Pottery Barn 2004 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    , Shareholders Letter LETTER TO SHAREHOLDERS WILLIAMS-SONOMA, INC. 2004 ANNUAL REPORT

  • Page 3
    ... Barn brand - delivering its highest annual growth rate in four years, despite a weaker than expected fourth quarter holiday performance. Retail revenues increased 11.6%, driven by an 11.4% increase in retail leased square footage and a 3.5% increase in comparable store sales. During 2004, we opened...

  • Page 4
    ... center in Cranbury, New Jersey. This facility, even in its early months of operations, provided significant operational efficiencies in our furniture supply chain and we expect to see even greater strategic and operational benefits, including improved delivery times and reduced shipping costs...

  • Page 5
    ... retail stores, ordering from our catalogs, or purchasing on our e-commerce websites, we are committed to providing a superior customer experience. In closing, we would like to thank our loyal customers, employees, vendor partners, and shareholders for their continued support. While 2004 was a year...

  • Page 6
    Form 10-K FORM 10-K WILLIAMS-SONOMA, INC. 2004 ANNUAL REPORT

  • Page 7
    ... Ness Avenue, San Francisco, CA (Address of principal executive offices) 94109 (Zip Code) Registrant's telephone number, including area code (415) 421-7900 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.01 par value (Title of class) New York Stock Exchange, Inc. (Name...

  • Page 8
    ... inventory and order management systems, new merchandising programs, new store replenishment programs, new marketing initiatives and expanding on-line and electronic direct marketing initiatives, statements related to making investments in our emerging brands, statements related to our plans to open...

  • Page 9
    ..., INC. ANNUAL REPORT ON FORM 10-K FISCAL YEAR ENDED JANUARY 30, 2005 TABLE OF CONTENTS PAGE Item 1. Item 2. Item 3. Item 4. Item 5. PART I Business Properties Legal Proceedings Submission of Matters to a Vote of Security Holders 3 6 7 7 PART II Market for Registrant's Common Equity, Related...

  • Page 10
    ..., and Pottery Barn Kids gift registry. Additionally, in 2001, we opened five new retail stores (two Williams-Sonoma, two Pottery Barn and one Pottery Barn Kids) in Toronto, Canada, our first stores operated by us outside of the U.S. In 2002, we launched our West Elm catalog. The brand targets young...

  • Page 11
    ... (our Outlet stores carry merchandise from all merchandising concepts). In fiscal 2005, we expect to increase retail leased square footage by approximately 8% to 9%, including 28 new stores (8 in Pottery Barn, 7 in West Elm, 5 in Williams-Sonoma, 3 in Pottery Barn Kids, 3 in Williams-Sonoma Home and...

  • Page 12
    ... retailers offering home centered assortments, other mail order catalogs and other e-commerce websites. The substantial sales growth in the direct-to-customer industry within the last decade has encouraged the entry of many new competitors and an increase in competition from established companies...

  • Page 13
    ... INFORMATION We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d) of the Securities Exchange Act of 1934, as amended. The public...

  • Page 14
    ... to accommodate expansion of our operations. We also lease office space, design/photo studio and warehouse space, and data center space in the following locations: Location Brisbane, California San Francisco, California New York City, New York Rocklin, California Square Footage (Approximate) 194,000...

  • Page 15
    ... II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol WSM. The following table sets forth the high and low closing prices of...

  • Page 16
    ... an expiration date and may be limited or terminated at any time without prior notice. The following table summarizes our repurchases of shares of our common stock during the fourth quarter of fiscal 2004: Total Number of Shares Purchased - 1,344,500 457,700 1,802,200 Average Price Paid Per Share...

  • Page 17
    ...Sales Retail sales growth Retail sales as a percent of net sales Comparable store sales growth Store count Williams-Sonoma: Grande Cuisine Classic Pottery Barn: Design Studio Classic Pottery Barn Kids Hold Everything West Elm Outlets Number of stores at year-end Store selling area at fiscal year-end...

  • Page 18
    ... Barn Kids, that could provide a significant long-term growth opportunity for the future. Net sales in the West Elm brand increased 75.9% primarily driven by significant growth in the e-commerce channel and an extremely successful retail launch. In late 2004, we opened three new prototype stores...

