in the cash surrender value of these policies, net of related premiums and plan administrative costs, 
is included in operating income.  Interest charges for policy loans are included in interest expenses below 
operating income.  The growth in cash surrender value of these policies is not taxable unless the policies are 
cashed in, while the interest paid is deductible for tax purposes.  The liquidation of these policies in 2016 
created approximately $24.0 million in taxable income which was offset by net operating loss carryforwards.    

The impact of the deferred compensation plan and corporate owned life insurance policies impact on net income 
is as follows (in thousands): 

Growth in cash surrender value of corporate-owned life 

insurance policies .........................................................  
Deferred compensation plan expenses ..............................  
  Operating income impact..............................................  
Interest expense on loans against corporate-owned life 

insurance polices ..........................................................  
  Net income impact .........................................................  

2016 

2015 

$ 301 
352 
(51) 

109 
$  (160) 

$1,701 
506 
1,195 

948 
$  247 

      F-17

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

7.     Employee Benefits Plans (continued) 

The financial status of the deferred compensation plan based on actuarially valued benefits at December 31 
follows (in thousands): 

Change in benefit obligation: 

Beginning benefit obligation ...................................  
Interest cost ............................................................  
Actuarial loss (gain) ................................................
Benefits paid ..........................................................  
  Ending benefit obligation ......................................  

Change in plan assets: 

Beginning fair value of plan assets ........................  
Employer contributions...........................................
Benefits paid ..........................................................  
Ending fair value of plan assets .............................  

2016 

2015 

$ 4,749
160 
210 
(450) 
$ 4,669  

-
450 
(450) 
-

$  5,412 
182 
(395) 
(450) 
$  4,749 

- 
450 
(450) 
- 

Funded status ...............................................................

$ (4,669) 

$ (4,749) 

Amount recognized in the consolidated balance sheet (in thousands): 

Current liabilities ...........................................................  
Noncurrent liabilities .....................................................  
Total ..........................................................................  

2016 
$     (450) 
(4,219) 
$  (4,669) 

2015 
$    (448) 
(4,301) 
$ (4,749) 

Amount recognized in accumulated other comprehensive (loss) income (in thousands): 

Net loss ........................................................................  

2016 
$  1,752 

2015 
$  1,614 

Components of net periodic benefit cost and other amounts recognized in other comprehensive (loss) income 
(in thousands):   

Net periodic benefit cost: 

Interest cost ...........................................................  
Amortization of net loss .........................................  
  Net periodic benefit cost ........................................  
Other changes in plan assets and benefit obligations 

recognized in other comprehensive (loss) income: 
  Net loss (gain) ........................................................  
Amortization of net loss .........................................  
 Total recognized in other comprehensive (loss) income 
 Total recognized in net periodic benefit cost and other 
comprehensive (loss) income ..................................  

2016 

2015 

$ 160 
72 
$ 232 

$ 210  
(72) 
138 

$ 370

$ 182 
93 
$  275 

$ (395)
(93)
(488)

$ (213)

Approximately $84,000 in accumulated other comprehensive income (loss) is expected to be recognized as 
components of net periodic benefit cost during 2017. 

      F-18

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

7.     Employee Benefits Plans (continued)

The assumptions used to determine the plan’s financial status and postretirement benefit cost: 

Discount rate for funded status ................................ 
Discount rate for benefit cost ................................... 

2016 

3.50%
3.55%

2015 

3.55%
3.50%

Estimated future benefit payments are as follows (in thousands): 

2017 ................................................  
2018 ................................................  
2019 ................................................  
2020 ................................................  
2021 ................................................  
2022 - 2026 ....................................  

Estimated contributions for 2017 

$  450  
402 
391 
381 
364 
1,582 

$450  

Supplemental retirement plan and other postretirement benefits 

Benefits under the supplemental retirement ceased to accrue after 1995.  Our postretirement health care 
benefits were terminated for current employees effective January 1, 2010.  Prior to this termination, we provided 
health care benefits to eligible retired employees between the ages of 55 and 65 and provide life insurance 
benefits to eligible retired employees from age 55 until death. 

