<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission file number 000-12704
WILLIAMS-SONOMA, INC.
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(Exact Name of Registrant as Specified in Its Charter)
California 94-2203880
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
3250 Van Ness Avenue, San Francisco, CA 94109
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 421-7900
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check [X] 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 [ ]
As of December 6, 1999, 56,413,988 shares of the Registrant's Common
Stock were outstanding.
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WILLIAMS-SONOMA, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 1999
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
PAGE
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<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (3)
October 31, 1999, January 31, 1999, and November 1, 1998
Condensed Consolidated Statements of Operations
Thirteen weeks ended October 31, 1999 and November 1, 1998
Thirty-nine weeks ended October 31, 1999 and November 1, 1998
Condensed Consolidated Statements of Cash Flows
Thirty-nine weeks ended October 31, 1999 and November 1, 1998
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations (8)
and Financial Condition
Item 3. Quantitative and Qualitative Disclosure (11)
about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (13)
Item 6. Exhibits and Reports on Form 8-K (14)
</TABLE>
<PAGE> 3
WILLIAMS-SONOMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
October 31, January 31, November 1,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,791 $107,308 $ 4,039
Accounts receivable (net) 29,980 20,082 27,496
Merchandise inventories 301,665 173,160 220,267
Prepaid expenses and other assets 10,968 8,985 9,252
Prepaid catalog expenses 27,068 13,154 25,253
Deferred income taxes 4,077 4,077 3,680
-------- -------- --------
Total current assets 378,549 326,766 289,987
Property and equipment (net) 302,718 243,119 233,310
Investments and other assets (net) 9,576 6,360 5,792
-------- -------- --------
Total assets $690,843 $576,245 $529,089
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $106,115 $ 70,964 $ 85,204
Accrued expenses 21,750 24,003 20,127
Line of credit 61,980 -- 19,950
Customer deposits 30,515 26,659 20,592
Income taxes payable 6,481 19,529 --
Current portion of long-term obligations 5,966 6,368 125
Other liabilities 7,691 6,377 8,330
-------- -------- --------
Total current liabilities 240,498 153,900 154,328
Deferred lease credits 85,610 72,327 72,512
Deferred tax liability 3,339 3,339 2,439
Long-term debt and other liabilities 40,206 44,649 50,384
Commitments and contingencies -- -- --
Shareholders' equity 321,190 302,030 249,426
-------- -------- --------
Total liabilities and shareholders' equity $690,843 $576,245 $529,089
======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
WILLIAMS-SONOMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------- ----------------------------
October 31, November 1, October 31, November 1,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 324,148 $ 241,298 $ 846,823 $ 662,770
Costs and expenses:
Cost of goods sold and occupancy 192,748 146,494 518,720 409,665
Selling, general and administrative 114,880 85,648 298,062 233,343
--------- --------- --------- ---------
Total costs and expenses 307,628 232,142 816,782 643,008
--------- --------- --------- ---------
Earnings from operations 16,520 9,156 30,041 19,762
Gain/(loss) on sale of assets (23) -- 3,977 --
Interest expense (net) 1,226 686 1,901 1,138
--------- --------- --------- ---------
Earnings before income taxes 15,271 8,470 32,117 18,624
Income taxes 6,032 3,472 12,686 7,635
--------- --------- --------- ---------
Net earnings $ 9,239 $ 4,998 $ 19,431 $ 10,989
========= ========= ========= =========
Earnings per share:
Basic $ 0.17 $ 0.09 $ 0.35 $ 0.20
Diluted $ 0.16 $ 0.09 $ 0.33 $ 0.20
Shares used in calculation of earnings per share:
Basic 55,827 55,613 55,761 53,988
Diluted 58,908 57,838 58,502 56,326
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
WILLIAMS-SONOMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-----------------------------
October 31, November 1,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 19,431 $ 10,989
Adjustments to reconcile net earnings
to net cash used in operating activities:
Depreciation and amortization 31,126 24,089
Net gain on disposition of assets (2,325) --
Amortization of deferred lease incentives (6,215) (4,694)
Other 165 --
Change in:
Accounts receivable (9,898) (12,258)
Merchandise inventories (131,177) (87,816)
Prepaid catalog expenses (15,543) (11,657)
Prepaid expenses and other assets (1,983) (1,261)
Accounts payable 35,151 26,708
Accrued expenses and other liabilities 2,858 (9,747)
Deferred lease incentives 19,498 21,049
Income taxes payable (13,048) (17,216)
--------- ---------
Net cash used in operating activities (71,960) (61,814)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (95,009) (59,202)
Proceeds from sale of property and equipment 11,192 2,117
Purchase of investment (2,000) --
Other (130) --
--------- ---------
Net cash used in investing activities (85,947) (57,085)
--------- ---------
Cash flows from financing activities:
Borrowings under line of credit 132,850 36,200
Repayments under line of credit (70,870) (16,250)
Repayment of long-term obligations (6,319) (461)
Proceeds from exercise of stock options 4,467 6,235
Repurchase of common stock (4,738) --
--------- ---------
Net cash provided by financing activities 55,390 25,724
--------- ---------
Net decrease in cash and cash equivalents (102,517) (93,175)
Cash and cash equivalents at beginning of period 107,308 97,214
--------- ---------
Cash and cash equivalents at end of period 4,791 4,039
========= =========
Non-cash financing transaction:
Conversion of Convertible Notes to equity $ 39,004
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
WILLIAMS-SONOMA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Thirteen and Thirty-nine Weeks Ended October 31, 1999 and November 1, 1998
(Unaudited)
NOTE A. FINANCIAL STATEMENTS - BASIS OF PRESENTATION
The condensed consolidated balance sheets as of October 31, 1999 and November 1,
1998, the condensed consolidated statements of operations for the thirteen and
thirty-nine week periods ended October 31, 1999 and November 1, 1998 and the
condensed consolidated statements of cash flows for the thirty-nine week periods
ended October 31, 1999 and November 1, 1998 have been prepared by
Williams-Sonoma, Inc., (the Company) without audit. In the opinion of
management, the financial statements include all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
at the balance sheet dates and the results of operations for the thirteen and
thirty-nine weeks then ended. These financial statements include
Williams-Sonoma, Inc., and its wholly-owned subsidiaries. Significant
intercompany transactions and accounts have been eliminated. The balance sheet
at January 31, 1999, presented herein, has been derived from the audited balance
sheet of the Company included in the Company's Form 10-K for the fiscal year
ended January 31, 1999.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report to Shareholders for the fiscal year ended January 31, 1999.