  • Page 19
    ... top-line sales growth, we expect to add 26 net new retail locations, increase catalog circulation, expand customer contacts through electronic direct marketing, and intensify the marketing support behind our bridal and gift registry businesses. In our emerging brands, we plan to focus on executing...

  • Page 20
    ... for customer service and to improve the overall operational efficiency of the furniture supply chain process. Additionally, we plan to test on a national basis a new store replenishment program. During 2005, we will begin replenishing our retail store inventories on a daily basis with UPS providing...

  • Page 21
    ...of merchandise. The following table summarizes our net revenues for the 52 weeks ended January 30, 2005 ("fiscal 2004"), February 1, 2004 ("fiscal 2003") and February 2, 2003 ("fiscal 2002"). Dollars in thousands Retail sales Direct-to-customer sales Shipping fees Net revenues Fiscal 2004 $1,802,523...

  • Page 22
    ... of 10 stores during fiscal 2003. Pottery Barn and Pottery Barn Kids accounted for 64.0% of the growth in retail revenues from fiscal 2002 to fiscal 2003. As part of the Hold Everything brand realignment strategy, three new prototype stores were opened and two stores were closed in fiscal 2004. Five...

  • Page 23
    ... Barn Kids brand over fiscal 2002 was primarily driven by an increase in the number of catalogs circulated and increased productivity in on-line advertising, as well as the growth in our baby and gift registry sales. Internet sales increased $144,622,000, or 43.4%, to $477,472,000 in fiscal 2004...

  • Page 24
    ... does not incur freight to store or store occupancy expenses, and typically operates with lower markdowns and inventory shrinkage than the retail channel. However, the direct-to-customer channel incurs higher shipping, damage and replacement costs than the retail channel. Cost of Goods and Occupancy...

  • Page 25
    ... costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing, and other general expenses...

  • Page 26
    ... costs. The increase in the employment rate was due in part to the up front investment required in the emerging brands prior to the opening of our new store locations. In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-tocustomer net revenues...

  • Page 27
    ... quarter holiday sales. In fiscal 2005, we plan to utilize our cash resources to fund our inventory and inventory related purchases, catalog advertising and marketing initiatives, and to support current store development and infrastructure strategies. In addition to the current cash balances on...

  • Page 28
    ... not have an expiration date and may be limited or terminated at any time without prior notice. Form 10-K Contractual Obligations The following table provides summary information concerning our future contractual obligations as of January 30, 2005. Payments Due by Period Dollars in thousands Long...

  • Page 29
    ... absence of scheduled maturities. The timing of these payments cannot be determined, except for amounts estimated to be payable in fiscal 2005 which are included in our current liabilities as of January 30, 2005. Commercial Commitments The following table provides summary information concerning our...

  • Page 30
    ... standby letters of credit were issued to secure the liabilities associated with workers' compensation, other insurance programs and the Mississippi Debt Transaction. OFF BALANCE SHEET ARRANGEMENTS Operating Leases We lease store locations, warehouses, corporate facilities, call centers and certain...

  • Page 31
    ... option during fiscal 2005. We are required to make annual rental payments of approximately $1,927,000, plus applicable taxes, insurance and maintenance expenses. On February 2, 2004, we entered into an agreement to lease 781,000 square feet of a distribution center located in Cranbury, New Jersey...

  • Page 32
    ... us to pay annual rent of $618,000 plus interest on the bonds calculated at a variable rate determined monthly (2.3% in January 2005), applicable taxes, insurance and maintenance expenses. Although the current term of the lease expires in August 2005, we are obligated to renew the operating lease...

  • Page 33
    ... as changes in operations within our distribution centers, the mix of our inventory (which ranges from large furniture to small tabletop items) and execution against loss prevention initiatives in our stores, off-site storage locations, and our third party transportation providers. Prepaid Catalog...

  • Page 34
    ... of sale in the store and for home-delivered merchandise and direct-to-customer sales when the merchandise is delivered to the customer. Discounts provided to customers are accounted for as a reduction of sales. We record a reserve for estimated product returns in each reporting period. Shipping and...

