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 August 3, 1997. --------------- [ ] 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. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) California 94-2203880 - -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 3250 Van Ness Avenue, San Francisco, CA 94109 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (415) 421-7900 -------------- - -------------------------------------------------------------------------------- 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 September 9, 1997, 25,792,737 shares of the Registrant's Common Stock were outstanding.
2 WILLIAMS-SONOMA, INC. REPORT ON FORM 10-Q FOR THE QUARTER ENDED AUGUST 3, 1997 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION <TABLE> <S> <C> Item 1. Financial Statements Condensed Consolidated Balance Sheets August 3, 1997, February 2, 1997, and July 28, 1996 Condensed Consolidated Statements of Operations Thirteen weeks ended August 3, 1997 and July 28, 1996 Twenty-six weeks ended August 3, 1997 and July 28, 1996 Condensed Consolidated Statements of Cash Flows Twenty-six weeks ended August 3, 1997 and July 28, 1996 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K </TABLE>
3 WILLIAMS-SONOMA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) (Unaudited) <TABLE> <CAPTION> August 3, February 2, July 28, 1997 1997 1996 ---- ---- ---- <S> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 27,266 $ 78,802 $ 6,176 Accounts receivable (net) 15,273 11,918 9,737 Merchandise inventories 125,709 110,702 101,284 Prepaid expenses and other assets 10,322 8,674 12,957 Prepaid catalog expenses 6,993 11,925 11,342 Deferred income taxes 4,028 4,028 139 -------- -------- -------- Total current assets 189,591 226,049 141,635 Property and equipment (net) 185,256 172,093 163,453 Investments and other assets (net) 6,160 5,824 7,867 Deferred income taxes 451 451 4,040 -------- -------- -------- $381,458 $404,417 $316,995 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 46,120 $ 64,409 $ 47,824 Accrued expenses 12,064 12,514 7,990 Accrued salaries and benefits 13,183 16,116 8,747 Customer deposits 13,672 13,801 9,846 Income taxes payable 2,900 15,715 -- Current portion of long-term obligations 125 125 125 Other liabilities 6,235 6,801 3,188 -------- -------- -------- Total current liabilities 94,299 129,481 77,720 Deferred lease credits and other liabilities 46,318 39,579 33,213 Long-term debt 89,534 89,319 86,854 Shareholders' equity 151,307 146,038 119,208 -------- -------- -------- $381,458 $404,417 $316,995 ======== ======== ======== </TABLE> See Notes to Condensed Consolidated Financial Statements.
4 WILLIAMS-SONOMA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) (Unaudited) <TABLE> <CAPTION> Thirteen Weeks Ended Twenty-Six Weeks Ended ------------------------ ------------------------ August 3, July 28, August 3, July 28, 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net sales $182,427 $ 155,499 $358,962 $ 312,895 Costs and expenses: Cost of goods sold and occupancy 116,667 101,644 226,694 204,419 Selling, general and administrative 60,662 53,451 124,003 110,631 -------- --------- -------- --------- Total costs and expenses 177,329 155,095 350,697 315,050 -------- --------- -------- --------- Earnings (loss) from operations 5,098 404 8,265 (2,155) Interest expense (net) 929 1,476 1,703 3,017 -------- --------- -------- --------- Earnings (loss) before income taxes 4,169 (1,072) 6,562 (5,172) Income taxes (benefit) 1,752 (450) 2,756 (2,172) -------- --------- -------- --------- Net earnings (loss) $ 2,417 $ (622) $ 3,806 $ (3,000) ======== ========= ======== ========= Earnings (loss) per share: Primary and fully diluted $ 0.09 $ (0.02) $ 0.14 $ (0.12) Average number of common shares outstanding: Primary 26,802 25,460* 26,678 25,442* Fully diluted 26,885** 25,460* 26,777** 25,442* </TABLE> * Incremental shares from assumed exercise of stock options and convertible debt are antidilutive for primary and fully diluted loss per share. ** Incremental shares from assumed conversion of convertible debt are antidilutive for fully diluted earnings per share. See Notes to Condensed Consolidated Financial Statements.
