AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------

SHELBY WILLIAMS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware 62-0974443

(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)

11-111 Merchandise Mart
Chicago, Illinois 60654
(312) 527-3593
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------------------

Manfred Steinfeld
Shelby Williams Industries, Inc.
11-111 Merchandise Mart
Chicago, Illinois 60654
(312) 527-3593
(Name, address, including zip code, and telephone
number, including area code, of agent for service)

Copies to:

Walter Roth Edward S. Best
D'Ancona & Pflaum Mayer, Brown & Platt
30 North LaSalle Street 190 South LaSalle Street
Chicago, Illinois 60602 Chicago, Illinois 60603
(312) 580-2200 (312) 782-0600

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------

CALCULATION OF REGISTRATION FEE

PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE

Common Stock, $.05 par value.......... 2,300,000 shares $16.4375 $37,806,250 $11,457

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, based upon the
average of the high and low prices of the Common Stock as reported on the
New York Stock Exchange - Composite Tape on February 28, 1997.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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- --------------------------------------------------------------------------------

SUBJECT TO COMPLETION, DATED MARCH 4, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration of qualification under the securities laws of any such State.

PROSPECTUS

2,000,000 SHARES

[LOGO]
SHELBY WILLIAMS INDUSTRIES, INC.
COMMON STOCK
----------------

OF THE 2,000,000 SHARES OF COMMON STOCK, PAR VALUE $.05 PER SHARE (THE
"COMMON STOCK"), OF SHELBY WILLIAMS INDUSTRIES, INC. ("SHELBY WILLIAMS" OR THE
"COMPANY") BEING OFFERED HEREBY, 569,000 SHARES ARE BEING SOLD BY THE COMPANY
AND 1,431,000 SHARES ARE BEING SOLD BY MANFRED STEINFELD, THE CHAIRMAN OF THE
EXECUTIVE COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS, AND THE FERN AND
MANFRED STEINFELD CHARITABLE REMAINDER TRUST (COLLECTIVELY, THE "SELLING
STOCKHOLDERS"). SEE "SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE ANY
PROCEEDS FROM THE SALE OF SHARES BY THE SELLING STOCKHOLDERS.

THE COMMON STOCK IS LISTED ON THE NEW YORK STOCK EXCHANGE (THE "NYSE") UNDER
THE SYMBOL "SY." ON MARCH 3, 1997, THE LAST REPORTED SALES PRICE FOR THE COMMON
STOCK ON THE NYSE WAS $16 3/4 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK AND
DIVIDENDS."

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PROCEEDS TO
UNDERWRITING SELLING
PRICE TO DISCOUNTS AND PROCEEDS TO STOCKHOLDERS
PUBLIC COMMISSIONS (1) COMPANY (2) (2)

Per Share..................... $ $ $ $
Total(3)...................... $ $ $ $

(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933. SEE "UNDERWRITING."

(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY AND THE SELLING
STOCKHOLDERS ESTIMATED TO BE $56,000 AND $144,000, RESPECTIVELY.

(3) THE COMPANY AND MANFRED STEINFELD, ONE OF THE SELLING STOCKHOLDERS, HAVE
GRANTED THE SEVERAL UNDERWRITERS A 30-DAY OVER-ALLOTMENT OPTION TO PURCHASE
UP TO 300,000 ADDITIONAL SHARES OF COMMON STOCK ON THE SAME TERMS AND
CONDITIONS AS SET FORTH ABOVE. IF ALL SUCH ADDITIONAL SHARES ARE PURCHASED
BY THE UNDERWRITERS, THE TOTAL PRICE TO PUBLIC WILL BE $ , THE
TOTAL UNDERWRITING DISCOUNTS AND COMMISSIONS WILL BE $ , THE TOTAL
PROCEEDS TO THE COMPANY WILL BE $ AND THE TOTAL PROCEEDS TO SELLING
STOCKHOLDERS WILL BE $ . SEE "UNDERWRITING."
------------------------

THE COMMON STOCK IS OFFERED BY THE UNDERWRITERS, SUBJECT TO PRIOR SALE,
WHEN, AS AND IF DELIVERED TO OR ACCEPTED BY THE UNDERWRITERS, SUBJECT TO CERTAIN
CONDITIONS. THE UNDERWRITERS RESERVE THEIR RIGHT TO WITHDRAW, CANCEL OR MODIFY
SUCH OFFER AND TO REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT
DELIVERY OF SHARE CERTIFICATES FOR THE COMMON STOCK WILL BE MADE AT THE OFFICES
OF LAZARD FRERES & CO. LLC, NEW YORK, NEW YORK ON OR ABOUT , 1997 AGAINST
PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.

------------------------

LAZARD FRERES & CO. LLCIINTERSTATE/JOHNSON LANE
CORPORATION
------------------------

THE DATE OF THIS PROSPECTUS IS , 1997.

[PICTURES]

[PICTURES OF COMPANY'S SEATING PRODUCTS AND OF
INSTALLATIONS INCLUDING THE COMPANY'S PRODUCTS.]

The illustration of these installations is not intended to indicate any
future Shelby Williams sales to these users.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF
THE UNDERWRITERS' OVER-ALLOTMENT OPTION.

THE COMPANY

Shelby Williams is the leading designer, manufacturer and distributor of
seating products used in the hospitality (including lodging, gaming, interval
vacation (i.e., time share) and country club) and food service industries. The
Company produces and markets under the SHELBY WILLIAMS-Registered Trademark-
brand name an extensive line of seating products including wood, metal and
rattan chairs, barstools, sofas and sleep sofas and stacking chairs, as well as
banquet-related products under the KING ARTHUR -Registered Trademark- brand name
including folding tables, food service carts and portable dance floors. In
addition, Shelby Williams designs and manufactures seating products under the
THONET-Registered Trademark- brand name for the university, healthcare and other
institutional markets. The Company also manufactures vinyl wallcovering products
for residential, hotel and office use and markets other textile products and
floor coverings to the architectural and design community and end users. The
Company markets these products under the brand names SELLERS &
JOSEPHSON-Registered Trademark- and PHF-Registered Trademark-, respectively.
Shelby Williams manufactures approximately 350 standard furniture products for
the hospitality and food service industries, and approximately 200 standard
products for the university, healthcare and other institutional markets. The
majority of these products are supplied under special order and finished and
upholstered to customer specifications.