  • Page 35
    ... business, financial condition or operating results could be harmed substantially, which could cause the market price of our stock to decline, perhaps significantly. We must successfully anticipate changing consumer preferences and buying trends, and manage our inventory commensurate with customer...

  • Page 36
    ... with brands or products similar to ours. The specialty retail and direct-to-customer business is highly competitive. Our specialty retail stores, mail order catalogs and e-commerce websites compete with other retail stores, other mail order catalogs and other ecommerce websites that market lines of...

  • Page 37
    ... our business and operating results. The growth of our sales and profits depends, in large part, on our ability to successfully open new stores. In each of the past three fiscal years, approximately 60% of our net revenues have been generated by our retail stores. During 2004, we opened 43 new and...

  • Page 38
    ... distribute products, changes in our merchandise mix, competition, current local and global economic conditions, the timing of our releases of new merchandise and promotional events, the success of marketing programs, and the cannibalization of existing store sales by new stores. Among other things...

  • Page 39
    ... the timing of catalog delivery, which could cause customers to forego or defer purchases. We must successfully manage our Internet business. The success of our Internet business depends, in part, on factors over which we have limited control. In addition to changing consumer preferences and buying...

  • Page 40
    ... to look for opportunities to reduce costs. We recognize that we may need to increase the number of our employees, especially in peak sales seasons, and incur other expenses to support new brands and brand extensions, as well as the opening of new stores and directto-customer growth of our existing...

  • Page 41
    ...in increased warehousing and distribution costs. Higher than expected costs, particularly if coupled with lower than expected sales, would negatively impact our business and operating results. We are planning certain systems changes that might disrupt our supply chain operations. Our success depends...

  • Page 42
    ... requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002. We have evaluated our internal controls in order to allow management to report on, and our registered independent public accounting firm to attest to, our internal controls, as required by Section 404...

  • Page 43
    ... of the U.S. dollar to other foreign currencies could, however, lead to increased purchasing costs. As of January 30, 2005, we have 11 retail stores in Canada, which expose us to market risk associated with foreign currency exchange rate fluctuations. As necessary, we have utilized 30-day foreign...

  • Page 44
    ... Statements of Earnings Fiscal Year Ended Dollars and shares in thousands, except per share amounts Net revenues Cost of goods sold Gross margin Selling, general and administrative expenses Interest income Interest expense Earnings before income taxes Income taxes Net earnings Basic earnings...

  • Page 45
    ... catalog expenses Prepaid expenses Deferred income taxes Other assets Total current assets Property and equipment - net Other assets (less accumulated amortization of $2,066 and $1,682) Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable Accrued salaries, benefits...

  • Page 46
    ... stock Amortization of deferred stock-based compensation Comprehensive income Balance at February 1, 2004 Net earnings Foreign currency translation adjustment Exercise of stock options and related tax effect Repurchase and retirement of common stock Comprehensive income Balance at January 30, 2005...

  • Page 47
    ... income taxes Tax benefit from exercise of stock options Amortization of deferred stock-based compensation Other Changes in: Accounts receivable Merchandise inventories Prepaid catalog expenses Prepaid expenses and other assets Accounts payable Accrued salaries, benefits and other Customer deposits...

  • Page 48
    ... of Significant Accounting Policies We are a specialty retailer of products for the home. The retail segment of our business sells our products through our five retail store concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Hold Everything, and West Elm). The direct-to-customer segment of...

  • Page 49
    ... conditions. The future estimates of store profitability and economic conditions require estimating such factors as sales growth, employment rates, lease escalations, inflation on operating expenses and the overall economics of the retail industry for up to twenty years in the future, and are...

  • Page 50
    ... of sale in the store and for home-delivered merchandise and direct-to-customer sales when the merchandise is delivered to the customer. Discounts provided to customers are accounted for as a reduction of sales. We record a reserve for estimated product returns in each reporting period. Shipping and...

  • Page 51
    ...are included in selling, general and administrative expenses. Financial Instruments As of January 30, 2005, we have 11 retail stores in Canada, which expose us to market risk associated with foreign currency exchange rate fluctuations. As necessary, we have utilized 30-day foreign currency contracts...

