<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, 1998
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. 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
<PAGE> 2
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK
INCENTIVE PLAN
Financial Statements as of and for the
Years Ended December 31, 1998 and 1997,
Supplemental Schedules as of and for
the Year Ended December 31, 1998
and Independent Auditors' Report
<PAGE> 3
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997:
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, 1998:
Item 27a - Supplemental Schedule of Assets Held for Investment
Purposes as of December 31, 1998 9
Item 27d - Supplemental Schedule of Reportable Transactions for
the Year Ended December 31, 1998 10
</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 (formerly the
Williams-Sonoma, Inc. Employee Profit Sharing and Stock Incentive Plan) (the
"Plan") as of December 31, 1998 and 1997, 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, 1998
and 1997, 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 15, 1999
<PAGE> 5
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS:
Investments, at fair value:
Common stock - Williams-Sonoma, Inc. $38,302,228 $18,947,015
Cash equivalents 216,551 845,658
Mutual funds:
Dodge & Cox Balanced Fund 1,225,783 1,001,277
Vanguard Federal Money Market Fund 304,785 250,357
----------- -----------
Total investments 40,049,347 21,044,307
----------- -----------
Dividend and interest income receivable 2,167 --
----------- -----------
Total assets 40,051,514 21,044,307
----------- -----------
LIABILITIES -
Forfeitures refundable to Williams-Sonoma, Inc. 60,022 24,024
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $39,991,492 $21,020,283
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 6
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net appreciation in fair value of investments $18,409,000 $ 2,706,324
Interest and dividends 79,336 49,588
----------- -----------
Total investment income 18,488,336 2,755,912
----------- -----------
Contributions:
Employee 2,845,884 2,177,465
Employer - matching 1,971,039 1,216,956
----------- -----------
Total contributions 4,816,923 3,394,421
----------- -----------
INCREASE ATTRIBUTABLE TO INVESTMENT INCOME
AND CONTRIBUTIONS 23,305,259 6,150,333
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO -
Benefit payments to participants 4,334,050 2,887,738
----------- -----------
NET INCREASE 18,971,209 3,262,595
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 21,020,283 17,757,688
----------- -----------
End of year $39,991,492 $21,020,283
=========== ===========
</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, 1998 AND 1997
- -------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following description of the Williams-Sonoma, Inc. Associate Stock
Incentive Plan (the "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 and has been amended as discussed in Note
5. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") and contains an arrangement under Section
401(k) of the Internal Revenue Code.
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. Under the terms of the Plan, 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 their
completion of 1,000 hours of service with the Company within a calendar
year. Prior to January 1, 1999, participants could defer up to 10% of
their annual compensation and the Company matched 100% of the first 6% of
a participant's salary deferral contributions which the participant
elected to have invested in the Company Stock Fund. Federal income tax
rules limited the maximum salary deferral contributions by an employee
during 1998 and 1997 to $10,000 and $9,500, respectively. 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 Company Stock Fund.
Effective January 1, 1999, the Plan was amended to increase the allowable
contribution percentage to 15% and allow participants to defer
distributions from the plan if the participants are still employed with
the Company when the participant reaches age 70 1/2.
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 1998 and 1997 were as
follows:
o Company Stock Fund - a Williams-Sonoma, Inc. common stock fund
o Dodge & Cox Balanced Fund - a fixed income and equity securities
mutual fund
o Vanguard Federal Money Market Fund - a money market mutual fund
Each participant's account is credited with the participant's
contribution, the Company's matching contribution (if applicable), and
plan earnings.
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<PAGE> 8
NONPARTICIPANT ACCOUNTS - The Plan maintains a short-term investment
account to invest funds prior to their transfer into one of the
participant investment funds, prior to distribution to a terminated
participant or prior to the execution of interfund transfers. 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.
CASH EQUIVALENTS represent shares in First American 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, Money Market
and Balanced Funds after each bi-weekly payroll.
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, 1998 and 1997, the following amounts
were due to participants who have withdrawn from participation in the
Plan:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Benefits payable $ 57,692 $ 42,825
Deferred benefits payable 6,171,269 3,067,714
</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
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 U.S. Bank (formerly First Trust).