Shelby Williams estimates that, of its 1996 net sales of $172.4 million,
approximately 80% were to the hospitality and food service industries and
approximately 13% were to university, healthcare and other institutional
markets. Representative users of the Company's products include Doubletree,
Embassy Suites, Four Seasons, Hampton Inns, Hilton, Holiday Inns, Hyatt, La
Quinta, Marriott, Ritz Carlton and Sheraton, in the lodging industry; Caesars
Palace, Circus Circus, Grand Casino, MGM Grand, Mirage and Sun International, in
the gaming industry; Fairfield Communities, Marriott Vacation, Signature Resorts
and Vacation Break USA, in the interval vacation industry; and Brinker
International (Corner Bakery, Macaroni Grill, Maggiano's), Darden Restaurants
(Olive Garden and Red Lobster), Hard Rock Cafe, Lettuce Entertain You, Luby's
Cafeteria, Morton's of Chicago, Pizza Hut, Planet Hollywood, Starbucks and
Wendy's in the food service industry. The Company's ten largest customers
accounted for approximately 17% of 1996 net sales, and no single customer
accounted for more than 3% of 1996 net sales.

The Company's sales and marketing staff consists of approximately 105
full-time employees, of which 65 are field sales personnel. The Company's
products are marketed to hospitality and food service chains or their buying
agencies and to other customers through interior designers, architects, contract
furniture, food service and office furniture dealers. Shelby Williams markets
its products through 14 showrooms and sales offices in the United States and
approximately 40 distributors internationally. In addition, Shelby Williams
publishes four extensive catalog systems displaying the Company's products.
Customers may order standard products directly from these catalogs or request
changes to meet their design specifications.

Shelby Williams estimates that approximately three quarters of the products
it sells to the hospitality and food service industries are used to replace
seating at existing facilities which are being refurbished. In light of the
significant level of acquisitions in the lodging industry over the last two
years and the trend of new owners to refurbish and reposition following an
acquisition, industry analysts expect strong levels of refurbishing. In
addition, increased profits in the lodging industry resulting from high
occupancy levels, coupled with increasing average daily rates, have made
additional funds available for refurbishment. According to industry research,
profitability levels in the United States lodging industry are expected to
remain strong over the next few years.

Based on net sales, management estimates that Shelby Williams is
approximately three times larger than the next largest manufacturer of contract
seating products for the hospitality and food service industries. The markets
for the seating products in which Shelby Williams competes are served by a small
number of relatively large, privately-held companies and divisions of
publicly-held companies and a large number of relatively small, privately-held
regional manufacturers. Shelby Williams believes that its size provides it with
certain advantages relative to its competitors.

In addition, the Company believes that the following factors distinguish it
from its competitors and have contributed to its leading position:

BREADTH OF PRODUCTS. Management believes that Shelby Williams offers the
widest range of seating products in the contract furniture industry for the
hospitality and food service markets. Shelby Williams believes that its ability
to provide a customer with all of its seating requirements (i.e., banquet, guest
room, casino, restaurant and public spaces) from a single source provides it
with a competitive advantage. In addition, Shelby Williams believes that it is
uniquely positioned to take advantage of the trend among large national
hospitality and food service companies to consolidate supplier relationships.

CUSTOMER SERVICE. Management believes that Shelby Williams offers a
superior level of customer service resulting in a high level of customer
satisfaction and enhanced opportunities for repeat business. As part of its
customer service program, Shelby Williams employs a dedicated sales force of 65
field sales personnel knowledgeable about Shelby Williams' products and attuned
to customers' requirements. Shelby Williams believes that its sales force and
the high quality of ongoing service and support it provides have enabled it to
establish strong relationships with its customers.

QUALITY AND RELIABILITY. Shelby Williams' strong reputation for product
quality, reliability and timely delivery has been an important factor in its
success and positions the Company favorably in competing for business. Moreover,
Shelby Williams' reputation for quality has enabled the Company to lead the
industry in setting standards for safety, quality and durability. Management
believes that its SHELBY WILLIAMS, THONET and KING ARTHUR brands are leading
tradenames in their respective markets.

DESIGN AND MANUFACTURING CAPABILITIES. Shelby Williams distinguishes itself
from other industry participants based on its manufacturing flexibility and its
ability to customize orders to customer specifications. Approximately 90% of the
Company's products are catalog items, finished and upholstered to customer
specifications. In addition, Shelby Williams often works with designers and
architects to design new products and customize standard products on behalf of
end users.

GROWTH STRATEGY

The Company seeks to grow both sales and profits by means of the following
strategies:

INCREASE PENETRATION OF CORE MARKETS. Shelby Williams has historically sold
the majority of its products to architects, design firms, buying groups and
directly to hospitality and food service chains. The Company intends to increase
sales through its traditional distribution channels by (i) strategically
increasing the number of salespeople in key geographic locations, (ii)
selectively adding product lines which complement the Company's existing product
lines and (iii) entering into licensing agreements to assemble and distribute
furniture designed and made by European furniture manufacturers such as the
LAMM-Registered Trademark- and GOLF -Registered Trademark- series in the THONET
line, which has been targeted for the university and other institutional
markets.

TARGET DEVELOPING MARKETS. By capitalizing on the knowledge, relationships
and reputation developed in its core markets, Shelby Williams believes it is
well positioned to take advantage of opportunities in certain developing markets
such as gaming, interval vacation, conference and convention center and country
club markets. For example, the recent entry of a number of the Company's
existing clients, including Hyatt, Marriott and Hilton, into the high-growth
interval vacation market has provided the Company with new business
opportunities.

EXPAND INTERNATIONALLY. Shelby Williams intends to increase its
international presence by expanding its marketing and distribution activities
primarily in Latin America and the Middle East. The Company is planning to add
four regional distributors in South America as well as a regional sales director
to oversee the development of new business in Latin America. Shelby Williams
believes international markets represent a significant opportunity for growth.

DEVELOP NEW PRODUCTS. Shelby Williams seeks to develop proprietary new
products which cannot easily be replicated by its competitors due to capital
requirements as well as patentability. Shelby Williams excels in designing
innovative new products for its core markets as well as conference and
convention centers and other corporate facilities. Since 1992, the Company has
obtained nine design patents, 13 utility patents and five trademarks.

IMPROVE OPERATING MARGINS. Shelby Williams continually reviews its
operations for opportunities to enhance operating efficiencies and control
costs. Over the last few years, Shelby Williams has (i) divested its low-margin
contemporary upholstered furniture business, (ii) initiated Company-wide
programs with middle- and lower-level management incentive bonuses based on
operating efficiency benchmarks, and (iii) automated manufacturing processes
utilizing robotics and state-of-the-art finishing systems. As a result,
operating margins increased from 4.7% in 1992 to 7.8% in 1996.

PURSUE SELECTIVE STRATEGIC ACQUISITIONS. Shelby Williams will continue to
explore opportunities to acquire complementary businesses, products and
technologies in order to broaden its product lines. In addition, Shelby Williams
plans to construct or purchase new facilities in certain regions that offer
favorable labor demographics and provide a geographic advantage relative to the
proximity of certain customers.