5 WILLIAMS-SONOMA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) <TABLE> <CAPTION> Twenty-Six Weeks Ended August 3, July 28, 1997 1996 ---- ---- <S> <C> <C> Cash flows from operating activities: Net earnings (loss) $ 3,806 $ (3,000) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 13,745 10,917 Amortization of deferred lease incentives (2,173) (1,493) Change in: Accounts receivable (3,355) 3,421 Merchandise inventories (15,007) 20,319 Deferred rents (218) (257) Prepaid catalog expenses 4,932 4,271 Prepaid expenses and other assets (1,648) (6,451) Accounts payable (18,289) (10,471) Accrued expenses and other liabilities (3,064) (1,371) Deferred lease incentives 9,131 6,385 Income taxes payable (12,815) (1,947) -------- --------- Net cash provided by (used in) operating activities (24,955) 20,323 -------- --------- Cash flows from investing activities: Purchases of property and equipment (27,751) (28,038) Other investments (506) -- -------- --------- Net cash used in investing activities (28,257) (28,038) -------- --------- Cash flows from financing activities: Borrowings under line of credit 3,900 119,180 Repayments under line of credit (3,900) (148,780) Proceeds from issuance of long-term debt -- 40,000 Debt issuance costs -- (1,327) Repayment of long-term debt (313) (31) Proceeds from exercise of stock options 1,462 555 Change in other long-term liabilities 527 128 -------- --------- Net cash provided by financing activities 1,676 9,725 -------- --------- Net increase (decrease) in cash and cash equivalents (51,536) 2,010 Cash and cash equivalents at beginning of period 78,802 4,166 -------- --------- Cash and cash equivalents at end of period $ 27,266 $ 6,176 ======== ========= </TABLE> See Notes to Condensed Consolidated Financial Statements.
6 WILLIAMS-SONOMA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Thirteen and Twenty-six Weeks Ended August 3, 1997 and July 28, 1996 (Unaudited) NOTE A. FINANCIAL STATEMENTS - BASIS OF PRESENTATION The condensed consolidated balance sheets as of August 3, 1997 and July 28, 1996, the condensed consolidated statements of operations for the thirteen and twenty-six week periods ended August 3, 1997 and July 28, 1996, and condensed consolidated statements of cash flows for the twenty-six week periods ending August 3, 1997 and July 28, 1996 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 twenty-six 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 February 2, 1997, presented herein, has been prepared from the audited balance sheet of the Company. 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 February 2, 1997. Certain reclassifications have been made to the prior year financial statements to conform to classifications used in the current period. The results of operations for the thirteen and twenty-six weeks ended August 3, 1997 are not necessarily indicative of the operating results of the full year. NOTE B. DEBT On April 15, 1996, the Company issued $40,000,000 principal amount of 5.25% convertible, subordinated notes due April 15, 2003 (Convertible Notes). Net proceeds from the transaction amounted to $38,607,000 and were used to provide the Company with a long-term source of working capital. Interest is payable semi-annually and began in October 1996. The Convertible Notes are convertible into shares of common stock at a conversion price of $26.10 per share (equivalent to a conversion rate of 38.3 shares per $1,000 principal amount). The conversion price is subject to adjustment in certain events, including stock splits and stock dividends. Except as discussed below, the Convertible Notes are redeemable at the option of the Company in the form of cash or common stock, on or after April 15, 1998, in whole or in part, at redemption prices (expressed as a percentage of principal amount) ranging from 103.75% to 100% in the last year. For the period of April 15, 1998 through April 14, 2000, redemption may not occur unless the ratio of the stock price to the conversion price has achieved a minimum as defined in the Convertible Note agreement. In the event of a change in control, holders of the Convertible Notes may, at their option, require the Company to repurchase all or any portion of the principal amount. The agreement does not restrict the Company from incurring additional indebtedness. The Company has a 364-day syndicated line of credit facility expiring on May 29, 1998 which provides for $60,000,000 to $90,000,000 in cash advances, depending on seasonal requirements. The agreement contains certain restrictive loan covenants, including minimum tangible net worth, a minimum out-of-debt period, and a prohibition on payment of cash dividends. Additionally, the Company has a $35,000,000 letter-of-credit agreement with its primary bank.
