<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 11-K
Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSACTIONS REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 000-12704
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
WILLIAMS-SONOMA, INC. EMPLOYEE
PROFIT SHARING AND STOCK INCENTIVE PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
WILLIAMS-SONOMA, INC.
3250 Van Ness Avenue
San Francisco, CA 94109
(415) 421-7900
<PAGE> 2
ITEM 4. FINANCIAL STATEMENTS AND SCHEDULES PREPARED IN ACCORDANCE WITH THE
FINANCIAL REPORTING REQUIREMENTS OF ERISA
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants 1
Statement of Net Assets Available For Plan Benefits 2
As of December 31, 1996 and 1995
Statement of Changes in Net Assets Available For Plan Benefits 3
For Years Ended December 31, 1996 and 1995
Notes to Financial Statements 4-8
Supplemental Schedules:
Schedule of Assets Held for Investment as of
December 31, 1996 9
Schedule of Reportable Transactions For the Year
Ended December 31, 1996 10
Exhibit:
Exhibit 23 Independent Auditors' Consent
</TABLE>
<PAGE> 3
WILLIAMS-SONOMA, INC.
EMPLOYEE PROFIT SHARING AND
STOCK INCENTIVE PLAN
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995, SUPPLEMENTAL
SCHEDULES AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1996 AND INDEPENDENT AUDITORS' REPORT
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
Administrative Committee,
Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan:
We have audited the accompanying statements of net assets available for benefits
of the Williams-Sonoma, Inc. Employee Profit Sharing and Stock Incentive Plan
(the "Plan") as of December 31, 1996 and 1995, and the related statements of
changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 1996
and 1995, and the changes in its net assets available for benefits for the years
then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
table of contents are presented for the purpose of additional analysis and are
not a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These schedules are the responsibility of the Plan's management. Such
schedules have been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, are fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
June 17, 1997
<PAGE> 5
WILLIAMS-SONOMA, INC.
EMPLOYEE PROFIT SHARING AND STOCK INCENTIVE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS:
Cash $ 19 $ 19
----------- ----------
Investments, at fair value:
Common stock - Williams-Sonoma, Inc. 16,869,489 8,204,750
Cash equivalents 61,217 203,264
Mutual funds:
Dodge & Cox Balanced Fund 698,404 485,558
Vanguard Money Market Reserve Fund 184,795 147,500
----------- ----------
Total investments 17,813,905 9,041,072
----------- ----------
Total assets 17,813,924 9,041,091
----------- ----------
LIABILITIES -
Forfeitures refundable to Williams-Sonoma, Inc. 56,236 70,998
----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $17,757,688 $8,970,093
=========== ==========
</TABLE>
See notes to financial statements.
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<PAGE> 6
WILLIAMS-SONOMA, INC.
EMPLOYEE PROFIT SHARING AND STOCK INCENTIVE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (loss):
Net appreciation (depreciation) in fair value of investments $ 8,340,290 $ (4,624,567)
Interest and dividends 36,710 37,096
----------- ------------
Total investment income (loss) 8,377,000 (4,587,471)
----------- ------------
Contributions:
Employee 1,529,797 1,469,946
Employer - matching 410,332 396,810
----------- ------------
Total contributions 1,940,129 1,866,756
----------- ------------
Increase (decrease) attributable to investment income
(loss) and contributions 10,317,129 (2,720,715)
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO -
Benefit payments to participants 1,529,534 904,888
----------- ------------
NET INCREASE (DECREASE) 8,787,595 (3,625,603)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 8,970,093 12,595,696
----------- ------------
End of year $17,757,688 $ 8,970,093
=========== ============
</TABLE>
See notes to financial statements.
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<PAGE> 7
WILLIAMS-SONOMA, INC.
EMPLOYEE PROFIT SHARING AND STOCK INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following description of the Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan (the "Plan") provides only general
information. Participants should refer to the Plan Agreement for a more
complete description of the Plan provisions.
GENERAL - The Williams-Sonoma, Inc. Employee Profit Sharing and Stock
Incentive Plan is a defined contribution plan covering all eligible
salaried and hourly employees. The Plan was created to provide savings
opportunities to the employees of Williams-Sonoma, Inc. (the "Company").
