Company Quick10K Filing
Quick10K
Williams Sonoma
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$64.16 79 $5,043
10-Q 2019-08-04 Quarter: 2019-08-04
10-Q 2019-05-05 Quarter: 2019-05-05
10-K 2019-02-03 Annual: 2019-02-03
10-Q 2018-10-28 Quarter: 2018-10-28
10-Q 2018-07-29 Quarter: 2018-07-29
10-Q 2018-04-29 Quarter: 2018-04-29
10-K 2018-01-28 Annual: 2018-01-28
10-Q 2017-10-29 Quarter: 2017-10-29
10-Q 2017-07-30 Quarter: 2017-07-30
10-Q 2017-04-30 Quarter: 2017-04-30
10-K 2017-01-29 Annual: 2017-01-29
10-Q 2016-10-30 Quarter: 2016-10-30
10-Q 2016-07-31 Quarter: 2016-07-31
10-Q 2016-05-01 Quarter: 2016-05-01
10-K 2016-01-31 Annual: 2016-01-31
10-Q 2015-11-01 Quarter: 2015-11-01
10-Q 2015-08-02 Quarter: 2015-08-02
10-Q 2015-05-03 Quarter: 2015-05-03
10-K 2015-02-01 Annual: 2015-02-01
10-Q 2014-11-02 Quarter: 2014-11-02
10-Q 2014-08-03 Quarter: 2014-08-03
10-Q 2014-05-04 Quarter: 2014-05-04
10-K 2014-02-02 Annual: 2014-02-02
8-K 2019-08-28 Earnings, Exhibits
8-K 2019-08-23 Enter Agreement, Off-BS Arrangement
8-K 2019-07-22 Officers
8-K 2019-07-08 Officers
8-K 2019-06-05 Shareholder Vote
8-K 2019-05-30 Earnings, Exhibits
8-K 2019-04-03 Officers, Exhibits
8-K 2019-03-20 Earnings, Other Events, Exhibits
8-K 2019-02-12 Officers
8-K 2018-10-25 Earnings, Officers, Exhibits
8-K 2018-08-24 Enter Agreement, Off-BS Arrangement
8-K 2018-08-22 Earnings, Exhibits
8-K 2018-05-30 Officers, Shareholder Vote, Exhibits
8-K 2018-05-23 Earnings, Exhibits
8-K 2018-03-14 Earnings, Other Events, Exhibits
8-K 2018-01-08 Enter Agreement
MHK Mohawk Industries 8,197
FUL HB Fuller 2,073
CSWI CSW Industrials 996
KBAL Kimball 646
ETH Ethan Allen Interiors 460
HOME At Home Group 429
HOME Homeland Energy Solutions 429
HOFT Hooker Furniture 203
TTS Tile Shop Holdings 143
FLXS Flexsteel Industries 123
WSM 2019-08-04
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 d775044dex101.htm
EX-31.1 d775044dex311.htm
EX-31.2 d775044dex312.htm
EX-32.1 d775044dex321.htm
EX-32.2 d775044dex322.htm

Williams Sonoma Earnings 2019-08-04

WSM 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q
false2020Q20000719955--02-020.010.010.010.010.010.01WILLIAMS SONOMA INCCaliforniaAmounts are shown net of shares withheld for employee taxes.Primarily relates to our adoption of ASU 2014-09, Revenue from Contracts with Customers, in fiscal 2018.Excludes 105,436 incremental shares released due to achievement of performance conditions above target.Primarily consists of net revenues from our international franchise operations, Rejuvenation and Mark and Graham.Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately $87.7 million and $80.7 million for the thirteen weeks ended August 4, 2019 and July 29, 2018, respectively, and approximately $174.3 million and $160.1 million for the twenty-six weeks ended August 4, 2019 and July 29, 2018, respectively.Relates to our adoption of ASU 2016-02, Leases, in fiscal 2019. See Note A. 0000719955 2019-02-04 2019-08-04 0000719955 2018-01-29 2018-07-29 0000719955 2018-07-29 0000719955 2019-08-04 0000719955 2019-02-03 0000719955 2019-05-06 2019-08-04 0000719955 2018-04-30 2018-07-29 0000719955 2018-01-29 2018-04-29 0000719955 2019-02-04 2019-05-05 0000719955 2019-09-01 0000719955 2018-01-28 0000719955 2019-05-05 0000719955 2018-04-29 0000719955 us-gaap:RestrictedStockUnitsRSUMember wsm:AchievementMember 2019-02-04 2019-08-04 0000719955 us-gaap:RestrictedStockUnitsRSUMember 2019-02-04 2019-08-04 0000719955 wsm:UnsecuredRevolvingLineOfCreditMember 2019-02-04 2019-08-04 0000719955 wsm:OptionAwardsMember 2019-02-04 2019-08-04 0000719955 wsm:StockAwardsMember 2019-02-04 2019-08-04 0000719955 wsm:OptionAwardsMember srt:MinimumMember 2019-02-04 2019-08-04 0000719955 srt:MinimumMember wsm:NonEmployeeMember 2019-02-04 2019-08-04 0000719955 wsm:ServiceBasedOptionAwardsMember 2019-02-04 2019-08-04 0000719955 wsm:PerformanceBasedStockAwardsMember 2019-02-04 2019-08-04 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Table of Contents
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarterly period ended August 4, 2019.
or
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:
001-14077
 