Certain reclassifications have been made to the prior period financial
statements to conform to classifications used in the current period.
The results of operations for the thirteen and thirty-nine weeks ended October
31, 1999 are not necessarily indicative of the operating results of the full
year.
NOTE B. DEBT
The Company's amended and restated syndicated line of credit facility, which
expires on May 31, 2001, provides for $50,000,000 in cash advances, and contains
certain restrictive loan covenants, including minimum tangible net worth, a
minimum out-of-debt period, fixed charge coverage requirements and a prohibition
on payment of cash dividends. Additionally, the Company has a one-year
$65,000,000 letter-of-credit agreement expiring on May 31, 2000 with its lead
bank.
During the third quarter, the Company amended its letter-of-credit agreement to
add a facility for up to $50,000,000 in cash advances in order to meet its
seasonal working capital needs. This additional facility expired on December 1,
1999.
At October 31, 1999, the Company had $50,000,000 of borrowings outstanding under
the line of credit facility, $48,316,000 in outstanding letters of credit, and
$11,980,000 of outstanding cash advances under the letter of credit facility.
<PAGE> 7
NOTE C. EARNINGS PER SHARE
Basic earnings per share is computed as net income divided by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur from common shares
issuable through stock options, warrants and other convertible securities.
NOTE D. SEGMENT REPORTING
Williams-Sonoma, Inc. has two reportable segments: retail and catalog. The
retail segment sells products for the home through its three retail concepts:
Williams-Sonoma, Pottery Barn and Hold Everything. The catalog segment sells
similar products through its four direct-mail catalogs: Williams-Sonoma, Pottery
Barn (including Pottery Barn Kids), Hold Everything and Chambers, and the
Internet.
In 1999 the Company sold its Gardners Eden catalog business to Brookstone, Inc.
As a result of this sale, the Company recorded a $3,977,000 pre-tax gain, which
is reflected in catalog earnings before income taxes in the segment information
below.
These reportable segments are strategic business units that offer similar
home-centered products. They are managed separately because each business unit
utilizes two distinct distribution and marketing strategies.
The accounting policies of the segments, where applicable, are the same as those
described in the summary of significant accounting policies detailed in the
Company's most recent annual report on Form 10-K filed with the Securities and
Exchange Commission. Williams-Sonoma uses earnings before unallocated corporate
overhead, interest and taxes to evaluate segment profitability. Unallocated
assets include corporate cash and equivalents, the net book value of corporate
facilities and related information systems, deferred tax amounts and other
corporate long-lived assets.
SEGMENT INFORMATION -
Dollars in thousands
<TABLE>
<CAPTION>
Retail Catalog Unallocated Total
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Thirteen Weeks Ended October 31, 1999
Revenues $189,732 $134,416 $ -- $324,148
Earnings before income taxes 12,052 21,195 (17,976) 15,271
Thirteen Weeks Ended November 1, 1998
Revenues $153,245 $ 88,053 $ -- $241,298
Earnings before income taxes 7,057 14,851 (13,438) 8,470
</TABLE>
Dollars in thousands
<TABLE>
<CAPTION>
Retail Catalog Unallocated Total
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Thirty-Nine Weeks Ended October 31, 1999
Revenues $520,583 $326,240 $ -- $846,823
Earnings before income taxes 33,040 51,395 (52,318) 32,117
Segment Assets 446,693 185,156 58,994 690,843
Thirty-Nine Weeks Ended November 1, 1998
Revenues $423,919 $238,851 $ -- $662,770
Earnings before income taxes 26,121 30,899 (38,396) 18,624
Segment Assets 376,329 100,856 51,904 529,089
</TABLE>
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
NET SALES
Net sales consists of the following components (dollars in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 31, 1999 November 1, 1998 October 31, 1999 November 1, 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Sales $189,732 58.5% $153,245 63.5% $520,583 61.5% $423,919 64.0%
Catalog Sales 134,416 41.5% 88,053 36.5% 326,240 38.5% 238,851 36.0%
-------- ----- -------- ----- -------- ----- -------- -----
Total Net Sales $324,148 100.0% $241,298 100.0% $846,823 100.0% $662,770 100.0%
</TABLE>
Net sales for Williams-Sonoma, Inc. and subsidiaries (the Company) for the 13
weeks ended October 31, 1999 (Third Quarter of 1999) were $324,148,000 -- an
increase of $82,850,000 (34.3%) over net sales for the 13 weeks ended November
1, 1998 (Third Quarter of 1998). Net sales for the 39-week period ended October
31, 1999 (Year-to-Date 1999) were $846,823,000, an increase of $184,053,000, or
27.8%, from the 39-week period ended November 1, 1998 (Year-to-Date 1998).