The financial status of the plans at December 31 follows (in thousands):   

Change in benefit obligation: 
  Beginning benefit obligation ..............  
  Interest cost .......................................  
  Plan participants’ contributions .........  
  Actuarial (gain) loss ...........................  
  Benefits paid ......................................
  Ending benefit obligation .................  
Change in plan assets: 
  Beginning fair value of plan assets ...  
  Employer contributions ......................  
  Plan participants’ contributions .........  
  Benefits paid ......................................
  Ending fair value of plan assets ......  
Funded status .....................................  

Supplemental Retirement Plan 

2016 

2015 

Other Postretirement 
Benefits 

2016 

2015 

$  1,952 
68 
-
14 
(155) 
$  1,879 

-
155 
-
(155) 
-

$  2,129 
72 
-
(93) 
(156) 
$  1,952 

-
156 
-
(156) 
-

$  827 
23 
46 
(51) 
(135) 
$   710 

-
89 
46 
(135) 
-

$  932 
26 
50 
(9) 
(172) 
$  827 

- 
122 
50 
(172) 
- 

$ (1,879) 

$ (1,952) 

$  (710) 

$ (827) 

Amount recognized in the consolidated balance sheet (in thousands): 

Supplemental Retirement Plan 

Other Postretirement 
Benefits 

  Current liabilities ................................  
  Noncurrent liabilities ..........................  
Total ..............................................  

2015 
$    (155) 
(1,797) 
$ (1,952) 

2016 
$   (88) 
(622) 
$ (710) 

2015 
$   (92) 
(735) 
$ (827) 

2016 
$    (155) 
(1,724) 
$ (1,879) 

      F-19

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

7.     Employee Benefits Plans (continued)

Amount recognized in accumulated other comprehensive (loss) income (in thousands): 

  Net loss (gain) ...................................  

Supplemental Retirement Plan 

Other Postretirement 
Benefits 

2016 

$ 686 

2015 

$ 704 

2016 
$ (182) 

2015 
$ (149) 

Components of net periodic benefit cost and other amounts recognized in other comprehensive (loss) income 
(in thousands):   

Supplemental Retirement Plan 

2016 

2015 

Other Postretirement 
Benefits 

2016 

2015 

Net periodic benefit cost: 
  Interest cost .......................................  
  Amortization of net loss (gain) ...........  
  Amortization of prior service cost ......  
  Net periodic benefit cost (income) .....  

Other changes in plan assets and 

benefit obligations recognized in 
other comprehensive income 
(loss): 

  Net loss (gain) ...................................  
  Amortization of net (loss) gain ..........  
  Amortization of prior service cost ......  
 Total recognized in other 

comprehensive (loss) income .........

Total recognized in net periodic 

benefit cost and other 
comprehensive (loss) income .........

$   68 
32 
-

$ 100 

$  14 
(32)
-

$ (18)

$    72 
36 
-

$  108 

$    23 
(17) 
-
$    6 

$  (93)
(36)
-

$    (51) 
17 
-

$ (129)

$ (34) 

$  26 
(13)
(92)
$ (79)

$   (9)
13 
92 

$  96 

$  82 

$   (21)

$ (28) 

$ 17 

The amounts in accumulated other comprehensive (loss) income that are expected to be recognized as 
components of net periodic benefit cost during 2017 are as follows (in thousands): 

Net loss (gain) .....................................  

Supplemental
Retirement Plan 
$  33 

Other 
Postretirement 
Benefits 

$  (16) 

      F-20

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

7.     Employee Benefits Plans (continued)

The assumptions used to determine the plan’s financial status and postretirement benefit cost: 

Discount rate for funded status ...........  
Discount rate for benefit cost...............  
Health care cost assumed trend rate 

for next year .....................................  
Rate that the cost trend rate gradually 
declines to ........................................  
Year that the rate reaches the rate it is 
assumed to remain at .......................