WILLIAMS-SONOMA, INC.
(Exact name of registrant as specified in its charter)
 
     
Delaware
 
94-2203880
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
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)
 
Securities registered pursuant to Section 12(b) of the Act:
         
Title of each class:
 
Trading
Symbol(s):
 
Name of each exchange
on which registered:
Common Stock, par value $.01 per share
 
WSM
 
New York Stock Exchange, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark 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  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  
    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
             
Non-accelerated filer
 
 
Smaller reporting company
 
             
Emerging growth company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
    No  
As of September 1, 2019, 78,022,213 shares of the registrant’s Common Stock were outstanding.
 
     
 
 
 
 
 
 
 
Table of Contents
 
WILLIAMS-SONOMA, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED AUGUST 4, 2019
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
             
 
 
PAGE
 
             
Item 1.
     
1
 
             
Item 2.
     
17
 
             
Item 3.
     
22
 
             
Item 4.
     
22
 
           
 
PART II. OTHER INFORMATION
 
 
             
Item 1.
     
23
 
             
Item 1A.
     
23
 
             
Item 2.
     
23
 
             
Item 3.
     
23
 
             
Item 4.
     
23
 
             
Item 5.
     
23
 
             
Item 6.
     
24
 
 
 
 
 
 
 
 
 
 
Table of Contents
 
 
ITEM 1. FINANCIAL STATEMENTS
WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
                                 
 
Thirteen
Weeks Ended
   
Twenty-six

Weeks Ended
 
In thousands, except per share amounts
 
August 4,
2019
   
July 29,
2018
   
August 4,
2019
   
July 29,
2018
 
Net revenues
  $
1,370,814
    $
1,275,174
    $
2,611,946
    $
2,478,174
 
Cost of goods sold
   
886,953
     
811,232
     
1,683,754
     
1,582,068
 
Gross profit
   
483,861
     
463,942
     
928,192
     
896,106
 
Selling, general and administrative expenses
   
397,696
     
389,776
     
767,895
     
755,390
 
Operating income
   
86,165
     
74,166
     
160,297
     
140,716
 
Interest (income) expense, net
   
2,669
     
1,584
     
4,922
     
2,785
 
Earnings before income taxes
   
83,496
     
72,582
     
155,375
     
137,931
 
Income taxes
   
20,848
     
20,869
     
40,071
     
41,050
 
Net earnings
  $
62,648
    $
51,713
    $
115,304
    $
96,881
 
Basic earnings per share
  $
0.80
    $
0.63
    $
1.47
    $
1.17
 
Diluted earnings per share
  $
0.79
    $
0.62
    $
1.45
    $
1.16
 
Shares used in calculation of earnings per share:
   
     
     
     
 
Basic
   
78,488
     
82,342
     
78,586
     
82,867
 
Diluted
   
79,470
     
83,167
     
79,633
     
83,519
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
                                 
 
Thirteen
Weeks Ended
   
Twenty-six

Weeks Ended
 
In thousands
 
August 4,
2019
   
July 29,
2018
   
August 4,
2019
   
July 29,
2018
 
Net earnings
  $
62,648
    $
51,713
    $
115,304
    $
96,881
 
Other comprehensive income (loss):
   
     
     
     
 