RETAIL SALES
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
(Dollars in thousands) October 31, November 1, October 31, November 1,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total retail sales $ 189,732 $ 153,245 $ 520,583 $ 423,919
Retail sales growth percentage 23.8% 17.3% 22.8% 20.0%
Comparable store sales growth 9.6% 2.4% 7.9% 4.3%
Number of stores - beginning of period 314 285 298 276
Number of new stores 24 27 44 52
Number of closed stores 2 8 6 24
Number of stores - end of period 336 304 336 304
Store selling area at quarter-end (sq. ft.) 1,420,903 1,219,940 1,420,903 1,219,940
Store leased area at quarter-end (sq. ft.) 2,197,588 1,872,709 2,197,588 1,872,709
</TABLE>
Retail sales for the third quarter of 1999 increased 23.8% over retail sales for
the third quarter of 1998 primarily due to a net increase of 32 stores. During
the Third Quarter of 1999, the Company opened 24 stores (9 Pottery Barn, 13
Williams-Sonoma, 1 Hold Everything and 1 Outlet) and closed 2 stores (1 Pottery
Barn and 1 Williams-Sonoma). Pottery Barn accounted for 65.3% of the growth in
retail sales during this period and 63.2% of the growth in Year-to-Date retail
sales. Total retail sales for Year-To-Date 1999 grew 22.8% over the same period
of the prior year, primarily due to new store openings.
Comparable stores are defined as those whose gross square feet did not change by
more than 20% in the previous twelve months and which have been open for at
least twelve months. Comparable store sales are compared monthly for purposes of
this analysis. In any given period, the set of stores comprising comparable
stores may be different than the comparable stores in the previous period,
depending on store opening and closing activity. Comparable store sales grew
9.6% in the Third Quarter of 1999, and 7.9% for Year-to-Date 1999, and were
particularly strong in Pottery Barn.
The prototypical 1999 large-format stores range from 4,500 - 10,200 selling
square feet for Pottery Barn stores and 2,800 - 3,700 selling square feet for
Williams-Sonoma stores. Management believes that the large-format stores enable
the Company to display merchandise more effectively. At the end of the Third
<PAGE> 9
Quarter of 1999, 216 stores (123 Williams-Sonoma and 93 Pottery Barn) were in
the large format, comprising 76.8% of the Company's total selling square
footage. Large-format stores accounted for 76.1% of total retail sales in the
Third Quarter of 1999 and 68.7% in the Third Quarter of 1998.
CATALOG SALES
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 31, November 1, October 31, November 1,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total catalog sales $ 134,416 $ 88,053 $ 326,240 $ 238,851
Percent growth in catalog sales 52.7% 20.2% 36.6% 13.9%
Percent growth in gross 49.3% 16.8% 26.3% 16.8%
number of pages mailed
Percent growth in number of catalogs mailed 28.4% 3.5% 12.7% 4.5%
</TABLE>
Catalog sales increased 52.7% in the Third Quarter of 1999 and 36.6% for
Year-to-Date 1999, primarily due to the strength of Pottery Barn (which includes
Pottery Barn Kids).
Pottery Barn catalog sales grew 85.3% in the Third Quarter of 1999 as compared
to the same period of the prior year. Pottery Barn Kids, which debuted in
January 1999, accounted for 40.2% of the total growth in Pottery Barn. The
number of pages mailed and number of catalogs mailed for Pottery Barn (excluding
Pottery Barn Kids), increased 55.3% and 26.0%, respectively, in the Third
Quarter of 1999. The growth of Pottery Barn over the last several years and the
initial success of Pottery Barn Kids reflect the Company's development of the
assortment and the enhanced consumer brand recognition achieved through the
Pottery Barn catalogs and Design Studio stores. Excluding Gardeners Eden, which
was sold in May 1999, Pottery Barn accounted for 90.4% of the growth in Third
Quarter 1999 catalog sales as compared to the prior year.
Sales for Williams-Sonoma (excluding Internet) increased 20.2% in the Third
Quarter of 1999 as compared to the Third Quarter of 1998. The Company attributes
this in part to the redesign of the Williams-Sonoma catalog, which was
introduced in the Second Quarter.