Supplemental Retirement 
Plan

2016 

3.55%
3.65%

2015 

3.65%
3.50%

Other Postretirement 
Benefits 

2016 

2015 

3.20% 
3.20% 

6.00% 

5.50% 

2018 

3.20%
3.10%

6.50%

5.50%

2018 

An increase or decrease in the assumed health care cost trend rate of one percentage point in each future year 
would affect the accumulated postretirement benefit obligation at December 31, 2016 by approximately $50 and 
the annual postretirement benefit cost by approximately $2.

Estimated future benefit payments are as follows (in thousands): 

Supplemental
Retirement Plan 

Other 
Postretirement 
Benefits 

Estimated net future benefit payments: 
2017 ................................................  
2018 ................................................  
2019 ................................................  
2020 ................................................  
2021 ................................................  
2022 - 2026 ....................................  

Estimated contributions for 2017 

$  155 
152 
148 
145 
141 
645 

$  155 

$  88 
80 
76 
72 
67 
259 

$  88 

The accrued liabilities relating to these plans are included in accrued salaries, wages and benefits and in long-
term liabilities.   

8.   

Discontinued Operations

During the second quarter of 2014, we concluded that revenue on our Young America product line remained 
below the level needed to reach profitability and that the time frame needed to assure sustainable profitability 
was longer than we felt was economically justified.  Therefore, we made the decision to cease manufacturing 
operations at our Robbinsville, North Carolina facility and sell the related assets of this facility.  Manufacturing 
operations were ceased in the third quarter of 2014 and as a result this product line was reflected as a 
discontinued operation pursuant to the provisions of Accounting Standards Update No. 2014-08, Reporting 
Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08) for all periods 
presented.    

      F-21

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

8.   

Discontinued Operations (continued) 

Loss from discontinued operations, net of taxes, comprised the following (in thousands): 

Net sales .................................................................................
Cost of sales ........................................................................... 
Selling, general and administrative expenses ........................ 
Other income .......................................................................... 
Loss from discontinued operations before income taxes .... 

Income tax (benefit) expense .....................................  
Loss from discontinued operations, net of taxes .....  

2016 

2015 

$  - 
-
-
-
-
-
$  - 

$ 553 
 772 
(144) 
64 
(11) 
-
$  (11) 

Loss from discontinued operations included write-down of inventories and other assets, severance and other 
termination costs and operating losses related to final manufacturing production. 

9. 

 Income for Continued Dumping and Subsidy Offset Act (CDSOA) 

The CDSOA provides for distribution of monies collected by U.S. Customs and Border Protection (Customs) for 
imports covered by antidumping duty orders entering the United States through September 30, 2007 to qualified 
domestic producers.  In 2016 and 2015, we received $1.1 million and $5.3 million, respectively, in distributions 
of funds collected on antidumping duty orders entering the United States prior to September 2007.  The 
distribution amount in 2015 included $4.9 million of distributions for 2012, 2013 and 2014 that were withheld by 
Customs until pending ligation had been exhausted.   

10. Commitments and Contingencies 

Our leased facilities include warehouse and distribution space, showroom and office space and certain 
technology equipment.  These leases have varying terms up to ten years.  Rental expenses charged to 
operations were $3.0 million and $2.9 million in 2016 and 2015, respectively.   

At December 31, 2016, the future minimum lease payments for our current operating leases were as follows (in 
thousands): 

2017 .......................................................................... 
2018 .......................................................................... 
2019 .......................................................................... 
2020 .......................................................................... 
2021 .......................................................................... 
Thereafter ................................................................. 
Total minimum lease payments ......................... 

Total 
$1,280
1,374 
1,420 
1,308 
1,339 
1,275  
$7,996  

We currently have letters of credit to cover estimated exposures, most notably with workman’s compensation 
claims.  This agreement requires us to maintain a compensating balance with the issuer for the amounts 
outstanding.  We currently have letters of credit outstanding in the amount of $663,000.  The compensating 
balance amount is reflected as restricted cash on the consolidated balance sheet. 

In the normal course of business, we are involved in claims and lawsuits, none of which currently, in 
management’s opinion, will have a material adverse effect on our Consolidated Financial Statements.