Foreign currency translation adjustments
   
(1,251
)    
(2,993
)    
(4,260
)    
(4,138
)
Change in fair value of derivative financial instruments, net of tax (tax benefit) of
$(8), $333, $66 and $401
   
(132
)    
6
     
72
     
1,129
 
Reclassification adjustment for realized (gain) loss on derivative financial
instruments, net of tax (tax benefit) of $10, $(21), $34 and $(24)
   
(160
)    
—  
     
(227
)    
49
 
Comprehensive income
  $   
61,105
    $  
48,726
    $   
110,889
    $  
93,921
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
 
1
 
 
Table of Contents
 
WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
In thousands, except per share amounts
 
August 4,
2019
 
 
February 3,
2019
 
 
July 29,
2018
 
ASSETS
   
     
     
 
Current assets
   
     
     
 
Cash and cash equivalents
  $
120,467
    $
338,954
    $
174,580
 
Accounts receivable, net
   
111,114
     
107,102
     
106,322
 
Merchandise inventories, net
   
1,187,728
     
1,124,992
     
1,099,888
 
Prepaid expenses
   
117,017
     
101,356
     
74,811
 
Other current assets
   
21,693
     
21,939
     
21,891
 
Total current assets
   
1,558,019
     
1,694,343
     
1,477,492
 
Property and equipment, net
   
913,059
     
929,635
     
919,689
 
Operating lease
right-of-use
assets
   
1,208,528
     
—  
     
—  
 
Deferred income taxes, net
   
38,803
     
44,055
     
60,960
 
Goodwill
   
85,348
     
85,382
     
85,673
 
Other long-term assets, net
   
65,924
     
59,429
     
64,163
 
Total assets
  $
3,869,681
    $
2,812,844
    $
2,607,977
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
   
     
     
 
Current liabilities
   
     
     
 
Accounts payable
  $
404,337
    $
526,702
    $
466,903
 
Accrued expenses
   
127,137
     
163,559
     
112,381
 
Gift card and other deferred revenue
   
283,108
     
290,445
     
263,546
 
Borrowings under revolving line of credit
 
 
60,000
 
 
 
 
 
 
 
Income taxes payable
   
13,065
     
21,461
     
35,529
 
Operating lease liabilities
   
222,978
     
—  
     
—  
 
Other current liabilities
   
76,254
     
72,645
     
69,589
 
Total current liabilities
   
1,186,879
     
1,074,812
     
947,948
 
Deferred rent and lease incentives
   
28,618
     
201,374
     
207,190
 
Long-term debt
   
299,719
     
299,620
     
299,521
 
Long-term operating lease liabilities
   
1,148,031
     
—  
     
—  
 
Other long-term liabilities
   
84,831
     
81,324
     
72,330
 
Total liabilities
   
2,748,078
     
1,657,130
     
1,526,989
 
Commitments and contingencies – See Note F
   
 
     
 
     
 
 
Stockholders’ equity
   
     
     
 
Preferred stock: $
.01
par value; 7,500 shares authorized; none issued
   
—  
     
—  
     
—  
 
Common stock: $
.01
par value; 253,125 shares authorized; 78,203, 78,813 and 80,988 shares issued and outstanding at August 4, 2019, February 3, 2019 and July 29, 2018, respectively
   
783
     
789
     
810
 
Additional
paid-in
capital
   
584,828
     
581,900
     
561,810
 
Retained earnings
   
552,454
     
584,333
     
528,368
 
Accumulated other comprehensive loss
   
(15,488
)    
(11,073
)    
(9,742
)
Treasury stock, at cost: 14, 2 and 2 shares as of August 4, 2019, February 3, 2019 and July 29, 2018, respectively
   
(974
)    
(235
)    
(258
)
Total stockholders’ equity
   
1,121,603
     
1,155,714
     
1,080,988
 
Total liabilities and stockholders’ equity
  $
3,869,681
    $
2,812,844
    $
2,607,977
 
See Notes to Condensed Consolidated Financial Statements.
 