In 1999, the Company recognized a $3,977,000 pre-tax gain ($2,406,000 after-tax)
as a result of the sale of the assets of Gardeners Eden to Brookstone, Inc. The
Company decided to sell Gardeners Eden to allow greater focus on existing
Williams-Sonoma, Inc. brands and the Internet. In June 1999, the Company
launched its Williams-Sonoma Internet Wedding and Gift Registry application, and
on November 1, 1999, the Company launched its Williams-Sonoma e-commerce site.
Management expects to add a Pottery Barn e-commerce site in the summer of 2000.
COST OF GOODS SOLD AND OCCUPANCY
Cost of goods sold and occupancy expenses expressed as a percent of net sales in
the Third Quarter of 1999 decreased 1.2 percentage points to 59.5% from 60.7% in
the same period of the prior year. Merchandise margin improved 0.8 percentage
points, principally due to a lower cost of merchandise. The Company believes
this is a direct result of its investment in product development, sourcing and
quality control personnel over the last several years. Occupancy expenses
expressed as a percentage of net sales improved 0.4 percentage points in the
Third Quarter of 1999 as compared to the same period of the prior year,
principally due to increased sales volume.
For the Year-to-Date 1999, cost of goods sold and occupancy expenses as a
percent of net sales decreased 0.5 percentage points, from 61.8% for the same
period of 1998 to 61.3%. This decrease was primarily due
<PAGE> 10
to improved merchandise margins as a result of lower cost of merchandise and an
improved occupancy expense rate.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses expressed as a percent of net sales
decreased slightly in the Third Quarter of 1999, from 35.5% in 1998 to 35.4% in
1999. The Year-to-Date 1999 selling, general and administrative expense rates
remained unchanged compared with the Year-to-Date 1998.
INTEREST EXPENSE
Net interest expense for the Third Quarter of 1999 increased $540,000 to
$1,226,000 from $686,000 for the Third Quarter of 1998. This is primarily due to
increased borrowing under the Company's line of credit and letter of credit
facilities.
INCOME TAXES
The Company's effective tax rate was 39.5% for the Third Quarter and
Year-to-Date of 1999 and 41.0% for the Third Quarter and Year-to-Date of 1998.
The reduction in the tax rate reflects decreases in state taxes resulting from
revisions in the corporate structure which are being undertaken in order to
conform more closely to the Company's operations.
LIQUIDITY AND CAPITAL RESOURCES
For Year-to-Date 1999, cash used in operating activities was $71,960,000
representing an increase of $10,146,000 from the $61,814,000 of cash used in
operating activities for the same period of 1998. This was principally
attributable to an increase in merchandise inventories, partially offset by
higher net earnings and improved cash flow from changes in accounts payable and
accrued expenses as compared to the prior year. Management believes that the
Company's merchandise levels are in line with planned sales for the fourth
quarter.
Net cash used in investing activities was $85,947,000 for Year-to-Date 1999.
Purchases of property and equipment were $95,009,000, which includes
approximately $54,000,000 for stores, $17,600,000 for warehouse and computer
equipment in a new, leased distribution facility and $19,500,000 for systems
development. Net proceeds from the sale of the assets of the Gardeners Eden
catalog were $9,101,000. Additionally, there were net proceeds from the sale of
land of $2,091,000. The Company is planning approximately $130,000,000 -
$135,000,000 of gross capital expenditures in 1999.
For Year-to-Date 1999, cash provided by financing activities was $55,390,000,
comprised primarily of net borrowings under Company's line of credit facility.
For Year-to-Date 1998, cash provided by financing activities was $25,724,000,
principally as a result of net borrowings under the line of credit facility. The
Company's amended and restated syndicated line of credit facility, which expires
on May 31, 2001, provides for $50,000,000 in cash advances, and contains certain
restrictive loan covenants, including minimum tangible net worth, a minimum
out-of-debt period, fixed charge coverage requirements and a prohibition on
payment of cash dividends. Additionally, the Company has a one-year $65,000,000
letter-of-credit agreement expiring on May 31, 2000 with its lead bank.
During the third quarter, the Company amended its letter-of-credit agreement to
add a facility for up to $50,000,000 in cash advances in order to meet its
seasonal working capital needs. This additional facility expired on December 1,
1999.
<PAGE> 11
On October 31, 1999, the Company had $50,000,000 of borrowings outstanding under
the line of credit facility, $48,316,000 in outstanding letters of credit, and
$11,980,000 of outstanding cash advances under the letter of credit facility.
IMPACT OF INFLATION
The impact of inflation on results of operations has not been significant.
YEAR 2000 COMPLIANCE
As is the case with most other companies using computers in their operations,
the Company is in the final stages of completing its program to address the
"Year 2000" problem. The Company previously identified those areas that could be
affected by the Year 2000 issue, and developed a comprehensive, risk-based plan.
This plan addressed both IT and non-IT systems and products, as well as
dependencies on those with whom the Company does significant business. The
status of this plan is as follows:
Earlier in the year, the Company completed an inventory and risk-assessment of
its computer systems and related technology. In the third quarter of 1999, the
Company substantially completed testing and remediation of its critical business
processes, and believes that all significant issues that were identified as a
result of this process have been resolved. However, the Company can not
guarantee that its systems will not encounter difficulties when attempting to
interface with certain internal or third party systems, whether or not those
systems are claimed to be "compliant", and the Company can not guarantee that
such failure to interface or interconnect will not have a materially adverse
effect on the Company's operations.