7 NOTE C. NEW ACCOUNTING STANDARDS In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS No. 128), Earnings per Share, was issued. SFAS No. 128 requires dual presentation of basic EPS on the face of all income statements issued after December 15, 1997 for all entities with complex capital structures. Basic EPS is computed as net income divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities. The pro forma effect assuming adoption of SFAS No. 128 at the beginning of each period is presented below: <TABLE> <CAPTION> Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, July 28, August 3, July 28, 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Pro forma earnings (loss) per share Basic $0.09 $(0.02) $0.15 $(0.12) Diluted $0.09 $(0.02) $0.14 $(0.12) </TABLE> In June 1997, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 130 (Reporting Comprehensive Income), which requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from nonowner sources; and No. 131 (Disclosures about Segments of an Enterprise and Related Information), which establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas, and major customers. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows, and any effect will be limited to the form and content of its disclosures. Both statements are effective for fiscal years beginning after December 15, 1997, with earlier application permitted.
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 Twenty-Six Weeks Ended August 3, 1997 July 28, 1996 August 3, 1997 July 28, 1996 -------------- ------------- -------------- ------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Retail Sales $116,264 63.7% $ 99,778 64.2% $222,520 62.0% $190,863 61.0% Catalog Sales 66,163 36.3% 55,721 35.8% 136,442 38.0% 122,032 39.0% -------- ----- -------- ----- -------- ----- -------- ----- Total Net Sales 182,427 100.0% 155,499 100.0% 358,962 100.0% 312,895 100.0% </TABLE> Net sales for Williams-Sonoma, Inc. and subsidiaries (the Company) for the 13 weeks ended August 3, 1997 (Second Quarter of 1997) were $182,427,000 -- an increase of $26,928,000 (17.3%) over net sales for the 13 weeks ended July 28, 1996 (Second Quarter of 1996). Net sales for the 26-week period ended August 3, 1997 (Year-to-Date 1997) were $358,962,000, a 14.7% increase from the 26-week period ended July 28, 1996 (Year-to-Date 1996). RETAIL SALES <TABLE> <CAPTION> Thirteen Weeks Ended Twenty-Six Weeks Ended (Dollars in thousands) August 3, 1997 July 28, 1996 August 3, 1997 July 28, 1996 -------------- ------------- -------------- ------------- <S> <C> <C> <C> <C> Total retail sales $116,264 $ 99,778 $222,520 $190,863 Retail growth percentage 16.5% 33.3% 16.6% 36.3% Comparable store sales growth 2.7% 2.6% 1.4% 4.8% Number of stores - beginning of period 260 244 256 240 Number of new stores 16 6 22 12 Number of closed stores 12 4 14 6 Number of stores - end of period 264 246 264 246 Store selling area at quarter-end (sq. ft.) 900,361 750,273 900,361 750,273 </TABLE> Retail sales for the Second Quarter of 1997 increased 16.5% over retail sales for the Second Quarter of 1996 primarily due to a net increase of 18 stores. Year-to-Date 1997 retail sales increased 16.6% over the same period of the prior year. The Company operated 264 stores at the end of the Second Quarter of 1997 as compared to 246 stores at the end of the same period during the prior year. During the Second Quarter of 1997, the Company opened 16 stores (8 Williams-Sonoma, 4 Pottery Barn, 2 Hold Everything and 2 Clearance Centers) and closed 12 smaller stores (7 Williams-Sonoma, 3 Hold Everything, 1 Pottery Barn and 1 Clearance Center). Pottery Barn, which represented 31.1% of the locations at the end of the Second Quarter of 1997, accounted for 59.1% and 57.8% of the growth in retail sales for the Second Quarter of 1997 and Year-to-Date 1997, respectively. Comparable store sales 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. Comparable store sales grew 2.7% in the Second Quarter of 1997, and 1.4% for Year-to-Date 1997. Comparable store sales for Pottery Barn stores were slightly negative in both of these periods. The Company opened its first large-format store in fiscal 1994. The prototypical 1997 large-format stores range from 5,700 - 8,100 selling square feet (10,000 - 13,800 gross square feet) for Pottery Barn stores, and