2
 
 
Table of Contents
 
WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
                                                         
 
 
Common Stock
 
 
Additional
Paid-in
 
 
Retained
 
 
Accumulated
Other
Comprehensive
 
 
Treasury
 
 
Total
Stockholders’
 
In thousands
 
Shares
 
 
 
Amount
 
 
Capital
 
 
Earnings
 
 
Income (Loss)
 
 
Stock
 
 
Equity
 
Balance at February 3, 2019
   
78,813
    $
789
    $
581,900
    $
584,333
    $
(11,073
)   $
(235
)   $
1,155,714
 
Net earnings
   
—  
     
—  
     
—  
     
52,656
     
—  
     
—  
     
52,656
 
Foreign currency translation adjustments
   
—  
     
—  
     
—  
     
—  
     
(3,009
)    
—  
     
(3,009
)
Change in fair value of derivative financial
instruments, net of tax
   
—  
     
—  
     
—  
     
—  
     
204
     
—  
     
204
 
Reclassification adjustment for realized (gain)
loss on derivative financial instruments, net
of tax
   
—  
     
—  
     
—  
     
—  
     
(67
)    
—  
     
(67
)
Conversion/release of stock-based awards
1
   
571
     
5
     
(25,298
)    
—  
     
—  
     
(113
)    
(25,406
)
Repurchases of common stock
   
(576
)    
(6
)    
(2,874
)    
(30,010
)    
—  
     
(958
)    
(33,848
)
Reissuance of treasury stock under stock-based
compensation plans
1
   
—  
     
—  
     
(332
)    
—  
     
—  
     
332
     
—  
 
Stock-based compensation expense
   
—  
     
—  
     
18,376
     
—  
     
—  
     
—  
     
18,376
 
Dividends declared
   
—  
     
—  
     
—  
     
(39,549
)    
—  
     
—  
     
(39,549
)
Adoption of accounting pronouncements
2
   
—  
     
—  
     
—  
     
(3,303
)    
—  
     
—  
     
(3,303
)
Balance at May 5, 2019
   
78,808
    $
788
    $
571,772
    $
564,127
    $
(13,945
)   $
(974
)   $
1,121,768
 
Net earnings
   
     
     
     
62,648
     
     
     
62,648
 
Foreign currency translation adjustments
   
     
     
     
     
(1,251
)    
     
(1,251
)
Change in fair value of derivative financial
instruments, net of tax
   
     
     
     
     
(132
)    
     
(132
)
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net
of tax
   
     
     
     
     
(160
)    
     
(160
)
Conversion/release of stock-based awards
1
   
31
     
1
     
(482
)    
     
     
     
(481
)
Repurchases of common stock
   
(636
)    
(6
)    
(3,170
)    
(35,107
)    
     
     
(38,283
)
Stock-based compensation expense
   
     
     
16,708
     
     
     
     
16,708
 
Dividends declared
   
     
     
     
(39,214
)    
     
     
(39,214
)
Balance at August 4, 2019
   
78,203
    $
783
    $
584,828
    $
552,454
    $
(15,488
)   $
(974
)   $
1,121,603
 
 
 
 
 
 
 
 
1
Amounts are shown net of shares withheld for employee taxes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
Relates to our adoption of ASU 2016-02, Leases, in fiscal 2019. See Note A.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
 
3
  
 
Table of Contents
 
WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
                                                         
 
 
 
Common Stock
 
 
 
Additional
Paid-in
 
 
 
Retained
 
 
 
Accumulated
Other
Comprehensive
 
 
 
Treasury
 
 
 
Total
Stockholders’
 
In thousands
 
 
Shares
 
 
 
Amount
 
 
 
Capital
 
 
 
Earnings
 
 
 
Income (Loss)
 
 
 
Stock
 
 
 
Equity
 
Balance at January 28, 2018
   
83,726
    $
837
    $
562,814
    $
647,422
    $
(6,782
)   $
(725
)   $
1,203,566
 
Net earnings
   
—  
     
—  
     
—  
     
45,168
     
—  
     
—  
     
45,168
 
Foreign currency translation adjustments
   
—  
     
—  
     
—  
     
—  
     
(1,145
)    
—  
     
(1,145
)
Change in fair value of derivative financial instruments, net of tax
   
—  
     
—  
     
—  
     
—  
     
1,123
     
—  
     
1,123
 
Reclassification adjustment for realized (gain)
loss on derivative financial instruments, net of tax
   