With regard to outside vendors, the Company believes the greatest Year 2000
exposure is with its service providers (customs broker, logistics providers,
etc.). The Company believes the Year 2000 risk with its merchandise suppliers is
low because no vendor accounts for more than 3% of purchases and many of the
vendors are small artisan manufacturers with simple business systems. The
Company has completed its compliance review of major vendors, and has resolved
all significant outstanding issues to the best of its ability. Despite this
approach, there can be no guarantee that the systems of other companies on which
the Company is reliant will be converted timely, or that a failure by another
company to convert would not have a materially adverse effect on the Company.
The Company is using both internal and external resources to complete this
project. In total, the estimated fourth quarter cost for the remediation and
testing of computer applications and related products is approximately $250,000.
Approximately $2.5 million of external costs have been expensed to date.
The Company presently believes the Year 2000 problem will not pose significant
operational risk. While the Company can not accurately predict a "worst case
scenario" with regard to its Year 2000 issues, the failure by the Company and or
vendors to complete Year 2000 compliance work in a timely manner could have a
materially adverse effect on the Company's operations. The Company has assessed
these risks and uncertainties, and has developed appropriate contingency plans
and procedures in an attempt to minimize the effects of such a scenario.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risks, which include changes in U.S. interest
rates and, to a lesser extent, foreign exchange rates. The Company does not
engage in financial transactions for trading or speculative purposes.
Interest Rate Risk: The interest payable on the Company's bank line of credit is
based on variable interest rates and therefore affected by changes in market
interest rates. If interest rates on existing variable rate debt rose 0.85
percentage points (a 10% change from the bank's reference rate as of October 31,
1999), the Company's results from operations and cash flows would not be
materially affected. In addition, the
<PAGE> 12
Company has fixed and variable income investments consisting of cash equivalents
and short-term investments, which are also affected by changes in market
interest rates. The Company does not use derivative financial investments in its
investment portfolio.
Foreign Currency Risks: The Company enters into a significant amount of purchase
obligations outside of the U.S. which are settled in U.S. Dollars, and,
therefore, has only minimal exposure to foreign currency exchange risks. The
Company does not hedge against foreign currency risks and believes that foreign
currency exchange risk is immaterial.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed in
this quarterly report are forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those set forth in such forward-looking statements. Such risks and
uncertainties include, without limitation, the Company's ability to continue to
improve planning and control processes and other infrastructure issues, the
potential for construction and other delays in store openings, the Company's
dependence on external funding sources, the potential for changes in consumer
spending patterns, consumer preferences and overall economic conditions, the
Company's dependence on foreign suppliers, increasing competition in the
specialty retail business, and the Company's ability to successfully resolve its
Year 2000 issues. Other factors that could cause actual results to differ
materially from those set forth in such forward-looking statements include the
risks and uncertainties detailed in the Company's most recent Annual Report on
Form 10-K and its other filings with the Securities and Exchange Commission.
<PAGE> 13
WILLIAMS-SONOMA, INC. AND SUBSIDIARIES
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company. The
Company is, however, involved in routine litigation arising in the ordinary
course of its business, and, while the results of the proceedings cannot be
predicted with certainty, the Company believes that the final outcome of such
matters will not have a material adverse effect on the Company's consolidated
financial statements taken as a whole.
<PAGE> 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
10.1 Fifth Amendment to Letter of Credit Agreement between
the Company and Bank of America National Trust and
Savings Association, dated September 22, 1999
10.2 Fourth Amendment to Syndicated Credit Agreement between
the Company and Bank of America National Trust and
Savings Association, dated September 22, 1999.
10.3 Sixth Amendment to Letter of Credit Agreement between
the Company and Bank of America National Trust and
Savings Association, dated October 29, 1999
11 Statement re computation of per share earnings.
27 Financial Data Schedule.
</TABLE>
(b) The Company filed the following reports on Form 8-K during the third
quarter of fiscal 1999.
(1) A report dated September 22, 1999 disclosing the ratification of the
proposed Restated Bylaws of the Company with respect to the indemnification
of officers, directors, and employees, and an advance notice provision
regarding director nominations and shareholder proposals.
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILLIAMS-SONOMA, INC.
By: /s/ John W. Tate
-------------------------------------
John W. Tate
Senior Vice President
Chief Financial Officer
Dated: December 13, 1999
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
10.1 Fifth Amendment to Letter of Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated September 22, 1999
10.2 Fourth Amendment to Syndicated Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated September 22, 1999.
10.3 Sixth Amendment to Letter of Credit Agreement between
the Company and Bank of America National Trust and
Savings Association, dated October 29, 1999
11 Statement re computation of per share earnings.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
FIFTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
This Amendment dated as of September 22, 1999 is between Bank of America,
N.A., formerly known as Bank of America National Trust and Savings Association
(the "Bank") and Williams-Sonoma, Inc. (the "Borrower").
