<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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, 1997
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
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A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
WILLIAMS-SONOMA, INC. ASSOCIATE
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
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WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996, SUPPLEMENTAL SCHEDULES
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1997 AND
INDEPENDENT AUDITORS' REPORT
<PAGE> 3
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-8
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1997:
Item 27a - Supplemental Schedule of Assets Held for Investment Purposes as of 9
December 31, 1997
Item 27d - Supplemental Schedule of Reportable Transactions for the Year 10
Ended December 31, 1997
</TABLE>
<PAGE> 4
[DELOITTE & TOUCHE, LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Administrative Committee,
Williams-Sonoma, Inc.
Associate Stock Incentive Plan:
We have audited the accompanying statements of net assets available for benefits
of the Williams-Sonoma, Inc. Associate Stock Incentive Plan (the "Plan")
(formerly, the Williams-Sonoma, Inc. Employee Profit Sharing and Stock Incentive
Plan) as of December 31, 1997 and 1996, 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, 1997
and 1996, 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 5, 1998
<PAGE> 5
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
ASSETS:
Cash -- $ 19
----------- -----------
Investments, at fair value:
Common stock - Williams-Sonoma, Inc. $18,947,015 16,869,489
Cash equivalents 845,658 61,217
Mutual funds:
Dodge & Cox Balanced Fund 1,001,277 698,404
Vanguard Money Market Reserve Fund 250,357 184,795
----------- -----------
Total investments 21,044,307 17,813,905
----------- -----------
Total assets 21,044,307 17,813,924
----------- -----------
LIABILITIES -
Forfeitures refundable to Williams-Sonoma, Inc. 24,024 56,236
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $21,020,283 $17,757,688
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 6
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ---------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net appreciation in fair value of investments $ 2,706,324 $ 8,340,290
Interest and dividends 49,588 36,710
----------- -----------
Total investment income 2,755,912 8,377,000
----------- -----------
Contributions:
Employee 2,177,465 1,529,797
Employer - matching 1,216,956 410,332
----------- -----------
Total contributions 3,394,421 1,940,129
----------- -----------
Increase attributable to investment income
and contributions 6,150,333 10,317,129
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO -
Benefit payments to participants 2,887,738 1,529,534
----------- -----------
NET INCREASE 3,262,595 8,787,595
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 17,757,688 8,970,093
----------- -----------
End of year $21,020,283 $17,757,688
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 7
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
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1. DESCRIPTION OF PLAN
The following description of the Williams-Sonoma, Inc. Associate Stock
Incentive Plan (the "Plan") (formerly, the Employee Profit Sharing and
Stock Incentive Plan) provides only general information. Participants
should refer to the Plan document for a more complete description of the
Plan provisions.
GENERAL - The Williams-Sonoma, Inc. Associate 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 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 was amended effective May 1, 1997,
as described below. Prior to the amendment, the Plan consisted 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 were
eligible could receive an allocation of employer contributions as
determined by the Board of Directors, based on each eligible participant's
annual compensation. No profit sharing contributions were made for the
years ended December 31, 1997 and 1996. Under the terms of the employee
stock incentive plan, which contains an arrangement under Section 401(k) of
the Internal Revenue Code, participants could defer up to 10% of their
annual compensation. For those salary deferral contributions which the
participant elected to have invested in the Williams-Sonoma, Inc. Stock
Fund, the Company matched 50% of the first 6% of such salary deferral
contributions. Federal income tax rules limited the maximum salary deferral
contributions by an employee during 1997 and 1996 to $9,500. Although the
Plan allowed participants to elect to have their salary deferral
contributions invested among various investment alternatives, all Company
contributions were invested in the Williams-Sonoma, Inc. Stock Fund.
Effective May 1, 1997, the Plan's name was changed to the Williams-Sonoma,
Inc. Associate Stock Incentive Plan and the Plan was amended as follows:
the Company now matches 100% of the first 6% of a participant's salary
deferral contributions which the participant elects to have invested in the
Williams-Sonoma, Inc. Stock Fund; and employees who are at least 21 years
old may participate 30 days after their date of hire, or, in the case of
certain "Limited Employees," 30 days after completion of 12 months and
1,000 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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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 1997 and 1996 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
Each participant's account is credited with the participant's contribution,
the Company's matching contribution, and plan earnings. 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 100% vested in their salary deferral
contributions and earnings attributable thereto. Vesting in the Company
contributions and earnings attributable thereto is based on years of
credited service. The Plan was amended effective August 18, 1997 to provide
that a participant is 100% vested in his or her Company contributions and
earnings attributable thereto after five years of credited service. Prior
to amendment, the Plan provided that a participant was 100% vested in his
or her Company contributions and earnings attributable thereto after six
years of credited service. Upon termination of employment prior to full
vesting, unvested Company contributions and earnings attributable thereto
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. The Company has 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.