The Plan became effective as of February 1, 1989. The Plan commencement
date was September 1, 1989. Beginning July 1, 1995, the Plan trustee was
changed to First Trust. This change did not affect the investment options
for Plan participants or the fundamental function and parameters of the
Plan. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS - The Plan allows participants to defer a portion of their
income and have such deferred income paid into the Plan, thus reducing the
participants' taxable income. The Plan consists of two parts, (1) the
profit sharing plan and (2) the employee stock incentive plan. Under the
terms of the profit sharing plan, participants who are eligible will
receive an allocation of employer contributions as determined by the Board
of Directors, based on the participant's annual gross compensation. No
profit sharing contributions were made for the years ended December 31,
1996 and 1995. Under the terms of the stock incentive plan, which contains
an arrangement under Section 401(k) of the Internal Revenue Code,
participants may defer up to 10% of their annual gross compensation and
the Company will match 50% of the first 6% of a participant's salary
deferral contribution to the Williams-Sonoma, Inc. Stock Fund. The Plan
allows participants to direct their contributions among various investment
alternatives. All Company contributions are invested in Williams-Sonoma
stock. Federal income tax regulations limited the maximum contributions by
an employee during 1996 to $9,500 and in 1995 to $9,240.
ELIGIBILITY - Employees are eligible to participate in the Plan if they
are at least 21 years of age and have completed a minimum of twelve
consecutive months and one thousand hours of service with the Company.
PARTICIPANT ACCOUNTS - The Plan maintains individual accounts for
participants and permits participants to direct their individual account
investments into available investment alternatives. The investment
alternatives available to participants during 1996 and 1995 were as
follows:
o Dodge & Cox Balanced Fund - a fixed income and equity securities mutual
fund
o Vanguard Money Market Reserve Fund - a money market mutual fund
o Company Stock Fund - a Williams-Sonoma, Inc. common stock fund
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<PAGE> 8
Each participant's account is credited with the participant's
contribution, the Company's matching contribution, the Company's profit
sharing contribution, and plan earnings. Allocations are based on
participant earnings or account balances, as defined. The benefit to which
a participant is entitled is the benefit that can be provided from the
participant's account.
NONPARTICIPANT ACCOUNTS - The Plan maintains a short-term investment
account to invest funds prior to their transfer into one of the
participant investment funds or prior to distribution to a terminated
participant. Amounts related to the short-term investment account are
included as cash equivalents in the statement of net assets available for
benefits.
VESTING - Participants are immediately vested in their salary deferral
contributions. Vesting in the remainder of their account, Company
contributions, profit sharing contributions and plan earnings, is based on
years of continuous service. A participant is 100% vested after six years
of credited service. Upon termination of employment prior to full vesting,
unvested Company contributions are forfeited and used to reduce the amount
of future Company contributions. In the event of plan termination,
participants' amounts become fully vested, and net assets of the Plan are
to be applied to the exclusive benefit of the participants. There is no
intention at this time to terminate the Plan.
PAYMENT OF BENEFITS - Benefits are payable upon termination, withdrawal
from the Plan, on account of hardship, death, disability, retirement, or
at age 59 1/2. Distribution of a participant's benefits may be made in
cash, Company common stock, or both, and are recorded when paid.
PLAN ADMINISTRATIVE EXPENSES - Administrative expenses incurred by the
Plan are paid by the Company.
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared on
the accrual basis.
MANAGEMENT ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of additions to and deductions from net assets available for
benefits during the reporting period. Actual results could differ from
those estimates.
CASH EQUIVALENTS represent shares in First America Prime Obligations Fund
which are purchased each time a contribution is made. The Plan converts
these short-term investments into the Company's common stock monthly and
into the Money Market and Balanced Funds twice a month.
PURCHASES AND SALES of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis.
INVESTMENTS in common stock and mutual funds are stated at fair value
which is based on publicly quoted market values.
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<PAGE> 9
BENEFITS PAYABLE - As of December 31, 1996 and 1995, the following amounts
were due to participants who have withdrawn from participation in the
Plan:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Benefits payable $ 70,688 $ 74,227
Deferred benefits payable 2,183,173 1,051,697
</TABLE>
Deferred benefits payable represent vested balances payable to terminated
plan participants who have elected to defer distribution of their account
balances.