  • Page 52
    ... Year Ended Jan. 30, 2005 Dividend yield Volatility Risk-free interest Expected term (years) - 60.1% 3.9% 6.8 Feb. 1, 2004 - 63.9% 3.4% 6.7 Feb. 2, 2003 - 65.5% 5.1% 6.7 During fiscal 2001, we entered into employment agreements with certain executive officers. All stock-based compensation expense...

  • Page 53
    ... is primarily comprised of a new merchandising, inventory management and order management system currently under development. 4Construction in progress is primarily comprised of leasehold improvements and furniture and fixtures related to new, unopened retail stores. Note C: Borrowing Arrangements...

  • Page 54
    ... In June 2004, in an effort to utilize tax incentives offered to us by the state of Mississippi, we entered into an agreement whereby the Mississippi Business Finance Corporation issued $15,000,000 in long-term variable rate industrial development bonds, the proceeds, net of debt issuance costs, of...

  • Page 55
    ... for income taxes consists of the following: Fiscal Year Ended Dollars in thousands Current payable Federal State Foreign Total current Deferred Federal State Foreign Total deferred Total provision Jan. 30, 2005 $105,096 17,642 2,487 125,225 (6,168) (70) (16) (6,254) $118,971 Feb. 1, 2004 $ 87,194...

  • Page 56
    ... Year Ended Jan. 30, 2005 Federal income taxes at the statutory rate State income tax rate, less federal benefit Total Significant components of our deferred tax accounts are as follows: Dollars in thousands Deferred tax asset (liability) Current: Compensation Inventory Accrued liabilities Customer...

  • Page 57
    ... option during fiscal 2005. We are required to make annual rental payments of approximately $1,927,000, plus applicable taxes, insurance and maintenance expenses. On February 2, 2004, we entered into an agreement to lease 781,000 square feet of a distribution center located in Cranbury, New Jersey...

  • Page 58
    ... development bonds. The operating lease for this distribution facility requires us to pay annual rent of $618,000 plus interest on the bonds calculated at a variable rate determined monthly (2.3% in January 2005), applicable taxes, insurance and maintenance expenses. Although the current term...

  • Page 59
    ... price, corporate and regulatory requirements and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice. Note I: Stock Options Our 1993 Stock Option Plan, as amended (the "1993 Plan"), provides...

  • Page 60
    ...2001 Plan to officers, employee and non-employee Board members of the company and any parent or subsidiary. Annual grants are limited to options to purchase 1,000,000 shares, 200,000 shares of restricted stock, and deferred stock awards of up to 200,000 shares on a per person basis. All stock option...

  • Page 61
    ...000 in fiscal 2002. We have a nonqualified executive deferred compensation plan that provides supplemental retirement income benefits for a select group of management, and other certain highly compensated employees. This plan permits eligible employees to make salary and bonus deferrals that are 100...

  • Page 62
    ...reportable segment, retail. The direct-to-customer segment has seven merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, Hold Everything, West Elm, and Williams-Sonoma Home) and sells similar products through our eight direct-mail catalogs (Williams-Sonoma, Pottery Barn...

  • Page 63
    ... that offer similar home-centered products. They are managed separately because the business units utilize two distinct distribution and marketing strategies. It is not practicable for us to report revenue by product group. We use earnings before unallocated corporate overhead, interest and taxes to...

  • Page 64
    ... internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide...

  • Page 65
    ... internal control over financial reporting as of January 30, 2005, based on the criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. /s/ DELOITTE & TOUCHE LLP San Francisco, California April 14, 2005 58

  • Page 66
    ... annual net earnings per share as each quarter is calculated independently. 2 Stock price represents our common stock price at the close of business on the Friday before our fiscal quarter-end. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM...

  • Page 67
    ... of any internal control may vary over time. Our management assessed the effectiveness of the company's internal control over financial reporting as of January 30, 2005. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway...

  • Page 68
    ... of Directors," "Information Concerning Executive Officers," "Committee Reports-Audit Committee Report," "Committee Reports-Nominations and Corporate Governance Committee Report," "Section 16(A) Beneficial Ownership Reporting Compliance" and "Corporate Governance Guidelines and Corporate Code of...