9 2,800 - 4,600 selling square feet (4,200 - 6,500 gross square feet) for Williams-Sonoma, and enable the Company to more clearly display merchandise. Large-format stores accounted for 54.0% and 53.2% of Second Quarter of 1997 and Year-to-Date 1997 retail sales, respectively. As of the end of the Second Quarter of 1997, 107 stores (66 Williams-Sonoma and 41 Pottery Barn) were in the large format. CATALOG SALES Catalog sales in the Second Quarter of 1997 and the Second Quarter of 1996 increased 18.7% and 5.4%, respectively, over the same period of the prior year in each case. For 1997 Year-to-Date, catalog sales increased 11.8% over the same period of 1996. The following table reflects catalog sales growth (loss) percentages by concept: <TABLE> <CAPTION> Percentage Growth (Loss) Thirteen Weeks Ended Twenty-Six Weeks Ended August 3, 1997 July 28, 1996 August 3, 1997 July 28, 1996 -------------- ------------- -------------- ------------- <S> <C> <C> <C> <C> Williams-Sonoma 36.8% 1.3% 27.7% 2.9% Pottery Barn 27.7% 6.0% 11.9% 28.0% Hold Everything 29.1% (6.6%) 16.5% 4.6% Gardeners Eden (9.1%) 7.8% (6.1%) 7.6% Chambers (20.3%) 26.5% (3.7%) 15.1% Total catalog 18.7% 5.4% 11.8% 15.3% </TABLE> Combined sales for Williams-Sonoma and Pottery Barn, the Company's primary concepts, comprised approximately 65.4% and 65.8% of total catalog sales for the Second Quarter of 1997 and Year-to-Date 1997, respectively. The number of catalogs mailed in the Second Quarter of 1997 as compared to the same period of 1996 increased 24.3% for Pottery Barn and 12.3% for Williams-Sonoma. The total number of catalogs mailed, which had remained relatively flat in the Second Quarter of 1996 as compared to the same period of the previous year, increased 17.6% in the Second Quarter of 1997 as compared to the Second Quarter of 1996. Other factors contributing to the sales growth in the Williams-Sonoma, Pottery Barn and Hold Everything concepts were a reduction in the return rate and an improved in-stock position. The reductions in sales for Chambers and Gardeners Eden reflect poor performance in the Spring catalogs, partly as a result of transition in the merchandising staff. COST OF GOODS SOLD AND OCCUPANCY Cost of goods sold and occupancy expenses expressed as a percent of net sales in the Second Quarter of 1997 decreased 1.4 percentage points to 64.0% from 65.4% in the same period of the prior year. Merchandise margin improved 1.6 percentage points, principally due to promotionally-driven catalog sales in the Second Quarter of 1996. Occupancy expenses expressed as a percentage of net sales increased slightly in the Second Quarter of 1997, primarily as a result of occupancy costs for the Company's Las Vegas call center, which opened in the third quarter of 1996. For the Year-to-Date 1997, the cost of goods sold and occupancy expenses as a percent of net sales decreased 2.1 percentage points, from 65.3% for the same period of 1996 to 63.2%. Merchandise margins improved 2.5 percentage points, partially as a result of markdowns taken in the first quarter of 1996 which significantly reduced overstocks and slow-moving items. The occupancy expense rate increased 0.4
10 percentage points, primarily due to the opening of the Las Vegas call center, and additional depreciation following completion of the expansion and upgrade of the Memphis distribution center. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expenses expressed as a percent of net sales decreased 1.1 percentage points to 33.3% in the Second Quarter of 1997 from 34.4% in the Second Quarter of 1996. This reduction is primarily attributable to lower shipping expense and packing supply expense rates for the catalog division, principally due to fewer sale items, improved fulfillment rates and a reduction of the return rates. The improvement in these measures is largely the result of improved merchandise planning and better quality control over the merchandise and its packaging. Selling, general and administrative expense rates for Year-to-Date 1997 improved 0.9 percentage points over the Year-to-Date 1996. This is primarily due to lower shipping expense rates and lower advertising expense rates. Year-to-Date 1997 advertising expense as a percent of net sales decreased .2 percentage points for the catalog division as compared to the prior year. For the total company, the 1997 Year-to-Date advertising expense rate decreased .6 percentage points. INTEREST EXPENSE Interest expense for the Second Quarter of 1997 decreased $547,000 