FORFEITURES REFUNDABLE TO WILLIAMS-SONOMA, INC. represent unvested Company
profit-sharing and matching contributions that will be used to offset
future Company contributions.
RELATED PARTY TRANSACTIONS - Certain Plan investments are held in a
short-term investment account managed by First Trust. First Trust is the
trustee as defined by the Plan, and, therefore, these transactions qualify
as party-in-interest. Fees paid by the Plan for the investment management
services amounted to $20,106 and $34,592 for the years ended December 31,
1996 and 1995, respectively.
RECLASSIFICATIONS - Certain items in the prior year's financial statements
have been reclassified to conform to the current year presentation.
3. INVESTMENTS
During the years ended December 31, 1996 and 1995, the Plan's investments,
including investments bought and sold as well as those held during the
year, appreciated (depreciated) in value as follows:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Common stock - Williams-Sonoma, Inc. $8,279,020 $(4,702,138)
Mutual funds 61,270 77,571
---------- -----------
Total $8,340,290 $(4,624,567)
========== ===========
</TABLE>
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<PAGE> 10
At December 31, 1996 and 1995, investments included the following, which
are 5% or more of the total plan assets:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Williams-Sonoma, Inc. common stock $16,869,489 $8,204,750
Balanced Fund -- 485,558
</TABLE>
4. CHANGES IN NET ASSETS
The following represents the changes in net assets available for benefits
by investment fund for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------
NON-PARTICIPANT
PARTICIPANT DIRECTED DIRECTED
--------------------------------------------------------
COMPANY MONEY
STOCK BALANCED MARKET SHORT TERM
FUND FUND FUND INVESTMENTS TOTAL
----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of
investments $ 8,279,020 $ 61,270 $ -- $ -- $ 8,340,290
Interest and dividends -- 20,765 8,552 7,393 36,710
----------- --------- --------- ---------- -----------
Total investment income 8,279,020 82,035 8,552 7,393 8,377,000
----------- --------- --------- ---------- -----------
Contributions:
Employee 1,235,343 224,140 70,314 -- 1,529,797
Employer - matching 410,332 -- -- -- 410,332
----------- --------- --------- ---------- -----------
Total contributions 1,645,675 224,140 70,314 -- 1,940,129
----------- --------- --------- ---------- -----------
Increase attributed to investment
income and contributions 9,924,695 306,175 78,866 7,393 10,317,129
Deductions from net assets attributed to
benefits paid to participants 1,402,229 92,125 35,180 -- 1,529,534
----------- --------- --------- ---------- -----------
Net increase before interfund transfers 8,522,466 214,050 43,686 7,393 8,787,595
Net interfund transfers 157,035 (1,204) (6,391) (149,440) --
----------- --------- --------- ---------- -----------
Net increase (decrease) 8,679,501 212,846 37,295 (142,047) 8,787,595
Net assets available for benefits:
Beginning of year 8,133,752 485,572 147,505 203,264 8,970,093
----------- --------- --------- ---------- -----------
End of year $16,813,253 $ 698,418 $ 184,800 $ 61,217 $17,757,688
=========== ========= ========= ========== ===========
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------
NON-PARTICIPANT
PARTICIPANT DIRECTED DIRECTED
----------------------------------------------------
COMPANY MONEY
STOCK BALANCED MARKET SHORT TERM
FUND FUND FUND INVESTMENTS TOTAL
----------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss):
Net appreciation (depreciation) in fair value of
investments $(4,702,138) $ 77,571 $ -- $ -- $(4,624,567)
Interest and dividends -- 14,969 6,924 15,203 37,096
----------- -------- -------- -------- -----------
Total investment income (loss) (4,702,138) 92,540 6,924 15,203 (4,587,471)
----------- -------- -------- -------- -----------
Contributions:
Employee 1,246,668 156,553 66,725 -- 1,469,946
Employer - matching 396,810 -- -- -- 396,810
----------- -------- -------- -------- -----------
Total contributions 1,643,478 156,553 66,725 -- 1,866,756
----------- -------- -------- -------- -----------
Increase (decrease) attributed to
investment income (loss) and
contributions (3,058,660) 249,093 73,649 15,203 (2,720,715)
Deductions from net assets attributed to
benefits paid to participants 857,723 30,776 16,389 -- 904,888
----------- -------- -------- -------- -----------
Net increase (decrease) before interfund transfers (3,916,383) 218,317 57,260 15,203 (3,625,603)
Net interfund transfers (174,544) 1,961 (13,622) 186,205 --
----------- -------- -------- -------- -----------
Net increase (decrease) (4,090,927) 220,278 43,638 201,408 (3,625,603)
Net assets available for benefits:
Beginning of year 12,224,679 265,294 103,867 1,856 12,595,696
----------- -------- -------- -------- -----------
End of year $ 8,133,752 $485,572 $147,505 $203,264 $ 8,970,093
=========== ======== ======== ======== ===========
</TABLE>
5. INCOME TAX STATUS
On April 13, 1993, the Internal Revenue Service ("IRS") issued a
determination letter that stated the Plan as amended through March 10,
1992 is qualified and the trust established thereunder is tax-exempt. The
Plan was amended in June and December 1993, and May 1996 (with an
effective date of January 15, 1995). The Administrative Committee believes
that the Plan continues to operate in accordance with current law and was
tax-exempt as of December 31, 1996. Therefore, no provision for income
taxes has been included in the Plan's financial statements.