  • Page 69
    ... notes are filed as part of this report pursuant to Item 8: Consolidated Statements of Earnings for the fiscal years ended January 30, 2005, February 1, 2004 and February 2, 2003 Consolidated Balance Sheets as of January 30, 2005 and February 1, 2004 Consolidated Statements of Shareholders' Equity...

  • Page 70
    ... Director and Executive Vice President, Chief Marketing Officer /s/ JEANNE P. JACKSON Jeanne P. Jackson Director /s/ MICHAEL R. LYNCH Michael R. Lynch Director /s/ RICHARD T. ROBERTSON Richard T. Robertson Director 63 Form 10-K Date: April 15, 2005 Date: April 15, 2005 Date: April 15, 2005 Date...

  • Page 71
    ... Association, dated July 2, 2002 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended August 4, 2002 as filed with the Commission on September 18, 2002, File No. 001-14077) Reimbursement Agreement between the Company and Bank of New York...

  • Page 72
    ... of the Williams-Sonoma, Inc. Associate Stock Incentive Plan, dated February 25, 2002 (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2003 as filed with the Commission on April 15, 2003, File No. 001-14077) First Amendment...

  • Page 73
    ... Inc. Associate Stock Incentive Plan, effective as of January 1, 1997 (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2003 as filed with the Commission on April 15, 2003, File No. 001-14077) Third Amendment, dated April 17...

  • Page 74
    ... Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2004 as filed with the Commission on April 15, 2004, File No. 001-14077) First Addendum, dated February 27, 2004, to Lease for an additional Company distribution facility located in Olive Branch, Mississippi, between Pottery...

  • Page 75
    ... 10.40 to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2004 as filed with the Commission on April 15, 2004, File No. 001-14077) Services Agreement, dated September 30, 2004, by and between the Company and International Business Machines Corporation (incorporated by...

  • Page 76
    2005 ANNUAL NOTICE MEETING OF OF SHAREHOLDERS PROXY STATEMENT Proxy WILLIAMS-SONOMA, INC. 2004 ANNUAL REPORT

  • Page 77
    .... ITEMS OF BUSINESS: 3) 4) WHO CAN VOTE: DATE OF MAILING: You may vote if you were a shareholder of record as of March 22, 2005. This notice, the Proxy Statement and the Annual Report are first being mailed to shareholders on or about April 20, 2005. By Order of the Board of Directors Proxy...

  • Page 78
    ... corporate headquarters located at 3250 Van Ness Avenue, San Francisco, California 94109. Our Annual Report to Shareholders for the fiscal year ended January 30, 2005, or fiscal 2004, including our financial statements for fiscal 2004, is also enclosed. These proxy materials are first being mailed...

  • Page 79
    ... Time on Tuesday, May 17, 2005. Shares Registered in the Name of a Brokerage Firm or Bank If your shares are held in an account at a brokerage firm or bank, you should follow the voting instructions on your proxy card. What if I return my proxy card directly to the company, but do not provide...

  • Page 80
    ... Annual Report and Proxy Statement. A shareholder may notify us that the shareholder would like a separate Annual Report and Proxy Statement by phone at 415-421-7900 or at the following mailing address: 3250 Van Ness Avenue, San Francisco, California 94109, Attention: Annual Report Administrator...

  • Page 81
    ... have retained Skinner & Company to assist in the solicitation of proxies at an estimated cost to us of $6,000. Some of our officers or employees may solicit proxies personally or by telephone or other means. None of those officers or employees will receive special compensation for such services. 4

  • Page 82
    ... Corporate Governance Committee an option to purchase 1,000 shares of our common stock. The exercise price of these options is equal to the fair market value of our common stock on the last market trading day prior to the date of the option grant. These options granted to our non-employee directors...

  • Page 83
    ... information set forth below. Nominee Director Since Position with the Company and Recent Business Experience W. Howard Lester ...Age 69 Edward A. Mueller ...Age 57 1979 • Chairman since 1986 • Chief Executive Officer, 1979 - 2001 • Director of Harold's Department Stores, Inc. (retail sales...