THE OFFERING

Common Stock Offered by:
The Company................. 569,000 shares

The Selling Stockholders.... 1,431,000 shares
--------
Total..................... 2,000,000 shares
--------
--------
Common Stock to be Outstanding 9,312,863 shares (1)
after the Offering:

Use of Proceeds............... The Company currently intends to use the net proceeds of the
offering as follows: (i) approximately $2.0 million for a
state-of-the-art powder coating system; (ii) approximately
$3.0 million to build or purchase a new wood products
facility; and (iii) approximately $1.0 million for automated
machinery, tooling systems and other equipment. The
remainder of the net proceeds will be used for general
corporate purposes, including working capital needs and
possible acquisitions. The Company will not receive any
proceeds from the sale of shares by the Selling
Stockholders. See "Use of Proceeds" and "Selling
Stockholders."

NYSE Symbol: SY

- ------------------------

(1) Excludes 350,000 shares of Common Stock reserved for issuance upon exercise
of outstanding stock options granted under the Company's stock option plans.

SUMMARY FINANCIAL INFORMATION

The summary income statement data, per share and share data and balance
sheet data presented herein have been derived from the Company's audited
consolidated financial statements. The information below should be read in
conjunction with the audited consolidated financial statements, including the
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus.

YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:
Net sales(1)........................ $ 172,431 $ 166,776 $ 159,072 $ 153,527 $ 140,262
---------- ---------- ---------- ---------- ----------
Cost of goods sold.................. 133,231 130,189 126,401 121,872 109,330
Restructuring charge(2)............. -- -- 5,575 -- --
Selling, general and administrative
expenses.......................... 25,765 25,974 25,402 24,770 24,342
---------- ---------- ---------- ---------- ----------
Total............................. 158,996 156,163 157,378 146,642 133,672
---------- ---------- ---------- ---------- ----------
Operating profit(1)................. 13,435 10,613 1,694 6,885 6,590
Interest expense, net............... 951 1,248 1,207 1,052 1,492
Miscellaneous expense (income)...... (44) (65) 106 (26) (44)
---------- ---------- ---------- ---------- ----------
Income before provision for income
taxes............................. 12,528 9,430 381 5,859 5,142
Provision for income taxes.......... 4,111 2,650 16 1,709 1,548
---------- ---------- ---------- ---------- ----------
Net income(1)....................... $ 8,417 $ 6,780 $ 365 $ 4,150 $ 3,594
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
PER SHARE AND SHARE DATA:
Net income(1)....................... $ 0.96 $ 0.76 $ 0.04 $ 0.46 $ 0.39
Dividends........................... $ 0.30 $ 0.28 $ 0.28 $ 0.28 $ 0.24
Weighted average shares
outstanding....................... 8,805 8,955 9,049 9,097 9,105

AT DECEMBER 31, 1996
----------------------
AS
ACTUAL ADJUSTED(3)
---------- ----------
(IN THOUSANDS)

BALANCE SHEET DATA:
Current assets........................ $ 57,177 $ 66,060
Working capital....................... 37,606 46,489
Total assets.......................... 84,678 93,561
Total debt (including current
portion)............................ 8,000 8,000
Stockholders' equity.................. 55,970 64,853

YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PRODUCTION PER MAN
HOUR)

OTHER DATA:
Depreciation and amortization....... $ 2,656 $ 2,833 $ 2,707 $ 2,673 $ 2,706
Capital expenditures................ 1,189 2,252 2,228 1,720 1,831
Production per man hour(4).......... 72.65 69.40 68.05 67.05 66.62
Backlog (at period end)(1).......... 32,000 29,700 28,400 28,300 23,600
Gross margin(5)..................... 22.7% 21.9% 17.0% 20.6% 22.1%
Operating margin(5)................. 7.8 6.4 1.1 4.5 4.7

- ------------------------

(1) In August 1996, the Company sold the business and certain assets related to
its Preview line of contemporary upholstered seating products ("Preview")
for $2.0 million in cash and approximately $400,000 in other consideration.
Excluding Preview, the Company's net sales, operating profit, net income and
net income per share for the year ended December 31, 1996 were $166.6
million,

$13.3 million, $8.4 million and $0.95 and for the year ended December 31,
1995 were $157.8 million, $10.3 million, $6.6 million and $0.74. Excluding
Preview, the Company's backlog at December 31, 1995 was $28.0 million.

(2) In December 1994, the Company made changes to its product and manufacturing
strategies designed to increase the Company's competitiveness. These changes
included (i) a plan to divest its contemporary upholstered seating product
line, Preview, and a related manufacturing facility and (ii) discontinuance
of a part of its product lines in the university, healthcare and other
institutional markets and the closure of a related manufacturing facility.
The Company took a pre-tax $5.6 million charge (or $3.9 million, $0.43 per
share, after-tax) in the fourth quarter of 1994 as a result of the
aforementioned restructuring. See Note to Consolidated Financial Statements
captioned "Restructuring Charge."

(3) Adjusted to give effect to the sale of 569,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $16 5/8 per
share and the application of the net proceeds therefrom (after deduction of
underwriting discounts and commissions and estimated offering expenses). See
"Use of Proceeds."

(4) Computed by dividing net sales of manufactured products by hours worked by
manufacturing personnel.

(5) Excluding the restructuring charge of $5.6 million in 1994, the gross margin
and operating margin was 20.5% and 4.6%, respectively.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 569,000 shares of
Common Stock offered by the Company hereby, after deducting underwriting
discounts and commissions and estimated offering expenses, at an assumed
offering price of $16 5/8 per share, are estimated to be approximately $8.9
million ($11.2 million if the Underwriters' over-allotment option is exercised
in full). The Company will not receive any proceeds from the sale of shares by
the Selling Stockholders. The Company currently intends to use the net proceeds
of the offering as follows: (i) approximately $2.0 million for a
state-of-the-art powder coating system; (ii) approximately $3.0 million to build
or purchase a new wood products facility; and (iii) approximately $1.0 million
for automated machinery, tooling systems and other equipment. The remainder of
the net proceeds will be used for general corporate purposes, including working
capital needs and possible acquisitions. While the Company may pursue
acquisitions, there can be no assurance that suitable acquisition candidates
will be identified or that any acquisitions will be consummated.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Common Stock is listed on the NYSE under the symbol "SY." The following
table sets forth, for the periods indicated, the range of high and low sales
prices per share of the Common Stock, as reported by the NYSE, and the per share
cash dividends declared during the periods:

HIGH LOW DIVIDENDS
--------- --------- -----------

1995
First Quarter.......................................................... $ 10 1/4 $ 7 1/2 $ 0.07
Second Quarter......................................................... 11 3/4 9 0.07
Third Quarter.......................................................... 13 3/4 11 3/4 0.07
Fourth Quarter......................................................... 13 1/2 11 3/8 0.07
1996
First Quarter.......................................................... 12 7/8 10 5/8 0.07
Second Quarter......................................................... 12 1/2 10 1/8 0.07
Third Quarter.......................................................... 13 1/2 10 5/8 0.08
Fourth Quarter......................................................... 14 3/4 12 1/4 0.08
1997
First Quarter (Through March 3, 1997).................................. 17 11 7/8 0.08

On March 3, 1997, the last reported sales price of the Common Stock as
reported on the NYSE was $16 3/4 per share.