      F-22

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

11. Quarterly Results of Operations (Unaudited) 

2016 Quarters: 
Net Sales ..................................
Gross profit ..............................

First 
  $ 11,683 
    2,541 

Second 
$ 12,053 
    2,062 

Third 
 $ 11,036 
   1,835 

Fourth 
 $ 9,802 
1,976 

(in thousands, except per share data) 

Net loss .................................

$ (1,485) 

$  (1,392) 

$  (2,080) 

$ (301) (1)

Net loss per share: 
 Basic ........................................  
 Diluted .....................................  

2015 Quarters: 
Net Sales ...................................  
Gross profit ................................  
Net income from continuing 

  $     (.10) 
  $     (.10) 

First 
  $14,672 
    2,983 

$      (.10) 
 $      (.10) 

Second 
$15,133 
    3,839 

$      (.15) 
$      (.15) 

Third 
 $13,760 
   3,410 

 $  (.02) 
$  (.02) 

Fourth 
 $13,799 
3,453 

operations .............................

2,773(1)

1,268(1)

391 

919(1)

Net (loss) income from 

discontinued operations ........
Net income ................................  
Basic earnings per share (2): 
Net income from continuing 

(118) 
$ 2,655(1) 

35 

$ 1,303(1) 

74 
$    465 

(2) 
$     917(1)

operations ............................

$     .20 

  Net (loss) income from 

discontinued operations ......

  Net income ..............................  
Diluted earnings per share (2): 
Net income from continuing 

    (.01) 
  $     .19 

operations ............................

$     .19 

  Net (loss) income from 

discontinued operations ......

  Net income ..............................  

    (.01) 
  $     .18 

$    .09 

-
$    .09 

$    .09 

  - 
 $    .09 

$    .03 

  - 
$    .03 

$    .03 

  - 
$    .03 

$      .06 

  - 
 $      .06 

$      .06 

  - 
$      .06 

(1) 

Includes proceeds received from the Continued Dumping and Subsidy Offset Act, net of taxes, of $1.1 million in fourth quarter of 
2016, $3.8 million in the first quarter of 2015, $1.1 million in the second quarter of 2015 and $407,000 in the fourth quarter of 2015. 
(2)  The sum of individual quarterly net income per share may not agree to the total for the year due to each period’s computation being 

based on the weighted average number of common shares outstanding during each period.     

      F-23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
          STANLEY FURNITURE COMPANY, INC. 

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS 
For each of the Two Years in the Period Ended December 31, 2016 
(in thousands) 

Column A 

  Column B 

Descriptions 

2016 
  Doubtful receivables ....................  
  Discounts, returns, 

and allowances ...........................  

Valuation allowance for deferred 
tax assets .................................  

2015 
  Doubtful receivables .......................  
  Discounts, returns, 

and allowances .............................  

Valuation allowance for deferred 
tax assets ...................................

  Balance at
  Beginning
of Period 

$     267

       137
$     404

$19,194

Column C 
Charged 
(Credited) 
to Costs & 
Expenses 

  Column D 

  Column E 

  Balance at

End 

  Deductions 

  of Period 

 $   91     

$    241(a)

$     117 

18(b)
 $ 109    

- 

$    241      

155  
 $     272  

$     -  

$ 6,606 

$12,588

$     189

 $      93 

$      15(a)

$     267

       186
$     375

(49)(b)

 $      44 

- 

$      15      

       137
 $     404

$21,724

$        - 

$ 2,530 

$19,194

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

S-1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subsidiaries

Exhibit 21 

The following is a list of subsidiaries of Stanley Furniture Company, Inc. as of December 31, 2016: 

Name of Subsidiary 

Jurisdiction
of Organization 

Stanley Furniture Company 2.0, LLC 

Virginia 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

Exhibit 23.1 

Stanley Furniture Company, Inc. 
High Point, North Carolina 

We  hereby  consent  to  the  incorporation  by  reference  in  the  Registration  Statements  on  Form S-8  (Nos.333-
45402, 333-150369, and 333-182777) of Stanley Furniture Company, Inc. of our report dated February 22, 2017 
relating to the financial statements and financial statement schedule, which appear in this Form 10-K.   