RECITALS
A. The Bank and the Borrower entered into a certain Letter of Credit
Agreement dated as of June 1, 1997 (as previously amended, the "Agreement").
B. The Bank and the Borrower desire to amend the Agreement.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Agreement.
2. Amendment. A new Article 2A is added to the Agreement as follows:
2A.1 Line of Credit Amount. From the effective date of the Fifth
Amendment to this Agreement until November 1, 1999 (the "Revolver
Expiration Date"), the Bank will provide a line of credit to the Borrower.
The amount of the line of credit (the "Revolver Commitment") is Fifty
Million Dollars ($50,000,000). This is a revolving line of credit providing
for cash advances. During the availability period, the Borrower may repay
principal amounts and reborrow them. The Borrower agrees not to permit the
outstanding principal balance of advances under the line of credit to
exceed the Revolver Commitment. Amounts advanced under this line of credit
shall be used for seasonal working capital needs of the Borrower and its
subsidiaries.
2A.2 Interest Rate. Unless the Borrower elects an optional interest
rate as described below, principal amounts outstanding under this line of
credit shall bear interest at the Base Rate (as defined in the Syndicated
Credit Agreement) plus the Applicable Margin (as defined below).
2A.3 Repayment Terms. The Borrower will pay interest on each Interest
Payment Date, as defined in the Syndicated Credit Agreement, until payment
in full of any principal outstanding under this line of credit. The
Borrower will repay in full all principal and any unpaid interest or other
charges outstanding under this line of credit no later than the Revolver
Expiration Date. Any interest period for an optional interest rate (as
described below) shall expire no later than the Revolver Expiration Date.
2A.4 Optional Interest Rates. Instead of the interest rate based on
the Base Rate, the Borrower may elect to have all or portions of the
principal amount outstanding under this facility bear interest at the
London Rate plus the Applicable Margin or the Cayman Rate plus the
Applicable Margin. The London Rate and Cayman Rate shall have the meanings
as defined in the Syndicated Credit Agreement.
2A.5 Fees. The Borrower agrees to pay a fee on any difference between
the Revolver Commitment and the amount of credit it actually uses under
this facility,
-1-
<PAGE> 2
determined by the weighted average credit outstanding during the specified
period. The fee will be calculated at the rates indicated in paragraph 2A.6
below, and shall be paid at the end of each calendar quarter in arrears. In
addition, the Borrower shall pay a commitment fee as described in the
Bank's fee letter dated September 9, 1999.
2A.6 Applicable Margin and Fee. The Applicable Margin shall be the
following amounts per annum:
<TABLE>
<CAPTION>
Applicable Margin
(in basis points per annum)
Unused Fee ------------------------------------
(basis points) Base Rate + London/Cayman Rate +
-------------- ----------- --------------------
<S> <C> <C>
17.5 0 87.5
</TABLE>
The Applicable Margin with respect to London and Cayman Rates shall be
increased above the amounts stated in the foregoing table in the following
cases: (a) During any period in which the principal amount outstanding
under this facility exceeds 33% of the Revolver Commitment, the Applicable
Margin shall be increased by 12.5 basis points; and (b) during any period
in which the principal amount outstanding under this facility exceeds 66%
of the Revolver Commitment, the Applicable Margin shall be increased by
25.0 basis points.
2A.7 Incorporation of Terms. The terms and conditions specified in
paragraphs 2.04(a), 2.05(a), (b) and (c), 2.12 and Article 3 of the
Syndicated Credit Agreement are incorporated by reference as though fully
set forth in this Agreement; provided, however, that each reference to the
Agent in such paragraphs shall be deemed to refer to the Bank in its
individual capacity as a lender; and provided that the terms "Base Rate
Loan," "Cayman Rate Loan" and "London Rate Loan" shall refer to amounts
outstanding under this Agreement which are bearing interest at the
respective interest rates.
2A.8 Default Rate. While any Event of Default exists or after
acceleration, the Borrower shall, at the Bank's option, pay interest at a
rate which is two (2.0) percentage points higher than the rate which would
otherwise apply under this Agreement.
3. Representations and Warranties. When the Borrower signs this
Amendment, the Borrower represents and warrants to the Bank that the
representations and warranties in Article 5 of the Agreement, as applied to the
Agreement as amended hereby, are true and correct as of the date of this
Amendment as if made on the date of this Amendment.
4. Conditions. This Amendment will be effective when the Bank receives
the following items. In form and content acceptable to the Bank:
(a) Evidence that the execution, delivery, and performance by the
Borrower of this Amendment and any Instrument or agreement required under
this Amendment have been duly authorized;
(b) A Guarantor Acknowledgement and Consent in the form attached
hereto.
-2-
<PAGE> 3
(c) An amendment from the Banks party to the Syndicated Credit
Agreement (as defined in the Agreement).
5. Effect of Amendment. Except as provided in this Amendment, all
of the terms and conditions of the Agreement shall remain in full force and
effect.
This Amendment is executed as of the date first stated above.
BANK OF AMERICA, N.A. WILLIAMS-SONOMA, INC.