  • Page 84
    ... and Planning Officer, Eaton Corporation (diversified industrial manufacturing), 1997 - 2001 • Member of the Audit and Compensation Committees • Founding Partner, MSP Capital (strategy and investment services) since 2002 • President and Chief Executive Officer, Walmart.com (on-line retail...

  • Page 85
    ... our compensation policy for our non-employee directors; and • Administers certain of our compensation plans and provides assistance and recommendations with respect to other compensation plans. • Reviews and recommends corporate governance policies; • Identifies and makes recommendations...

  • Page 86
    ... and Corporate Governance Committee Report" and "Shareholder Proposals" sections of this Proxy Statement. Are there any disclosures relating to Compensation Committee interlocks and insider participation? During fiscal 2004, none of our executive officers served as a member of the Board of Directors...

  • Page 87
    ... goals applicable to an award to reflect extraordinary expenses or changes in accounting rules. In addition, the maximum award available under the plan has been increased to the lesser of $3,000,000 or 300% of each participant's annual base salary in effect on the first day of the first fiscal year...

  • Page 88
    ... Plan during each fiscal year of the company. For purposes of Section 162(m), covered employees include our Chief Executive Officer and the company's next four most highly compensated executive officers. An executive whose employment or service relationship with the company terminates before the end...

  • Page 89
    ... of Section 162(m). How can we amend or terminate the plan? The Board generally may amend, suspend or terminate the plan at any time and for any reason. Amendments will be contingent on shareholder approval if the amendment raises the maximum award limit under the plan or if required by applicable...

  • Page 90
    ... majority of the outstanding shares of our common stock must vote "FOR" this proposal. If approved, when would the amended and restated plan become effective? The amended and restated plan would become effective as of January 25, 2006. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR...

  • Page 91
    ... associate stock incentive plan; review of our quarterly consolidated financial statements; review of our internal control over financial reporting; and audit services related to periodic filings made with the SEC. In fiscal 2004, Deloitte also performed certain audit-related and tax services, and...

  • Page 92
    ... EXECUTIVE OFFICERS This table provides certain information about our executive officers as of April 20, 2005. The executive officers are elected by our Board and serve at the pleasure of our Board, subject to rights, if any, under employment contracts. Name Position with the Company and Business...

  • Page 93
    ...-Term Compensation Awards Annual Compensation(2) Name and Principal Position Year(1) Salary Bonus Other Annual Compensation Restricted Stock Awards Securities Underlying Options(3) All Other Compensation W. Howard Lester ...Chairman Edward A. Mueller ...Director and Chief Executive Officer Patrick...

  • Page 94
    ... rates of appreciation are required by the SEC and do not represent our estimate or projection of our future stock price. Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year-End Option Values This table sets forth information with respect to the named executive officers' exercise...

  • Page 95
    ... to Section 162(m) of the Internal Revenue Code and is a non-employee director under Section 16(b) of the Securities Exchange Act of 1934. None of the committee members has ever served as an officer of the company. What is the role of the Compensation Committee with respect to executive compensation...

  • Page 96
    ... in our compensation program is discussed in detail below, but in general this means: • Base salaries are competitive with comparable public retail companies relative to similar positions. • Annual incentive opportunities are based principally on the company's overall corporate performance and...

  • Page 97
    ... officers' base salaries must be sufficiently competitive to attract and retain key executives. Accordingly, base pay and annual increases are determined through an analysis of each individual's salary and total target compensation relative to salaries for similar positions at comparable companies...

  • Page 98
    ... determined? The third component of the company's executive compensation program consists of annual stock option grants. We continue to believe that stock option grants are important for motivating executive officers and other employees to increase shareholder value over the long term. We...

  • Page 99
    ... the Internal Revenue Service, publicly held companies may be precluded from deducting certain compensation paid to certain executive officers in excess of $1.0 million in a year. The regulations exclude from this limit performance-based compensation and stock options, provided certain requirements...

  • Page 100
    ...• Consider director nominations from shareholders; and • Annually evaluate the performance of the company's Chief Executive Officer and oversee the evaluation of the performance of the company's management and the Board. Does the Nominations and Corporate Governance Committee have a policy with...