CAPITALIZATION

The following table sets forth the capitalization of the Company at December
31, 1996 and as adjusted to give effect to the sale of the 569,000 shares of
Common Stock offered by the Company hereby and the application of the estimated
net proceeds therefrom (the "Offering"), which are estimated to be $8.9 million
after deducting underwriting discounts and commissions and estimated offering
expenses. See "Use of Proceeds." The information set forth in the table should
be read in conjunction with the audited consolidated financial statements of the
Company, including the notes thereto, appearing elsewhere herein.

AT DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(2)
---------- --------------
(IN THOUSANDS)

Long-term debt including current portion.......................................... $ 8,000 $ 8,000
Common Stock, $.05 par value, 30,000,000 shares authorized, 11,814,000 shares
issued(1)........................................................................ 591 591
Capital in excess of par value.................................................... 8,143 10,961
Retained earnings................................................................. 69,172 69,172
Pension liability adjustment...................................................... (789) (789)
Common stock held in treasury; 3,047,000 shares at cost (2,478,000 as adjusted)... (21,147) (15,082)
---------- --------------
Total stockholders' equity.................................................... 55,970 64,853
---------- --------------
Total capitalization.......................................................... $ 63,970 $ 72,853
---------- --------------
---------- --------------

- ------------------------

(1) Excludes 350,000 shares reserved for issuance upon the exercise of stock
options under the Company's stock option plans. See Note to Consolidated
Financial Statements captioned "Stock Option Plans."

(2) Adjusted to give effect to the sale by the Company of 569,000 shares of
Common Stock offered hereby at an assumed public offering price of $16 5/8
per share and the application of the net proceeds therefrom. See "Use of
Proceeds."

SELECTED FINANCIAL INFORMATION

The income statement data for the years ended December 31, 1996, 1995 and
1994, and the balance sheet data at December 31, 1996 and 1995, have been
derived from the Company's audited consolidated financial statements appearing
elsewhere herein. The income statement data for the years ended December 31,
1993 and 1992, and the balance sheet data at December 31, 1994, 1993 and 1992,
have been derived from the Company's audited consolidated financial statements
which are not included herein. The selected financial information should be read
in conjunction with such audited consolidated financial statements, including
the notes thereto, and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this Prospectus.

INCOME STATEMENT DATA:
Net sales (1)...................................... $ 172,431 $ 166,776 $ 159,072 $ 153,527 $ 140,262
---------- ---------- ---------- ---------- ----------
Cost of goods sold................................. 133,231 130,189 126,401 121,872 109,330
Restructuring charge (2)........................... -- -- 5,575 -- --
Selling, general and administrative expenses....... 25,765 25,974 25,402 24,770 24,342
---------- ---------- ---------- ---------- ----------
Total............................................ 158,996 156,163 157,378 146,642 133,672
---------- ---------- ---------- ---------- ----------
Operating profit (1)............................... 13,435 10,613 1,694 6,885 6,590
Interest expense, net.............................. 951 1,248 1,207 1,052 1,492
Miscellaneous expense (income)..................... (44) (65) 106 (26) (44)
---------- ---------- ---------- ---------- ----------
Income before provision for income taxes........... 12,528 9,430 381 5,859 5,142
Provision for income taxes......................... 4,111 2,650 16 1,709 1,548
---------- ---------- ---------- ---------- ----------
Net income (1)..................................... $ 8,417 $ 6,780 $ 365 $ 4,150 $ 3,594
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
PER SHARE AND SHARE DATA:
Net income (1)..................................... $ 0.96 $ 0.76 $ 0.04 $ 0.46 $ 0.39
Dividends.......................................... $ 0.30 $ 0.28 $ 0.28 $ 0.28 $ 0.24
Weighted average shares outstanding................ 8,805 8,955 9,049 9,097 9,105

BALANCE SHEET DATA (AT YEAR END):
Current assets..................................... $ 57,177 $ 59,256 $ 57,079 $ 57,151 $ 52,237
Working capital.................................... 37,606 32,016 28,092 28,809 28,680
Total assets....................................... 84,678 89,907 88,520 90,804 86,775
Total debt (including current portion)............. 8,000 8,895 8,944 8,987 9,025
Stockholders' equity............................... 55,970 51,724 48,658 51,316 51,156

YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PRODUCTION PER MAN HOUR)

OTHER DATA:
Depreciation and amortization....... $ 2,656 $ 2,833 $ 2,707 $ 2,673 $ 2,706
Capital expenditures................ 1,189 2,252 2,228 1,720 1,831
Production per man hour (3)......... 72.65 69.40 68.05 67.05 66.62
Backlog (at period end) (1)......... 32,000 29,700 28,400 28,300 23,600
Gross margin (4).................... 22.7 % 21.9 % 17.0 % 20.6 % 22.1 %
Operating margin (4)................ 7.8 6.4 1.1 4.5 4.7

- ------------------------

(1) In August 1996, the Company sold the business and certain assets related to
its Preview line of contemporary upholstered seating products for $2.0
million in cash and approximately $400,000 in

other consideration. Excluding Preview, the Company's net sales, operating
profit, net income and net income per share for the year ended December 31,
1996 were $166.6 million, $13.3 million, $8.4 million and $0.95 and for the
year ended December 31, 1995 were $157.8 million, $10.3 million, $6.6
million and $0.74. Excluding Preview, the Company's backlog at December 31,
1995 was $28.0 million.

(2) In December 1994, the Company made changes to its product and manufacturing
strategies designed to increase the Company's competitiveness. These changes
included (i) a plan to divest its contemporary upholstered seating product
line, Preview, and a related manufacturing facility and (ii) discontinuance
of a part of its product lines in the university, healthcare and other
institutional markets and the closure of a related manufacturing facility.
The Company took a pre-tax $5.6 million restructuring charge (or $3.9
million, $0.43 per share, after-tax) in the fourth quarter of 1994 as a
result of the aforementioned restructuring. See Note to Consolidated
Financial Statements captioned "Restructuring Charge."