to $929,000 from $1,476,000 for the Second Quarter of 1996. This is primarily due to the Company's 1996 fourth quarter performance, which enabled the Company to start fiscal 1997 with $78,802,000 in cash and equivalents. As a result, the Company had an average investment balance of $27,558,000 for the Second Quarter of 1997, versus average short-term borrowings of $5,660,000 for the Second Quarter of 1996. Year-to-Date 1997 interest expense was $1,703,000, representing a decrease of $1,314,000 from the same period of the prior year. On April 15, 1996, the Company issued $40,000,000 principal amount of 5.25% convertible notes due April 15, 2003 (Convertible Notes). See Note B to the condensed consolidated financial statements. INCOME TAXES The Company's effective tax rate was 42.0% for the Second Quarter and Year-to-Date of 1997 and 1996. This rate reflects the affect of aggregate state tax rates based on the mix of retail sales and catalog sales in the various states in which the Company has sales or conducts business. LIQUIDITY AND CAPITAL RESOURCES For Year-to-Date 1997, net cash used in operating activities was $24,955,000, representing a change of $45,278,000 from the $20,323,000 of cash provided by operating activities in the same period of 1996. The majority of the change is due to the fact that in the first quarter of 1996, the Company was liquidating inventories to reduce overstocks and slow-moving items. Due to improved merchandise planning and control, the Company was in the more typical position of building inventories during the first two quarters of 1997 and expects to continue to do so in the third quarter in response to growth and seasonal requirements. The income tax liability during Year-to-Date 1997 decreased $12,815,000, as compared to a decrease of $1,947,000 in the same period of 1996. This is primarily due to the payment of the Company's 1996 income taxes in the first quarter of 1997 as a result of the improved profitability of 1996 as compared to 1995. Net cash used in investing activities of $28,257,000 for the Year-to-Date 1997 was primarily for new stores. The Company is planning $64,500,000 of gross capital expenditures in 1997 (approximately $42,200,000 net of tenant improvement allowances), including $10,000,000 for information systems.
11 For Year-to-Date 1997, cash provided by financing activities was $1,676,000 as compared to $9,725,000 for the same period of 1996. On April 15, 1996, the Company issued the Convertible Notes, which are convertible into shares of the Company's common stock at a conversion price of $26.10 per share (or 38.3 shares per $1,000 principal amount). Proceeds from the notes were used primarily to reduce bank borrowings. The Company has a 364-day syndicated line of credit facility expiring on May 29, 1998 which provides for $60,000,000 to $90,000,000 in cash advances, depending on seasonal requirements. The agreement contains certain restrictive loan covenants, including minimum tangible net worth, a minimum out-of-debt period, and a prohibition on payment of cash dividends. Additionally, the Company has a $35,000,000 letter-of-credit agreement with its primary bank. See Note B to the condensed consolidated financial statements. IMPACT OF INFLATION The impact of inflation on results of operations has not been significant. SEASONALITY The Company's business is subject to substantial seasonal variations in demand. Historically, a significant portion of the Company's sales and net income have been realized during the period from October through December, and levels of net sales and net income have generally been significantly lower during the period from February through July. The Company believes this is the general pattern associated with the mail order and retail industries. In anticipation of its peak season, the Company hires a substantial number of additional employees in its retail stores and mail order processing and distribution areas, and incurs significant fixed catalog production and mailing costs. 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, a limited operating history for the Company's new large-format stores, the potential for changes in consumer spending patterns, consumer preferences and overall economic conditions, the Company's dependence on foreign suppliers, and increasing competition in the specialty retail business. 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.