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<PAGE> 9
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.
BENEFITS PAYABLE - As of December 31, 1997 and 1996, the following amounts
were due to participants who have withdrawn from participation in the Plan:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Benefits payable $ 42,825 $ 70,688
Deferred benefits payable 3,067,714 2,183,173
</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 $21,318 and $20,106 for the years ended December 31,
1997 and 1996, respectively.
3. INVESTMENTS
During the years ended December 31, 1997 and 1996, the Plan's investments,
including investments bought and sold as well as those held during the
year, appreciated in value as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Common stock - Williams-Sonoma, Inc. $2,575,945 $8,279,020
Mutual funds 130,379 61,270
---------- ----------
Total $2,706,324 $8,340,290
========== ==========
</TABLE>
At December 31, 1997 and 1996, investments included the following, which
are 5% or more of the total plan assets:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Williams-Sonoma, Inc. common stock $ 18,947,015 $ 16,869,489
</TABLE>
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<PAGE> 10
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, 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------
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 $ 2,575,945 $ 130,379 $ -- $ -- $ 2,706,324
Interest and dividends -- 29,280 11,220 9,088 49,588
------------ ------------ ------------ ------------ ------------
Total investment income 2,575,945 159,659 11,220 9,088 2,755,912
------------ ------------ ------------ ------------ ------------
Contributions:
Employee 1,791,730 298,504 87,231 -- 2,177,465
Employer - matching 1,216,956 -- -- -- 1,216,956
------------ ------------ ------------ ------------ ------------
Total contributions 3,008,686 298,504 87,231 -- 3,394,421
------------ ------------ ------------ ------------ ------------
Increase attributed to investment
income and contributions 5,584,631 458,163 98,451 9,088 6,150,333
Deductions from net assets attributed to
benefits paid to participants 2,708,300 154,941 24,497 -- 2,887,738
------------ ------------ ------------ ------------ ------------
Net increase before interfund transfers 2,876,331 303,222 73,954 9,088 3,262,595
Net interfund transfers (766,593) (363) (8,397) 775,353 --
------------ ------------ ------------ ------------ ------------
Net increase 2,109,738 302,859 65,557 784,441 3,262,595
Net assets available for benefits:
Beginning of year 16,813,253 698,418 184,800 61,217 17,757,688
------------ ------------ ------------ ------------ ------------
End of year $ 18,922,991 $ 1,001,277 $ 250,357 $ 845,658 $ 21,020,283
============ ============ ============ ============ ============
</TABLE>
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<PAGE> 11
<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>
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, May 1996 (with an effective date of
January 15, 1995), May 1997 (with an effective date of May 1, 1997) and
September 1997 (with an effective date of August 18, 1997). The
Administrative Committee believes that the Plan continues to operate in
accordance with current law and was tax-exempt as of December 31, 1997.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
******
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WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997 (FORM 5500 - ITEM 27A)
- ---------------------------------------------------------------------------------------------------
SHARES SECURITY DESCRIPTION COST FAIR VALUE
----------- ------------
<S> <C> <C> <C>
845,648 First American Prime Obligation $ 845,658 $ 845,658
Short-Term Investment Fund
452,466 Williams-Sonoma, Inc. Common Stock 5,992,135 18,947,015
14,994 Dodge & Cox Balanced Fund 839,660 1,001,277
250,357 Vanguard Money Market Reserve Fund 250,357 250,357
----------- ------------
Total $ 7,927,810 $ 21,044,307
=========== ============
</TABLE>
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WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997 (FORM 5500 - ITEM 27d)
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PURCHASES SALES/DISPOSITION
---------------------- ---------------------- GAIN/
ISSUER DESCRIPTION TRANSACTIONS AMOUNTS TRANSACTIONS AMOUNTS COST (LOSS)
<S> <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 45 2,734,990 74 1,976,254 1,976,254 *
Fund
</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 5, 1998
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
By: /s/Dennis A. Chantland
--------------------------------
Dennis A. Chantland
Administrative Committee Member
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<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
23 Independent Auditors' Consent
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<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 5, 1998
appearing in the Annual Report on Form 11-K of the Williams-Sonoma, Inc.
Associate Stock Incentive Plan for the fiscal year ended December 31, 1997.
Deloitte & Touche LLP
San Francisco, California
June 26, 1998
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