/s/BDO USA, LLP 
Raleigh, North Carolina 
February 22, 2017 

 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 31.1 

I, Glenn Prillaman, certify that: 

1. 

2. 

3. 

4. 

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

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

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

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure 
controls  and  procedures  (as  defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  and  internal 
control  over  financial  reporting  (as  defined  in  Exchange  Act  Rules  13a-15(f)  and  15d-15(f))  for  the 
registrant and have: 

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

(b)  Designed such internal control over financial reporting, or caused such internal control over 
financial reporting to be designed under our supervision, to provide reasonable assurance 
regarding the reliability of financial reporting and the preparation of financial statements for 
external purposes in accordance with generally accepted accounting principles; 

(c)  Evaluated  the  effectiveness  of  the  registrant’s  disclosure  controls  and  procedures  and 
presented  in  this  report  our  conclusions  about  the  effectiveness  of  the  disclosure  controls 
and  procedures,  as  of  the  end  of  the  period  covered  by  this  report  based  on  such 
evaluation; and 

(d)  Disclosed  in  this  report  any  change  in  the  registrant’s  internal  control  over  financial 
reporting  that  occurred  during  the  registrant’s  most  recent  fiscal  quarter  (the  registrant’s 
fourth  fiscal  quarter  in  the  case  of  an  annual  report)  that  has  materially  affected,  or  is 
reasonably likely to materially affect, the registrant’s internal control over financial reporting; 
and 

5. 

The  registrant’s  other  certifying  officer  and  I  have  disclosed,  based  on  our  most  recent  evaluation  of 
internal  control  over  financial  reporting,  to  the  registrant’s  auditors  and  the  audit  committee  of  the 
registrant’s board of directors (or persons performing the equivalent functions): 

(a)  All  significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal 
control  over  financial  reporting  which  are  reasonably  likely  to  adversely  affect  the 
registrant’s ability to record, process, summarize and report financial information; and 

(b)  Any  fraud,  whether  or  not  material,  that  involves  management  or  other  employees  who 

have a significant role in the registrant’s internal control over financial reporting. 

Date: February 22, 2017 

/s/Glenn Prillaman 
Glenn Prillaman 
Chief Executive Officer 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 31.2 

I, Anita W. Wimmer, certify that: 

1. 

2. 

3. 

4. 

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

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

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

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure 
controls  and  procedures  (as  defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  and  internal 
control  over  financial  reporting  (as  defined  in  Exchange  Act  Rules  13a-15(f)  and  15d-15(f))  for  the 
registrant and have: 

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

(b)  Designed such internal control over financial reporting, or caused such internal control over 
financial reporting to be designed under our supervision, to provide reasonable assurance 
regarding the reliability of financial reporting and the preparation of financial statements for 
external purposes in accordance with generally accepted accounting principles; 

(c)  Evaluated  the  effectiveness  of  the  registrant’s  disclosure  controls  and  procedures  and 
presented  in  this  report  our  conclusions  about  the  effectiveness  of  the  disclosure  controls 
and  procedures,  as  of  the  end  of  the  period  covered  by  this  report  based  on  such 
evaluation; and 

(d)  Disclosed  in  this  report  any  change  in  the  registrant’s  internal  control  over  financial 
reporting  that  occurred  during  the  registrant’s  most  recent  fiscal  quarter  (the  registrant’s 
fourth  fiscal  quarter  in  the  case  of  an  annual  report)  that  has  materially  affected,  or  is 
reasonably likely to materially affect, the registrant’s internal control over financial reporting; 
and 

5. 