(3) Computed by dividing net sales of manufactured products by hours worked by
manufacturing personnel.

(4) Excluding the restructuring charge of $5.6 million in 1994, the gross margin
and operating margin was 20.5% and 4.6%, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Shelby Williams is the leading designer, manufacturer and distributor of
seating products used in the hospitality (including lodging, gaming, interval
vacation (i.e., time share) and country club) and food service industries. The
Company produces and markets under the SHELBY WILLIAMS brand name an extensive
line of seating products including wood, metal and rattan chairs, barstools,
sofas and sleep sofas and stacking chairs, as well as banquet-related products
under the KING ARTHUR brand name including folding tables, food service carts
and portable dance floors. In addition, Shelby Williams designs and manufactures
seating products under the THONET brand name for the university, healthcare and
other institutional markets. The Company also manufactures vinyl wallcovering
products for residential, hotel and office use and markets other textile
products and floor coverings to the architectural and design community and end
users. The Company markets these products under the brand names SELLERS &
JOSEPHSON and PHF, respectively. Shelby Williams manufactures approximately 350
standard furniture products for the hospitality and food service industries, and
approximately 200 standard products for the university, healthcare and other
institutional markets. The majority of these products are supplied under special
order and finished and upholstered to customer specifications.

Shelby Williams estimates that, of its 1996 net sales of $172.4 million,
approximately 80% were to the hospitality and food service industries and
approximately 13% were to university, healthcare and other institutional
markets. The Company's ten largest customers accounted for approximately 17% of
1996 net sales, and no single customer accounted for more than 3% of 1996 net
sales.

Shelby Williams estimates that approximately three quarters of the products
it sells to the hospitality and food service industries are used to replace
seating at existing facilities which are being refurbished. In light of the
significant level of acquisitions in the lodging industry over the last two
years, and the trend of new owners to refurbish and reposition following an
acquisition, industry analysts expect strong levels of refurbishing. In
addition, increased profits in the lodging industry resulting from high
occupancy levels, coupled with increasing average daily rates, have made
additional funds available for refurbishment. According to industry research,
profitability levels in the United States lodging industry are expected to
remain strong over the next few years.

RESULTS OF OPERATIONS

The following table sets forth certain statement of income data as a
percentage of net sales for the periods presented.

YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------

Net sales................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.......................................... 77.3 78.1 79.5 79.4 77.9
Restructuring charge........................................ -- -- 3.5 -- --
----- ----- ----- ----- -----
Gross profit................................................ 22.7 21.9 17.0 20.6 22.1
Selling, general and administrative expenses................ 14.9 15.6 16.0 16.1 17.4
----- ----- ----- ----- -----
Operating profit............................................ 7.8 6.4 1.1 4.5 4.7
Interest expense, net....................................... 0.6 0.8 0.8 0.7 1.1
Miscellaneous expense (income).............................. (0.0) (0.0) 0.1 (0.0) (0.0)
----- ----- ----- ----- -----
Income before provision for income taxes.................... 7.3 5.7 0.2 3.8 3.7
Provision for income taxes.................................. 2.4 1.6 0.0 1.1 1.1
----- ----- ----- ----- -----
Net income.................................................. 4.9% 4.1% 0.2% 2.7% 2.6%
----- ----- ----- ----- -----
----- ----- ----- ----- -----

1996 COMPARED TO 1995

Net sales increased 3.4% to $172.4 million in 1996 from $166.8 million in
1995. This increase was due almost entirely to volume increases. Volume growth
was primarily attributable to the continued robust levels of refurbishment
activity in the hospitality and food service markets. The Company's sales growth
also reflects higher levels of new construction, particularly in the budget
sector of the hospitality market and in the food service and gaming markets.
Excluding Preview, net sales increased by 5.6% to $166.6 million in 1996 from
$157.8 million in 1995. At December 31, 1996, the backlog of orders, which
achieved record levels, was approximately $32.0 million, compared to $28.0
million, excluding Preview, at December 31, 1995.

Gross profit increased 7.1% to $39.2 million in 1996 from $36.6 million in
1995. The gross profit margin increased to 22.7% in 1996 compared to 21.9% in
1995, reflecting higher factory utilization rates and favorable product mix.
Excluding Preview, gross profit margins in 1996 and 1995 were 22.6% and 21.6%,
respectively.

Selling, general and administrative expenses decreased 0.8% to $25.8 million
in 1996 from $26.0 million in 1995. As a percentage of net sales, selling,
general and administrative expenses decreased to 14.9% in 1996 from 15.6% in
1995. This decrease reflects the success of management's cost containment
programs. Excluding Preview, selling, general and administrative expenses
increased 2.3% to $24.3 million in 1996 from $23.8 million in 1995, and as a
percentage of sales were 14.6% and 15.1% in 1996 and 1995, respectively.

As a result of the factors described above, operating profit increased 26.4%
to $13.4 million in 1996 from $10.6 million in 1995. The operating margin
improved to 7.8% in 1996 compared to 6.4% in 1995. Excluding Preview, operating
profits in 1996 and 1995 were $13.3 million and $10.3 million, respectively, and
as a percentage of sales, were 8.0% and 6.5%, respectively. Excluding Preview,
operating profit grew 28.8% in 1996, reflecting the high selling, general and
administrative expenses of Preview.

Net interest expense fell 23.8% to $951,000 in 1996 from $1.2 million in
1995. The decrease reflects the reduction in outstanding indebtedness to $8.0
million at December 31, 1996 from $14.8 million at December 31, 1995.

The effective tax rate increased to 32.8% in 1996 from 28.1% in 1995 due to
the absence of tax credits which were no longer available and the effect of
reduced export sales.

As a result of the foregoing, net income increased 24.1% to $8.4 million in
1996, or $0.96 per share, compared to $6.8 million, or $0.76 per share in 1995.
Excluding Preview, net income per share in 1996 and 1995 was $0.95 and $0.74,
respectively, representing an annual increase of 28.4%

1995 COMPARED TO 1994

Net sales increased 4.8% to $166.8 million in 1995 from $159.1 million in
1994. Of such increase, approximately 2% was due to volume increases with the
remainder being due to a combination of increased pricing and favorable product
mix. The volume growth was primarily attributable to pent-up demand in the
refurbishment sector. Excluding Preview, total net sales increased by 4.4% to
$157.8 million in 1995 from $151.1 million in 1994. Excluding Preview, the
backlog of orders at December 31, 1995 was $28.0 million, compared to $26.5
million at December 31, 1994.

In December 1994, the Company made changes to its product and manufacturing
strategies designed to increase the Company's competitiveness. These changes
included (i) a plan to divest its contemporary upholstered seating product line,
Preview, and a related manufacturing facility and (ii) discontinuance of a part
of its product lines in the healthcare, university and office markets and the
closure of a related manufacturing facility. The Company took a $5.6 million
restructuring charge in the fourth quarter of 1994

as a result of the aforementioned restructuring. See Note to Consolidated
Financial Statements captioned "Restructuring Charge."