  • Page 101
    ... a person directly for election to the Board at the company's Annual Meeting must also meet the deadlines and other requirements set forth in Rule 14a-8 of the Securities Exchange Act of 1934 and the company's Restated Bylaws, each of which are described in the "Shareholder Proposals" section of...

  • Page 102
    ... fiscal 2004. During fiscal 2004, we took the following actions, among other things: • Reviewed and discussed with company management applicable changes in corporate governance requirements under federal and state securities laws, the Sarbanes-Oxley Act of 2002, and the NYSE listing standards...

  • Page 103
    ... other things: • Reviewed and discussed the company's audited financial statements for fiscal 2004 with management and Deloitte; • Reviewed and discussed the company's periodic filings on Forms 10-K and 10-Q with management and Deloitte; • Reviewed and discussed all company earnings, sales and...

  • Page 104
    ... in our Annual Report on Form 10-K and to review our condensed, consolidated financial statements included in our quarterly reports on Form 10-Q. Fees for audit services billed relating to fiscal 2004 also consisted of fees for the attestation of management's assessment of internal control as...

  • Page 105
    ... development bonds. The operating lease for this distribution facility requires us to pay annual rent of $618,000 plus interest on the bonds calculated at a variable rate determined monthly (2.3% in January 2005), applicable taxes, insurance and maintenance expenses. Although the current term...

  • Page 106
    ...16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and holders of more than 10% of our common stock to file reports regarding their ownership and changes in ownership of our stock with the SEC. Based on their filings with the SEC and information provided to us by...

  • Page 107
    ...Ness Avenue, San Francisco, California 94109. Information regarding our non-management 5% holders is derived from the most recently available 13G filings. The options to purchase our stock listed below are currently exercisable or are exercisable within 60 days of March 22, 2005. Name and Address of...

  • Page 108
    ... 4,400 shares owned by Mr. Robertson's wife. (7) The directors and officers as a group own $2,562,891 in the Williams-Sonoma, Inc. Stock Fund under our Associate Stock Incentive Plan, a 401(k) plan, as of March 22, 2005. The number of shares listed above includes 70,043 shares held in the Williams...

  • Page 109
    ... approved the 2000 Nonqualified Stock Option Plan, or the 2000 Plan. The 2000 Plan provides for the grant of nonqualified stock options to employees who are not officers or members of our Board, and persons who have accepted employment and actually become employees within 120 days of such acceptance...

  • Page 110
    ... of this year's Annual Meeting, or March 24, 2006, a notice shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered no later than the close of business on the 10th day following the day on which we first make such public...

  • Page 111
    ... on the previous trading day. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. The index level for all series was set to $100.00 on 1/30/00. * Center for Research in Security Prices, University of Chicago Graduate School of Business. 34

  • Page 112
    ...fiscal 2004 as filed with the SEC, is available at our website at www.williams-sonomainc.com and upon written request and without charge to any shareholder by writing to: Secretary, Williams-Sonoma, Inc., 3250 Van Ness Avenue, San Francisco, California 94109. San Francisco, California April 20, 2005...

  • Page 113
    ... to persons who are "executive officers" of the Company, as such term is defined in Rule 3b-7 under the Securities Exchange Act of 1934, as amended (or any successor rule or regulation), or who are "covered employees" of the Company or its subsidiary or affiliated corporations under Code Section 162...

  • Page 114
    ... results of operations appearing in the Company's annual report to shareholders for the applicable year, or (ii) the effect of any changes in accounting principles affecting the Company's or a business units' reported results. 5.2 Award Limits. The maximum award under this Plan for each award period...

  • Page 115
    ... Board shall have the authority to amend or modify this Plan from time to time in order to reflect amendments to or regulations promulgated under Section 162(m) of the Code. Notwithstanding the foregoing, in the event that any amendment or other modification of or to this Plan raises the limits set...

  • Page 116
    ...hold everything, Pottery Barn, pottery barn kids, PBteen, west elm, Williams-Sonoma and Williams-Sonoma Home are trademarks of Williams-Sonoma, Inc. Stock Exchange Listing New York Stock Exchange Symbol: WSM Corporate Website www.williams-sonomainc.com Shareholder/Investor Information www.williams...