By /s/ H. P. ROGERS By /s/ JERRY S. B. DRATLER
------------------------- ------------------------------
Henry Rogers Title V.P. Finance Asst Secretary
Senior Vice President ---------------------------
By /s/ JOHN W. TATE
------------------------------
Title CFO
---------------------------
- 3 -
<PAGE> 4
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a guarantor with respect to the Borrower's obligations to
the Bank under the Agreement, each hereby (i) acknowledge and consent to the
execution, delivery and performance by the Borrower of the foregoing Fifth
Amendment to Letter of Credit Agreement, and (ii) reaffirm and agree that
the guaranty to which the undersigned is party is in full force and effect, and
guaranties all of the obligations of the Borrower under the Agreement, as
amended.
Dated as of September 22, 1999 WILLIAMS-SONOMA, INC.
By /s/ JERRY S. B. DRATLER
------------------------------
Jerry S. B. Dratler
Assistant Secretary
HOLD EVERYTHING, INC.
By /s/ JERRY S. B. DRATLER
------------------------------
Jerry S. B. Dratler
Assistant Secretary
CHAMBERS CATALOG COMPANY, INC.
By /s/ JERRY S. B. DRATLER
------------------------------
Jerry S. B. Dratler
Assistant Secretary
POTTERY BARN EAST, INC.
By /s/ JERRY S. B. DRATLER
------------------------------
Jerry S. B. Dratler
Assistant Secretary
WILLIAMS-SONOMA STORES, LLC
By Williams-Sonoma, Inc., its sole
member
By /s/ JERRY S. B. DRATLER
----------------------------------
Jerry S. B. Dratler, its President
- 4 -
<PAGE> 1
EXHIBIT 10.2
FOURTH AMENDMENT TO SYNDICATED CREDIT AGREEMENT
AND WAIVER
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
September 22, 1999, is entered into by and among WILLIAMS-SONOMA, INC. (the
"Company"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for
itself and the Banks (the "Agent"), and the several financial institutions party
to the Credit Agreement (collectively, the "Banks").
RECITALS
A. The Company, Banks, and Agent are parties to a Credit Agreement dated as
of June 1, 1997 (as previously amended, the "Credit Agreement") pursuant to
which the Agent and the Banks have extended certain credit facilities to the
Company.
B. The L/C Agreement (as defined in the Credit Agreement) is being amended
to add a facility for up to $50,000,000 in cash advances by BofA to the Company.
C. The Company has made an investment in Della & James in the approximate
amount of $2,000,000, as has been disclosed to the Banks in writing.
D. The Banks are willing to amend the Credit Agreement, subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) A new subsection (i) is added to Section 7.05 ("Limitation on
Indebtedness") as follow:
(i) Additional Indebtedness to BofA (or another replacement
lender) in a principal amount not to exceed Fifty Million Dollars
($50,000,000) outstanding at any one time;
(b) All references to the L/C Agreement in the Credit Agreement shall
be deemed to refer to the L/C Agreement as amended as described in Recital B
above. In particular, the pro rata sharing provisions in paragraph 2.15(d) shall
be deemed to apply to all credit outstanding under the L/C Agreement, as
amended.
3. Waiver. The Banks hereby waive any violation of section 7.04 of the
Credit Agreement arising from the investment in Della & James, as described in
the Recitals. This waiver shall not be deemed to cover any other or any future
violations of the Credit Agreement by the Borrower.
4. Representations and Warranties. The Company hereby represents and
warrants to the Agent and the Bank as follows:
1
<PAGE> 2
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without
defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Agent and
the Banks or any other Person.
5. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment
shall be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Agent of a
facsimile transmitted document purportedly bearing the signature of a Bank or
the Company shall bind such Bank or the Company, respectively, with the same
force and effect as the delivery of a hard copy original. Any failure by the
Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 10.01 of the Credit
Agreement.
2
<PAGE> 3
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent, upon
demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
WILLIAMS-SONOMA, INC
By /s/ PATRICK W. ZETZMAN
------------------------------
Patrick W. Zetzman By /s/ JERRY S. B. DRATLER
Vice President -------------------------------
Title V.P. Finance Asst Secretary
----------------------------
By /s/ JOHN W. TATE
-------------------------------
Title CFO
----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank THE BANK OF NEW YORK
By /s/ HENRY ROGERS By
------------------------------ -------------------------------
Henry Rogers
Senior Vice President Title
----------------------------
3
<PAGE> 4
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent, upon
demand for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent WILLIAMS-SONOMA, INC.
By By
------------------------------- --------------------------------
Patrick W. Zetzman
Vice President Title
-----------------------------
By
--------------------------------
Title
-----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank THE BANK OF NEW YORK
By By /s/ Claudette San
------------------------------- --------------------------------
Henry Rogers
Vice President Title V.P.
-----------------------------
3
<PAGE> 5
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a guarantor with respect to the Company's
obligations under the Credit Agreement, each hereby (i) acknowledge and consent
to the execution, delivery and performance by the Company of the foregoing
Fourth Amendment to Syndicated Credit Agreement, and (ii) reaffirm and agree
that the guaranty to which the undersigned is a party is in full force and
effect, and guaranties all of the obligations of the Company under the
Agreement, as amended.