The  registrant’s  other  certifying  officer  and  I  have  disclosed,  based  on  our  most  recent  evaluation  of 
internal  control  over  financial  reporting,  to  the  registrant’s  auditors  and  the  audit  committee  of  the 
registrant’s board of directors (or persons performing the equivalent functions): 

(a)  All  significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal 
control  over  financial  reporting  which  are  reasonably  likely  to  adversely  affect  the 
registrant’s ability to record, process, summarize and report financial information; and 

(b)  Any  fraud,  whether  or  not  material,  that  involves  management  or  other  employees  who 

have a significant role in the registrant’s internal control over financial reporting. 

Date: February 22, 2017 

/s/ Anita W. Wimmer 
Anita W. Wimmer 
Principal Financial  and Accounting 
Officer 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

Exhibit 32.1 

In  connection  with  the  Stanley  Furniture  Company, Inc.  (the “Company”)  Annual Report on  Form 10-K  for  the 
period ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the 
“Report”),  I,  Glenn  Prillaman,  Chief  Executive  Officer  of  the  Company,  certify  pursuant  to  18  U.S.C.  Section 
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 

(1). 

(2). 

The  Report  fully  complies  with  the  requirements  of  Section  13(a)  or  15(d)  of  the  Securities 
Exchange Act of 1934, as amended; and 

The  information  contained  in  the  Report  fairly  presents,  in  all  material  respects,  the  financial 
condition and results of operations of the Company. 

Date: February 22, 2017 

/s/Glenn Prillaman 
Glenn Prillaman 
Chief Executive Officer 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, 
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

Exhibit 32.2 

In  connection  with  the  Stanley  Furniture  Company, Inc.  (the “Company”)  Annual Report on  Form 10-K  for  the 
period ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the 
“Report”), I, Anita W. Wimmer, Principal Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 

(1). 

(2). 

The  Report  fully  complies  with  the  requirements  of  Section  13(a)  or  15(d)  of  the  Securities 
Exchange Act of 1934, as amended; and 

The  information  contained  in  the  Report  fairly  presents,  in  all  material  respects,  the  financial 
condition and results of operations of the Company. 

Date: February 22, 2017 

 /s/ Anita W. Wimmer 
Anita W. Wimmer 
Principal Financial and Accounting 
Officer 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Directors, Officers and Stockholder Information

Directors and Officers

Stockholder Information

John Ian Lapey *
Chairman
Partner, Moerus Capital Management LLC

Legal Counsel
McGuireWoods LLP
Richmond, VA  23219

Jeffery S. Gilliam *
Director
Managing Member, Willow Oak Advisory Group, LLC

Transfer Agent
Continental Stock Transfer & Trust Co.
17 Battery Place, 8th Floor

Steven S. Hale, II**
Director
Founder, Hale Partnership Capital Management, LLC

New York, NY  10004
Tel: 212-509-4000
Fax: 212-509-5150

Michael Haley *
Director
Retired, Formerly Managing Director, Fenway Resources

Independent Accountants
BDO USA, LLP
Raleigh, NC  27607

T. Scott McIlhenny, Jr. *
Director
Retired, Formally Principal, Northstar Travel Media, LLC

Stock Listing
NASDAQ Stock Market - GS
Symbol - STLY

Justyn Putnam*
Director
Managing Member, Talanta Investment Group, LLC

Glenn Prillaman
President and Chief Executive Officer
Director

Anita W. Wimmer
Vice President – Finance/Corporate Controller

*Member of the Audit Committee, Compensation and Benefits Committee, 
and Corporate Governance and Nominating Committee.

**Member of Compensation and Benefits Committee,
and Corporate Governance and Nominating Committee.

Corporate Headquarters
Stanley Furniture Company, Inc. 
200 North Hamilton Street, No.200
High Point, NC 27260
Tel: 336-884-7700
Email: investor@stanleyfurniture.com

Web site
stanleyfurniture.com

Annual Meeting
May 25, 2017, 11:00 a.m.
200 North Hamilton Street, No. 200
High Point, NC 27260

Form 10-K, Other Investor Information

For a free copy of the Annual Report on
Form 10-K as filed with the Securities and
about Stanley Furniture Company, please
visit our Web site or e-mail: 
investor@stanleyfurniture.com

200 N. HAMILTON ST. NO. 200, HIGH POINT, NC 27260