U.S. Bank is the trustee as defined by the Plan, and, therefore, these
transactions qualify as party-in-interest. Fees paid by the Company for
the investment management services amounted to $23,720 and $21,318 for the
years ended December 31, 1998 and 1997, respectively.
3. INVESTMENTS
During the years ended December 31, 1998 and 1997, the Plan's investments,
including investments bought and sold as well as those held during the
year, appreciated in value as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Common stock - Williams-Sonoma, Inc. $18,373,524 $2,575,945
Mutual funds 35,476 130,379
----------- ----------
Total $18,409,000 $2,706,324
=========== ==========
</TABLE>
At December 31, 1998 and 1997, investments included the following, which
are 5% or more of the total plan assets:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Williams-Sonoma, Inc. common stock $38,302,228 $18,947,015
</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, 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------------------------
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 $18,373,524 $ 35,476 $ -- $ -- $18,409,000
Interest and dividends -- 37,426 15,471 26,439 79,336
----------- ----------- --------- --------- -----------
Total investment income 18,373,524 72,902 15,471 26,439 18,488,336
----------- ----------- --------- --------- -----------
Contributions:
Employee 2,410,381 326,108 109,395 -- 2,845,884
Employer - matching 1,971,039 -- -- -- 1,971,039
----------- ----------- --------- --------- -----------
Total contributions 4,381,420 326,108 109,395 -- 4,816,923
----------- ----------- --------- --------- -----------
Increase attributed to investment
income and contributions 22,754,944 399,010 124,866 26,439 23,305,259
Deductions from net assets attributed
to benefits paid to participants 4,133,040 141,287 59,723 -- 4,334,050
----------- ----------- --------- --------- -----------
Net increase before interfund transfers 18,621,904 257,723 65,143 26,439 18,971,209
Net interfund transfers 697,311 (33,217) (9,454) (654,640) --
----------- ----------- --------- --------- -----------
Net increase (decrease) 19,319,215 224,506 55,689 (628,201) 18,971,209
Net assets available for benefits:
Beginning of year 18,922,991 1,001,277 250,357 845,658 21,020,283
----------- ----------- --------- --------- -----------
End of year $38,242,206 $ 1,225,783 $ 306,046 $ 217,457 $39,991,492
=========== =========== ========= ========= ===========
</TABLE>
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<PAGE> 11
<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>
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), September 1997 (with an effective date of August 18, 1997),
September 1998 (with an effective date of October 1, 1998) and December
1998 (with an effective date of January 1, 1999). The Administrative
Committee believes that the Plan continues to operate in accordance with
current law and was tax-exempt as of December 31, 1998. Therefore, no
provision for income taxes has been included in the Plan's financial
statements.
******
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<PAGE> 12
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998 (FORM 5500 - ITEM 27a)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION COST FAIR VALUE
<S> <C> <C> <C>
First American Prime Obligation
216,551 Short-Term Investment Fund $ 216,551 $ 216,551
950,121 Williams-Sonoma, Inc. Common Stock 8,063,731 38,302,228
18,795 Dodge & Cox Balanced Fund 1,119,162 1,225,783
304,785 Vanguard Federal Money Market Fund 304,785 304,785
----------- -----------
Total $ 9,704,229 $40,049,347
=========== ===========
</TABLE>
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<PAGE> 13
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
SUPPLEMENTAL SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998 (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 Short-Term
Obligation Short-Term Cash
Investment Fund Instrument 50 $ 4,422,741 88 $5,118,824 $ 5,118,824 *
Williams-Sonoma, Inc. Common Stock 11 2,516,875 *** *** *** ***
</TABLE>
* No gain/loss resulted from the sales/disposition of investments.
** There were no reportable single transactions.
*** Sales of Williams-Sonoma, Inc. common stock did not amount to greater than
5% of beginning plan assets.
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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 25, 1999
WILLIAMS-SONOMA, INC.
ASSOCIATE STOCK INCENTIVE PLAN
By :/s/Dennis A. Chantland
---------------------------------
Dennis A. Chantland
Administrative Committee Member
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
23 Independent Auditors' Consent
</TABLE>
<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 15, 1999 appearing in the Annual Report on Form ll-K of the
Williams-Sonoma, Inc. Associate Stock Incentive Plan for the fiscal year ended
December 31, 1998.
Deloitte & Touche, LLP
San Francisco, California
June 23, 1999