12 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 position or results of operations. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company's Annual Meeting of Shareholders was held on May 28, 1997. (b) At the Company's 1997 Annual Meeting of Shareholders, the shareholders took the following actions: (I) The shareholders elected Adrian D.P. Bellamy by the vote indicated to serve as a director of the Company until the next Annual Meeting of Shareholders or until his successor is elected and qualified: <TABLE> <CAPTION> Name For Withheld ---- --- -------- <S> <C> <C> Adrian D.P. Bellamy 21,145,391 223,724 </TABLE> The shareholders re-elected each of the following persons by the vote indicated to serve as a director of the Company until the next Annual Meeting of Shareholders or until his successor is elected and qualified: <TABLE> <CAPTION> Name For Withheld ---- --- -------- <S> <C> <C> Charles E. Williams 21,139,217 229,898 W. Howard Lester 21,144,192 224,923 James A. McMahan 21,137,158 231,957 Nathan Bessin 21,146,391 222,724 Patrick J. Connolly 21,146,118 222,997 Gary G. Friedman 21,146,401 222,714 James M. Berry 21,146,676 222,439 Millard S. Drexler 18,552,883 2,816,232 John E. Martin 18,541,405 2,827,710 </TABLE> (II) The shareholders approved by the vote indicated the Amended and Restated 1993 Stock Option Plan: <TABLE> <CAPTION> For Against Withheld --- ------- -------- <S> <C> <C> 20,402,141 829,365 37,609 </TABLE> (III) The shareholders ratified by the vote indicated the selection of Deloitte & Touche LLP as the independent accountants for the Company's fiscal year ending February 1, 1998: <TABLE> <CAPTION> For Against Withheld --- ------- -------- <S> <C> <C> 21,350,381 7,915 10,819 </TABLE>
13 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits <TABLE> <CAPTION> EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- <S> <C> 10.1 Amended and Restated Standing Loan Agreement between the Company and Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.1 to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.2 Credit Agreement between the Company and Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.2 to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.2A Agreement Re: Intercreditor Agreement, dated May 22, 1997 (incorporated by reference to Exhibit 10.2A to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.2B Continuing Guaranty from Pottery Barn East, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.2B to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.2C Continuing Guaranty from Hold Everything, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.2C to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.2D Continuing Guaranty from Williams-Sonoma Stores, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.2D to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.2E Continuing Guaranty from Chambers Catalog Company, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.2E to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.2F Continuing Guaranty from Gardeners Eden, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.2F to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.3 Letter of Credit Agreement between the Company and Bank of America, NT & SA dated June 1, 1997 (incorporated by reference to Exhibit 10.3 to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). </TABLE>
14 <TABLE> <S> <C> 10.3A One Bank Guaranty from Pottery Barn East, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.3A to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.3B One Bank Guaranty from Hold Everything, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.3B to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.3C One Bank Guaranty from Williams-Sonoma Stores, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.3C to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.3D One Bank Guaranty from Chambers Catalog Company, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.3D to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.3E One Bank Guaranty from Gardeners Eden, Inc. to Bank of America, NT & SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.3E to the Company's Report on Form 10-Q for the period ended May 4, 1997 as filed with the Commission on June 17, 1997). 10.4 Amendment Number Seven to the Williams-Sonoma, Inc. Employee Profit Sharing and Stock Incentive Plan, dated May 1, 1997. 11 Statement re computation of per share earnings. 27 Financial Data Schedule. </TABLE> (b) There have been no reports on Form 8-K filed during the quarter for which this report is being filed.
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/ Dennis A. Chantland ---------------------------- Dennis A. Chantland Executive Vice President Chief Administrative Officer Secretary Dated: September 12, 1997