Gross profit excluding the restructuring charge increased 12.0% to $36.6
million in 1995 from $32.7 million in 1994. The gross profit margin excluding
the restructuring charge increased to 21.9% in 1995 compared to 20.5% in 1994,
resulting mainly from greater operating efficiencies and lower expense levels
achieved by the restructuring. Excluding Preview, gross profit margins in 1995
and 1994 were 21.6% and 20.1%, respectively.

Selling, general and administrative expenses increased 2.3% to $26.0 million
in 1995 from $25.4 million in 1994. As a percentage of net sales, selling,
general and administrative expenses decreased to 15.6% in 1995 from 16.0% in
1994. This decrease as a percentage of net sales was a function of volume.
Weakness in the Mexican economy led to the liquidation in 1995 of Shelby
Williams de Mexico, S.A. de C.V., in which the Company owned 25% of the issued
and outstanding shares. The write-off of the investment in and receivables from
this affiliate amounted to $200,000. The Company's frame and component
manufacturing plant in Mexico was unaffected. Excluding Preview, selling,
general and administrative expenses increased 2.2% to $23.8 million in 1995 from
$23.3 million in 1994, and as a percentage of sales were 15.1% and 15.4% in 1995
and 1994, respectively.

As a result of the factors described above operating profit, excluding the
restructuring charge, increased 46.0% to $10.6 million in 1995 from $7.3 million
in 1994 and the operating margin improved to 6.4% in 1995 compared to 4.6% in
1994. Excluding Preview and the restructuring charge, operating profits in 1995
and 1994 were $10.3 million and $7.1 million, respectively, and as a percentage
of sales, were 6.5% and 4.7%, respectively.

Net interest expense was relatively unchanged from 1994 to 1995.

The effective tax rate increased to 28.1% in 1995 from 4.2% in 1994.

As a result of the foregoing, net income excluding the restructuring charge
increased 60.9% to $6.8 million in 1995, or $0.76 per share, compared to $4.2
million, or $0.47 per share in 1994. Excluding Preview and the restructuring
charge, net income per share in 1995 and 1994 would have been $0.74 and $0.45,
respectively, representing an annual increase of 63.2%.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of funds have been, and are expected to
continue to be, cash flows from operations and borrowings under credit lines
provided by banks. At December 31, 1996, the Company had cash and cash
equivalents of $1.0 million compared with $2.4 million at December 31, 1995.

The Company has additional sources of liquidity available in the form of
committed lines of credit maintained with banks. Unused short-term bank credit
lines totaled $20.0 million at December 31, 1996. Long-term debt at year-end,
including current portions of $1.0 million, amounted to $8.0 million. Total debt
as a percentage of total capitalization was 12.5% at December 31, 1996.

The Company's outstanding indebtedness consists of a note payable to an
institutional investor which bears interest at an annual rate of 7.8%.
Amortization of $1.0 million per quarter begins in October 1997 and continues
through July 1999. Pursuant to the terms of the note, a prepayment option is
available only at a substantial penalty.

Net cash provided by operating activities was $8.1 million in 1996.

Net cash provided by investing activities was $816,000 in 1996, which
principally reflects $2.0 million from the sale of the Preview facility,
partially offset by capital expenditures of $1.2 million. Capital expenditures
in 1996 were primarily used to upgrade manufacturing equipment. In 1997, the
Company expects capital expenditures of approximately $6.0 million which will
consist of $3.0 million for a new

regional manufacturing facility, $2.0 million for a powder coating system and
$1.0 million for automated machinery.

Cash used by financing activities in 1996 was $10.2 million which
principally reflects the repayment of $5.9 million of total indebtedness, the
payment of $2.6 million in dividends and the repurchase of $1.9 million of
treasury stock.

The Company's stockholders' equity at December 31, 1996, was $56.0 million.
The Company purchased 168,000 shares of its common stock in 1996 for $1.9
million at an average repurchase price of $11.52 per share. These repurchases
were made to provide shares upon the exercise of options granted and to be
granted under the Company's stock option plans. In January 1997, the Company's
Board of Directors authorized the repurchase of an additional 467,000 shares of
Common Stock. The Company may purchase these shares from time to time, depending
on market conditions, in the open market or privately negotiated transactions.

The Company operates a frame and component manufacturing plant in Mexico.
The year-end carrying value of property, plant and equipment at this facility
was $3.5 million for 1996, $3.8 million for 1995, and $4.1 million for 1994. All
items produced at the plant are shipped to facilities of the Company in the
United States for further processing. The value of these transfers amounted to
$2.1 million in 1996, $1.9 million in 1995, and $1.8 million in 1994.

The Company believes that cash on hand, internally generated cash flows, the
net proceeds of the offering and available credit lines will be adequate to
support currently planned business operations both on a near-term and long-term
basis.

BUSINESS

INDUSTRY

The contract furniture industry in which Shelby Williams primarily operates
serves the hospitality (including lodging, gaming, interval vacation and country
club), food service, university, healthcare and other institutional markets.
Approximately 80% of the Company's 1996 net sales were to the hospitality and
food service markets.

Shelby Williams estimates, based upon its experience and knowledge of its
markets, that demand for seating products in the hospitality and food service
industries is primarily for the refurbishment of existing facilities rather than
seating in new facilities. Shelby Williams estimates that food service seating
(including seating for food service facilities in hotels) is replaced
approximately every eight to 12 years and seating for hotel guest rooms every
ten to 15 years. In light of the significant level of acquisitions in the
lodging industry over the last two years and the trend of new owners to
refurbish and reposition following an acquisition, industry analysts expect
strong levels of refurbishing. In addition, increased profits in the lodging
industry resulting from high occupancy levels, coupled with increasing average
daily rates, have made additional funds available for refurbishing. According to
industry research, profitability levels in the United States lodging industry
are expected to remain strong over the next few years.

New construction activity also provides opportunities for additional
contract seating sales. According to independent industry analysts, over 100,000
rooms were constructed in 1996, a 20.8% increase over the previous year. New
construction activity reflects high profits in the lodging industry due to
strong occupancy levels and increasing average daily rates.