Dated as of September 22, 1999 WILLIAMS-SONOMA STORES, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
HOLD EVERYTHING, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
CHAMBERS CATALOG
COMPANY, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
POTTERY BARN EAST, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
WILLIAMS-SONOMA STORES, LLC
By Williams-Sonoma, Inc., its sole
member
By: /s/ JERRY S. B. DRATLER
-----------------------------------
Jerry S. B. Dratler, its President
4
<PAGE> 1
EXHIBIT 10.3
SIXTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
This Amendment dated as of October 29, 1999 is between Bank of America,
N.A., formerly known as Bank of America National Trust and Savings Association
(the "Bank") and Williams-Sonoma, Inc. (the "Borrower").
RECITALS
A. The Bank and the Borrower entered into a certain Letter of Credit
Agreement dated as of June 1, 1997 (as previously amended, the "Agreement").
B. The Bank and the Borrower desire to amend the Agreement.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Agreement.
2. Amendment. Paragraph 2A.1, which was added to the Agreement by the
Fifth Amendment, is amended by changing the Revolver Expiration Date to
December 1, 1999.
3. Representations and Warranties. When the Borrower signs this Amendment,
the Borrower represents and warrants to the Bank that the representations and
warrants in Article 5 of the Agreement, as applied to the Agreement as amended
hereby, are true and correct as of the date of this Amendment as if made on the
date of this Agreement.
4. Conditions. This Amendment will be effective when the Bank receives the
following items, in form and content acceptable to the Bank: A Guarantor
Acknowledgment and Consent in the form attached hereto.
5. Effect of Amendment. Except as provided in this Amendment, all of the
terms and conditions of the Agreement shall remain in full force and effect.
This Amendment is executed as of the date first stated above.
BANK OF AMERICA, N.A. WILLIAMS-SONOMA, INC.
By /s/ HENRY ROGERS By /s/ JERRY S. B. DRATLER
--------------------------- -----------------------------
Henry Rogers
Senior Vice President Title V P Finance
--------------------------
By /s/ JOHN TATE
-----------------------------
Title CFO
--------------------------
-1-
<PAGE> 2
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a guarantor with respect to the Borrower's
obligations to the Bank under the Agreement, each hereby (i) acknowledge and
consent to the execution, delivery and performance by the Borrower of the
foregoing Sixth Amendment to Letter of Credit Agreement, and (ii) reaffirm and
agree that the guaranty to which the undersigned is party is in full force and
effect, and guaranties all of the obligations of the Borrower under the
Agreement, as amended.
Dated as of October 29, 1999 WILLIAMS-SONOMA STORES, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
HOLD EVERYTHING, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
CHAMBERS CATALOG
COMPANY, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
POTTERY BARN EAST, INC.
By: /s/ JERRY S. B. DRATLER
---------------------------
Jerry S. B. Dratler
Assistant Secretary
WILLIAMS-SONOMA STORES, LLC
By Williams-Sonoma, Inc., its sole
member
By: /s/ JERRY S. B. DRATLER
-----------------------------------
Jerry S. B. Dratler, its President
- 2 -
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Net Weighted Average Per-Share
Earnings Shares Amount
----------- ---------------- -----------
<S> <C> <C> <C>
Thirteen weeks ended October 31, 1999:
Basic $ 9,239,000 55,827,002 $ 0.17
Effect of dilutive stock options -- 3,080,629
------------------------------
Diluted $ 9,239,000 58,907,631 $ 0.16
=========== =========== ===========
Thirteen weeks ended November 1, 1998:
Basic $ 4,998,000 55,612,921 $ 0.09
Effect of dilutive stock options -- 2,224,919
------------------------------
Diluted $ 4,998,000 57,837,840 $ 0.09
=========== =========== ===========
Thirty-nine weeks ended October 31, 1999:
Basic $19,431,000 55,761,295 $ 0.35
Effect of dilutive stock options -- 2,740,368
------------------------------
Diluted $19,431,000 58,501,663 $ 0.33
=========== =========== ===========
Thirty-nine weeks ended November 1, 1998:
Basic $10,989,000 53,987,790 $ 0.20
Effect of dilutive stock options -- 2,338,001
------------------------------
Diluted $10,989,000 56,325,791 $ 0.20
=========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 4,791
<SECURITIES> 0
<RECEIVABLES> 29,980
<ALLOWANCES> 0
<INVENTORY> 301,665
<CURRENT-ASSETS> 378,549
<PP&E> 458,228
<DEPRECIATION> 155,510
<TOTAL-ASSETS> 690,843
<CURRENT-LIABILITIES> 240,498
<BONDS> 35,497
0
0
<COMMON> 11,466
<OTHER-SE> 309,724
<TOTAL-LIABILITY-AND-EQUITY> 690,843
<SALES> 846,823
<TOTAL-REVENUES> 846,823
<CGS> 518,720
<TOTAL-COSTS> 816,782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,901
<INCOME-PRETAX> 32,117
<INCOME-TAX> 12,686
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,431
<EPS-BASIC> 0.35<F1>
<EPS-DILUTED> 0.33
<FN>
<F1>
</FN>
</TABLE>