6. PLAN AMENDMENTS
Effective May 1, 1997, the Plan name has been changed to the
Williams-Sonoma, Inc. Associate Stock Incentive Plan. Amendments to the
Plan are: 1) the Company will match 100% of the first 6% of a
participant's salary deferral contribution to the Williams-Sonoma, Inc.
Stock Fund, and 2) employees who are at least 21 years old may
participate 30 days after their date of hire, or, in the case of "Limited
Employees," 30 days after completion of twelve months and one thousand
hours of service with the Company. In view of the increased matching
contribution, the Company has no intention of making profit sharing
contributions in the future.
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WILLIAMS-SONOMA, INC.
EMPLOYEE PROFIT SHARING AND STOCK INCENTIVE PLAN
SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT
DECEMBER 31, 1996 (FORM 5500 - ITEM 27a)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION COST FAIR VALUE
<S> <C> <C> <C>
First American Prime Obligation
61,217 Short-Term Investment Fund $ 61,217 $ 61,217
463,766 Williams-Sonoma, Inc. Common Stock 5,623,711 16,869,489
11,675 Dodge & Cox Balanced Fund 592,551 698,404
Vanguard Money Market
184,795 Reserve Fund 184,795 184,795
---------- -----------
Total $6,462,274 $17,813,905
========== ===========
</TABLE>
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<PAGE> 13
WILLIAMS-SONOMA, INC.
EMPLOYEE PROFIT SHARING AND STOCK INCENTIVE PLAN
SUPPLEMENTAL SCHEDULE OF REPORTABLE PLAN TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996 (FORM 5500 - ITEM 27d)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PURCHASES SALES/DISPOSITION
----------------------- ----------------------- GAIN/
ISSUER DESCRIPTION TRANSACTIONS AMOUNTS TRANSACTIONS AMOUNTS COST (LOSS)
<S> <C> <C> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS
IN EXCESS OF 5% OF
BEGINNING PLAN ASSETS: ** ** ** ** ** **
SERIES OF TRANSACTIONS
IN EXCESS OF 5% OF
BEGINNING PLAN ASSETS:
First American Prime Obligation Short-Term Cash
Short-Term Investment Instrument
Fund 47 $1,595,860 76 $1,685,661 $1,685,661 *
Williams-Sonoma, Inc. Common Stock 12 657,142
</TABLE>
* No gain/loss resulted from the sales/disposition of investments.
** There were no reportable single transactions.
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<PAGE> 14
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Plan's Administrative Committee has duly caused this annual report
to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: June 23, 1997
WILLIAMS-SONOMA, INC.
EMPLOYEE PROFIT SHARING AND STOCK
INCENTIVE PLAN
By: /s/ DENNIS A. CHANTLAND
---------------------------------
Dennis A. Chantland
Administrative Committee Member
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
23 Independent Auditors' Consent
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-33693 of Williams-Sonoma, Inc. on Form S-8 of our report dated June 17, 1997
appearing in the Annual Report on Form 11-K of the Williams-Sonoma, Inc.
Employee Profit Sharing and Stock Incentive Plan for the fiscal year ended
December 31, 1996.
Deloitte & Touche LLP
San Francisco, California
June 27, 1997