GENERAL

Shelby Williams is the leading designer, manufacturer and distributor of
seating products used in the hospitality (including lodging, gaming, interval
vacation and country club) and food service industries. The Company produces and
markets under the SHELBY WILLIAMS brand name an extensive line of seating
products including wood, metal and rattan chairs, barstools, sofas and sleep
sofas and stacking chairs, as well as banquet-related products under the KING
ARTHUR brand name including folding tables, food service carts and portable
dance floors. In addition, Shelby Williams designs and manufactures seating
products under the THONET brand name for the university, healthcare and other
institutional markets. The Company also manufactures vinyl wallcovering products
for residential, hotel and office use and markets other textile products and
floor coverings to the architectural and design community and end users. The
Company markets these products under the brand names SELLERS & JOSEPHSON and
PHF, respectively. Shelby Williams manufactures approximately 350 standard
furniture products for the hospitality and food service industries, and
approximately 200 standard products for the university, healthcare and other
institutional markets. The majority of these products are supplied under special
order and finished and upholstered to customer specifications.

Sun International, in the gaming industry; Fairfield Communities, Marriott
Vacation, Signature Resorts and Vacation Break USA, in the interval vacation
industry; and Brinker International (Corner Bakery, Macaroni Grill, Maggiano's),
Darden Restaurants (Olive Garden and Red Lobster), Hard Rock Cafe, Lettuce
Entertain You, Luby's Cafeteria, Morton's of Chicago, Pizza Hut, Planet
Hollywood, Starbucks and Wendy's in the food service industry. The Company's ten
largest customers accounted for approximately 17% of 1996 net sales, and no
single customer accounted for more than 3% of 1996 net sales.

Shelby Williams believes that the following factors distinguish it from its
competitors and have contributed to its leading position:

GROWTH STRATEGY

The Company seeks to grow both sales and profits by means of the following
strategies:

distribute furniture designed and made by European furniture manufacturers such
as the LAMM-Registered Trademark- and GOLF -Registered Trademark- series in the
THONET line, which has been targeted for the university and other institutional
markets.

TARGET DEVELOPING MARKETS. By capitalizing on the knowledge, relationships
and reputation developed in its core markets, Shelby Williams believes it is
well positioned to take advantage of opportunities in certain developing markets
such as gaming, interval vacation, conference and, convention center and country
club markets. For example, the recent entry of a number of the Company's
existing clients, including Hyatt, Marriott and Hilton, into the high-growth
time share condominium market has provided the Company with new business
opportunities.

PRODUCTS

Shelby Williams' product lines consist primarily of: (i) seating for dining,
gaming, guest room, conference and banquet facilities, (ii) healthcare and
university seating, and (iii) desks, credenzas and seating for general office
and institutional use. To complement its major product lines, Shelby Williams
also manufactures and distributes banquet folding tables, portable dance floors
and platforms, food service carts and other function furniture, as well as a
full range of vinyl wallcoverings and floor coverings. Shelby Williams' products
are primarily sold: (i) directly to hospitality and food service providers,
gaming establishments, universities and other institutions, (ii) to interior
designers, architects and other buying agencies that in turn sell the products
to the end users, and (iii) to rental companies that store Company products and
rent them to their customers.

Approximately 350 standard furniture products are marketed to the
hospitality and food service industries; approximately 200 standard furniture
products are marketed for healthcare, university and other institutional use;
and approximately 25 standard furniture products are marketed for office use. In
addition to offering a standard line of products, Shelby Williams focuses on the
specific requirements of its customers and end users and has considerable
customization capabilities. Substantially all products are supplied under
special order and are finished and upholstered to customers' specifications.
Shelby

Williams' products are marketed through an extensive catalog system, through
which customers may order standard Company products or devise custom designs to
suit their specific needs.

Shelby Williams' products are manufactured in hardwoods, such as maple, elm
and beech, as well as in rattan and metal, and are available in a wide variety
of finishes. Products are made of solid wood or a combination of woods, and many
are constructed with bentwood components, which provides extended durability.
All wooden products are finished on a conveyorized line which incorporates
forced drying cycles. The sealer coat and final conversion varnish coats are
applied by means of a state-of-the-art electrostatic finishing system which
insures uniform application resulting in a durable chip-resistant finish. Chairs
may be covered with fabric upholstery or vinyl, pursuant to customer design and
specification. Metal products are also produced in a wide variety of styles and
finishes.

In addition to its seating products, Shelby Williams produces and
distributes certain function-room furniture items, such as banquet and
conference tables, stages and food service equipment. Shelby Williams also
designs, produces and distributes furniture utilized by private healthcare
practitioners, such as reclining chairs, as well as standard dormitory furniture
utilized by universities. In addition, Shelby Williams designs and markets
approximately 50 standard patterns of textile products. These textile products
are manufactured by outside suppliers and are both used on the Company's own
seating products and distributed through dealers and interior designers for use
by other manufacturers. Shelby Williams also distributes a wide line of floor
coverings in the Pacific Basin which are manufactured by outside sources.

Management believes that it provides one of the widest ranges of seating
products in the contract furniture industry, as well as superior custom-design
capabilities. Due to its component-manufacturing facility in Zacatecas, Mexico,
its 200,000 square foot storage warehouse in Morristown, Tennessee, and its
considerable in-house production capabilities, the Company believes it is able
to provide a shorter lead time on orders than many of its competitors, most of
whom import components from European sources. Shelby Williams believes that all
of these qualities are instrumental in attracting the large orders of hotels,
restaurants and casinos that seek the convenience and pricing of a single-source
provider.

MARKETING

The Company's marketing strategy is based upon a higher degree of direct
sales relative to its competitors which tend to conduct sales through factory
representatives and with minimal sales forces. The Company's sales and marketing
staff consists of approximately 105 full-time employees, approximately 65 of
which are exclusively involved in field sales. This dedicated sales force is an
integral component of the Company's customer service and support strategy.
Management believes the high quality of ongoing service and support provided by
the sales force results in strong customer relationships and enhanced
opportunities for repeat business.

Each of the Company's sales persons sells products and services customers
within an assigned territory. The Company's sales persons promote customer
satisfaction with periodic service calls in addition to scheduled follow-up
visits. Sales persons receive a base salary, plus commissions based on net
sales. All orders are subject to acceptance by the Company's management.

Shelby Williams markets its products to a wide variety of customers
including: (i) hospitality and food service chains or their buying agencies and
(ii) other users through interior designers, architects, contract furniture,
food service and furniture dealers.

Shelby Williams markets its products through advertising in major trade
publications and illustrating the Company's products in its catalogs. Shelby
Williams publishes four extensive catalogs displaying its products and
distributes catalogs to architects, designers and dealers. Catalogs are
periodically supplemented as new products are introduced. Customers may order
standard products directly from these catalogs or request changes to meet their
design specifications.