—  
     
—  
     
—  
     
—  
     
49
     
—  
     
49
 
Conversion/release of stock-based awards
1
   
228
     
3
     
(7,213
)    
—  
     
—  
     
(226
)    
(7,436
)
Repurchases of common stock
   
(732
)    
(7
)    
(3,437
)    
(34,269
)    
—  
     
—  
     
(37,713
)
Reissuance of treasury stock under stock-based
compensation plans
1
   
—  
     
—  
     
(290
)    
(358
)    
—  
     
648
     
—  
 
Stock-based compensation expense
   
—  
     
—  
     
12,811
     
—  
     
—  
     
—  
     
12,811
 
Dividends declared
   
—  
     
—  
     
—  
     
(36,877
)    
—  
     
—  
     
(36,877
)
Adoption of accounting pronouncements
2
   
—  
     
—  
     
—  
     
17,688
     
—  
     
—  
     
17,688
 
Balance at April 29, 2018
   
83,222
    $
833
    $
564,685
    $
638,774
    $
(6,755
)   $
(303
)   $
1,197,234
 
Net earnings
   
—  
     
—  
     
—  
     
51,713
     
—  
     
—  
     
51,713
 
Foreign currency translation adjustments
   
—  
     
—  
     
—  
     
—  
     
(2,993
)    
—  
     
(2,993
)
Change in fair value of derivative financial instruments, net of tax
   
—  
     
—  
     
—  
     
—  
     
6
     
—  
     
6
 
Conversion/release of stock-based awards
1
   
175
     
2
     
(4,869
)    
—  
     
—  
     
(32
)    
(4,899
)
Repurchases of common stock
   
(2,409
)    
(25
)    
(11,431
)    
(125,649
)    
—  
     
—  
     
(137,105
)
Reissuance of treasury stock under stock-based
compensation plans
1
   
—  
     
—  
     
(72
)    
(5
)    
—  
     
77
     
—  
 
Stock-based compensation expense
   
—  
     
—  
     
13,497
     
—  
     
—  
     
—  
     
13,497
 
Dividends declared
   
—  
     
—  
     
—  
     
(36,465
)    
—  
     
—  
     
(36,465
)
Balance at July 29, 2018
   
80,988
    $
810
    $
561,810
    $
528,368
    $
(9,742
)   $
(258
)   $
1,080,988
 
 
 
 
 
 
 
 
 
Amounts are shown net of shares withheld for employee taxes.
 
 
 
 
 
 
 
 
 
 
 
 
 
2  
Primarily relates to our adoption of ASU 2014-09, Revenue from Contracts with Customers, in fiscal 2018.
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
 
4
 
 
Table of Contents
 
WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Twenty-six

Weeks Ended
 
In thousands
 
August 4,
2019
 
 
July 29,
20
18
 
Cash flows from operating activities:
   
     
 
Net earnings
  $
115,304
    $
96,881
 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
   
     
 
Depreciation and amortization
   
93,744
     
93,809
 
(Gain) loss on disposal/impairment of assets
   
(6
)    
4,466
 
Amortization of deferred lease incentives
   
(4,228
)    
(13,210
)
Non-cash
lease expense
   
105,437
     
—  
 
Deferred income taxes
   
(8,428
)    
(4,415
)
Tax benefit related to stock-based awards
   
14,110
     
9,711
 
Stock-based compensation expense
   
35,401
     
26,526
 
Other
   
92
     
166
 
Changes in:
   
     
 
Accounts receivable
   
(4,430
)    
(13,567
)
Merchandise inventories
   
(63,576
)    
(45,159
)
Prepaid expenses and other assets
   
(24,506
)    
(29,217
)
Accounts payable
   
(127,511
)    
(1,735
)
Accrued expenses and other liabilities
   
(30,677
)    
(12,209
)
Gift card and other deferred revenue
   
(7,173
)    
11,927
 
Deferred rent and lease incentives
   
—  
     
18,861
 
Operating lease liabilities
   
(111,782
)    
—  
 
Income taxes payable
   
(8,407
)    
(22,712
)
Net cash (used in) provided by operating activities
   
(26,636
)    
120,123
 
Cash flows from investing activities:
   
     
 
Purchases of property and equipment
   
(77,189
)    
(80,021
)
Other
   
470
     
513
 
Net cash used in investing activities
   
(76,719
)    
(79,508
)
                 
Cash flows from financing activities:
   
     
 
Payment of dividends
 
 
(75,453
)
 
 
(70,331
)
Repurchases of common stock
   
(72,131
)    
(174,818
)
Borrowings under revolving line of credit
   
60,000
     
—  
 
Tax withholdings related to stock-based awards
   
(25,887
)    
(12,335
)
Net cash used in financing activities
   
(113,471
)    
(257,484
)
Effect of exchange rates on cash and cash equivalents
   
(1,661
)    
1,313
 
Net decrease in cash and cash equivalents
   
(218,487
)    
(215,556
)
Cash and cash equivalents at beginning of period
   
338,954
     
390,136
 
Cash and cash equivalents at end of period
  $
120,467
    $
174,580
 
See Notes to Condensed Consolidated Financial Statements.
 
5
 
 
Table of Contents
 
WILLIAMS-SONOMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A. FINANCIAL STATEMENTS - BASIS OF PRESENTATION
These financial statements include Williams-Sonoma, Inc. and its wholly owned subsidiaries (“we,” “us” or “our”). The Condensed Consolidated Balance Sheets as of August 4, 2019 and July 29, 2018, the Condensed Consolidated Statements of Earnings, the Condensed Consolidated Statements of Comprehensive Income, and the Condensed Consolidated Statements of Stockholders’ Equity for the thirteen weeks and
twenty-six
weeks then ended and the Condensed Consolidated Statements of Cash Flows for the
twenty-six
weeks then ended, have been prepared by us, without audit. In our opinion, 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. Intercompany transactions and accounts have been eliminated. The balance sheet as of February 3, 2019, presented herein, has been derived from our audited Consolidated Balance Sheet included in our Annual Report on Form
10-K
for the fiscal year ended February 3, 2019.
The results of operations for the thirteen and
twenty-six
weeks ended August 4, 2019 are not necessarily indicative of the operating results of the full year.
Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. These financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form
10-K
for the fiscal year ended February 3, 2019.
New Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-02,
Leases
, which requires lessees to recognize a
right-of-use
asset and an operating lease liability for virtually all leases. This ASU, as amended, was effective for us beginning in the first quarter of fiscal 2019. The adoption of this ASU resulted in an increase in total long-term assets and total liabilities of approximately $1.2 billion, which includes an increase in liabilities for lease obligations of approximately $1.4 billion, a decrease in deferred rent and deferred lease incentives of approximately $0.2 billion, and an increase in
right-of-use
assets of approximately $1.2 billion on the first day of fiscal 2019. We also recorded an approximate $3.3 million, net of tax, reduction to the opening balance of retained earnings resulting from the impairment of certain long-lived assets upon adoption of this ASU. We have elected to apply the provisions of this ASU at the adoption date, instead of to the earliest comparative period presented in the financial statements. We have elected the package of practical expedients upon adoption, which permits us not to reassess whether existing contracts are or contain leases, the lease classification of existing leases, or initial direct costs for existing leases. We have also elected not to separate lease and
non-lease
components for all of our leases and not to recognize a
right-of-use
asset and a lease liability for short-term leases. The adoption of this ASU did not materially impact our Condensed Consolidated Statement of Earnings.
In August 2017, the FASB issued ASU
 2017-12,
 Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities
 (Topic 815),
which expands and refines hedge accounting for both
 non-financial
 and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The guidance also makes certain targeted improvements to simplify the application of hedge accounting guidance and ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. Entities should apply the guidance to existing cash flow and net investment hedge relationships using a modified retrospective approach with a cumulative effect adjustment recorded to opening retained earnings on the date of adoption. The guidance also provides transition relief to make it easier for entities to apply certain amendments to existing hedges where the hedge documentation needs to be modified. This ASU was effective for us in the first quarter of fiscal 2019. The adoption of this ASU did not have a material impact on our financial condition, results of operations or cash flows.
In August 2018, the FASB issued ASU
2018-15,
Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement 
That Is a Service Contract.
This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain
internal-use
software. Accordingly, the amendments require an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic
350-40
to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. This ASU is effective for us in the first quarter of fiscal 2020. We do not expect the adoption of this ASU to have a material impact on our financial condition, results of operations or cash flows.
 
6
 
 
Table of Contents
 
NOTE B. BORROWING ARRANGEMENTS
Credit Facility
We have a credit facility, which provides for a $500,000,000 unsecured revolving line of credit (the “revolver”) and a $300,000,000 unsecured term loan facility (the “term loan”). The revolver may be used to borrow revolving loans or request the issuance of letters of credit. We may, upon notice to the administrative agent, request existing or new lenders to increase the revolver by up to $250,000,000, at such lenders’ option, to provide for a total of $750,000,000 of unsecured revolving credit. The revolver matures on January 8, 2023, at which time all outstanding borrowings must be repaid and all outstanding letters of credit must be cash collateralized. We may, prior to January 8, 2020, elect to extend the maturity date for an additional year, subject to lender approval.
During the second quarter and for year-to-date fiscal 2019, we had borrowings of $
60,000,000
under the revolver (at a year-to-date weighted average interest rate of 3.42%), all of which was outstanding as of August 4, 2019. During the second quarter and for year-to-date fiscal 2018, we had no borrowings under the revolver. Additionally, as of August 4, 2019, $12,400,000 in issued but undrawn standby letters of credit was outstanding under the credit facility. The standby letters of credit were issued to secure the liabilities associated with workers’ compensation and other insurance programs.
As of August 4, 2019, we had $300,000,000
outstanding under our term loan (at a year-to-date weighted average interest rate of
3.57
%). The term loan matures on January 8, 2021, at which time all outstanding principal and any accrued interest must be repaid.
The interest rates under the credit facility are variable, and may be elected by us as: (i) the London Interbank Offer Rate plus an applicable margin based on our leverage ratio ranging from 0.91% to 1.775% for a revolver borrowing, and 1.0% to 2.0% for the term loan; or (ii) a base rate as defined in the credit facility plus an applicable margin ranging from 0% to 0.775% for a revolver borrowing, and 0% to 1.0% for the term loan.
As of August 4, 2019, we were in compliance with our financial covenants under the credit facility and, based on current projections, we expect to remain in compliance throughout the next 12 months.
Letter of Credit Facilities
We have three unsecured letter of credit reimbursement facilities for a total of $70,000,000. The letter of credit facilities contain covenants that are consistent with our credit facility. Interest on unreimbursed amounts under the letter of credit facilities accrues at a base rate as defined in the credit facility plus an applicable margin based on our leverage ratio. As of August 4, 2019, an aggregate of $7,356,000 was outstanding under the letter of credit facilities, which represents only a future commitment to fund inventory purchases to which we have not taken legal title.
On August 23, 2019, we renewed all three of our letter of credit facilities for an aggregate of $70,000,000 and extended each of these facilities’ maturity dates until
August 23, 2020
The latest expiration possible for any future letters of credit issued under the facilities is January 20, 2021.
NOTE C. STOCK-BASED COMPENSATION
Equity Award Programs
Our Amended and Restated 2001 Long-Term Incentive Plan (the “Plan”) provides for grants of incentive stock options, nonqualified stock options, stock-settled stock appreciation rights (collectively, “option awards”), restricted stock awards, restricted stock units (including those that are performance-based), deferred stock awards (collectively, “stock awards”) and dividend equivalents up to an aggregate of 36,570,000 shares. As of August 4, 2019, there were approximately 5,345,000 shares available for future grant. Awards may be granted under the Plan to our officers, employees and
non-employee
members of the board of directors of the company (the “Board”) or any parent or subsidiary. Shares issued as a result of award exercises or releases are primarily funded with the issuance of new shares.
Option Awards
Annual grants of option awards are limited to 1,000,000 shares on a per person basis and have a maximum term of seven years
The exercise price of these option awards must not be less
 than 100% of the closing price of our stock on the day prior to the grant date. Option awards granted to employees generally vest evenly over a period of four years for service-based awards. Certain
option awards contain vesting acceleration clauses which are triggered upon certain events including, but not limited to, retirement, or a merger or similar corporate 
event.
Stock Awards
Annual grants of stock awards are limited to 1,000,000 shares on a per person basis. Stock awards granted to employees generally vest evenly over a period of four years for service-based awards. Certain performance-based awards, which have variable payout conditions based on predetermined financial targets, generally vest three years from the date of grant. Certain stock awards and other agreements contain vesting acceleration clauses which are triggered upon certain events including, but not limited to, retirement, or a merger or similar corporate event. Stock awards granted to
non-employee
Board members generally vest in one year.
Non-employee
Board members automatically receive stock awards on the date of their initial election to the Board and annually thereafter on the date of the annual meeting of stockholders (so long as they continue to serve as a
non-employee
Board member).
 
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Stock-Based Compensation Expense
During the thirteen and
twenty-six
weeks ended August 4, 2019, we recognized total stock-based compensation expense, as a component of selling, general and administrative expenses, of $16,872,000 and $35,401,000, respectively. During the thirteen and