DISTRIBUTION

Shelby Williams distributes its products both domestically and
internationally. Shelby Williams has showrooms and sales offices in 14 cities in
the United States, as well as distributors in 32 foreign countries. Many of
these distributors are concentrated in Europe and Asia, and Shelby Williams is
expanding its presence in Latin America and the Middle East. The Company's
design resource center in Honolulu, Hawaii, serves customers in the Pacific
Basin and Far East. In addition, Shelby Williams utilizes its local facilities
and existing distribution channels to assemble and distribute products in the
United States imported from European sources. Shelby Williams also exhibits at
major national and international trade shows.

CUSTOMERS AND END USERS

Some of the Company's major hospitality and food service customers and end
users:

HOTELS
Boykin Lodging Co.
Bristol Hotel Co.
Cap Star Hotels
Ciga Hotels
Doubletree Hotel Corp.
Four Seasons Hotel, Inc.
John Q. Hammons Hotel, Inc.
Hilton Hotel Corp.
Hyatt Hotel Co.
Holiday Inns, Inc.
Intercontinental Hotels
Interstate Hotel Corp.
La Quinta Inns, Inc.
Loews Hotel Corp.
Marcus Corp. (Budgetel Inns)
Marriott Hotel Corp.
Prime Hospitality Corp.
Promus Companies Inc.
(Embassy Suites, Hampton Inns
Homewood Suites)
Renaissance Hotel Corp.
The Ritz Carlton Hotel Co.
The Sheraton Corp.
Starwood Lodging Trust
Westin Hotels
Wyndham Hotels

RESTAURANTS
Applebees Restaurants
Au Bon Pain Restaurants
Brinker International Inc.
(The Corner Bakery,
Macaroni Grill, Maggiano's)
Champs Restaurants
Club Corporation of America
Darden Restaurants Inc.
(The Olive Garden and
Red Lobster Restaurants)
The Hard Rock Cafe
Luby's Cafeteria Inc.
Morton's of Chicago Restaurant
Nick's Fishmarkets
Pizza Hut Inc.
Planet Hollywood Int'l Inc.
Sirloin Stockade
Starbucks Coffee Company
Sullivan Steak Houses
T.G.I. Friday's
Veladi Ranch Steakhouses
Wendy's International Inc.

GAMING
Boyd Gaming Corp.
(Stardust Resort & Casino)
Bally's Casino Resort
Carnival Hotel & Casino
Caesars Palace
Circus Circus Enterprises, Inc.
Cow Creek Indian Gaming Center
Churchill Downs Race Track
Delaware Park Race Track & Casino
Grand Casino, Inc.
Harrah's Entertainment Inc.
Menominee Tribal Gaming
MGM Grand Hotel & Casino
The Mirage Resorts
Sheraton Casino
Showboat Marina Casino
Soaring Eagle Indian Casino
Sun International Hotels
INTERVAL VACATION
(TIME SHARE)
Embassy Vacation Resort
Properties, Inc.
Fairfield Communities, Inc.
Hilton Grand Vacations
Hyatt Vacation Club
Marriott Vacation Club Int'l.
Nevada Resort Properties
The Shell Group
Signature Resorts Inc.
Trendwest Resorts, Inc.
Vacation Break USA, Inc.
Vistana Resorts

Some of the Company's major healthcare and university, wallcovering and
floorcovering and other customers and end users:

HEALTHCARE AND
UNIVERSITIES
Albert Einstein Medical Center
Assisted Living Concepts
(Columbia/HCA Hospitals)
Georgia Institute of Technology
Georgia State University
Kaiser Foundation Hospitals
Manor Care Inc.
Michigan State University
Roosevelt University
Rutgers University
Sterling House
The University of Chicago
Hospitals
University of California at Davis
University of Tennessee
Wake Forest University

WALLCOVERING AND
FLOORCOVERING
Duron Paints
Island Flooring
Patton Wallcoverings, Inc.
Seabrook Wallcoverings Co. Inc.
Thybony Wallcoverings Co. Inc.
The Warner Company

OTHER
Allstate Insurance Co.
AFNAF (Air Force Non-
Appropriated Funds)
Clinique Cosmetics Departments
The Eckerd Corporation
The General Services Administration
May Department Stores
J.C. Penney Company
Sears, Roebuck & Co.
The Walgreen Co.

The Company's past business relationship with the above customers and end
users is not intended to imply that such relationship will continue in the
future.

In 1996, the Company also sold products to over 220 country clubs.

The Company's ten largest customers accounted for approximately 17% of net
sales in 1996, and no single customer accounted for more than 3% of 1996 net
sales. Approximately 90% of the Company's products are manufactured to fill
specific orders.

TRADEMARKS AND TRADENAMES

The Company sells its hospitality and food service products under the
trademarks SHELBY WILLIAMS-Registered Trademark-, KING
ARTHUR-Registered Trademark- and STERNO-Registered Trademark- and its
healthcare, dormitory and other institutional furniture under the trademark
THONET-Registered Trademark-. The Company markets cutting room tables and
accessories under the PHILLOCRAFT-Registered Trademark- name, fabric products
under the SW TEXTILES-Registered Trademark- name and wallcoverings under the
SELLERS & JOSEPHSON-REGISTERED TRADEMARK- name. The Company distributes wall and
floor coverings, fabrics, textiles and furniture in Hawaii and the entire
Pacific Basin under the name PHF-Registered Trademark-.

BACKLOG

The Company's backlog of orders at December 31, 1996, was $32.0 million, a
record level, as compared to $28.0 million at December 31, 1995, excluding
Preview. The Company expects to ship substantially all of its backlog by the end
of 1997.

RAW MATERIALS AND SUPPLIES

The Company manufactures most of its products to customer order from basic
raw materials. The Company utilizes a wide variety of raw materials in the
manufacture of its products including lumber, plywood, rattan, metal tubing, and
other frame components, foam cushioning, vinyl and textiles, all of which the
Company believes to be in abundant supply and available from a variety of
different sources. The Company has no long-term supply contracts with any of its
suppliers and it has experienced no significant problems in obtaining raw
materials in adequate amounts for its operations.

MANUFACTURING AND ASSEMBLY

The following table summarizes the products manufactured and assembled at
each of the Company's manufacturing facilities (as of January 1, 1997):

LOCATION PRODUCTS
- ---------------------------------------------------- ----------------------------------------

Morristown, TN...................................... Hospitality, food service and gaming
seating; banquet seating (1)
Statesville, NC..................................... Healthcare and university seating;
banquet seating and products
Canton, MS.......................................... Upholstered products
Zacatecas, MX....................................... Furniture components
Englewood, NJ....................................... Wallcoverings
Carlstadt, NJ....................................... Wallcoverings

- ------------------------

(1) Product information is summarized for two manufacturing facilities located
in Morristown, Tennessee.

Shelby Williams operations primarily consist of wood bending, wood working
and finishing, assembly, metal forming and fabrication, electrostatic wood and
metal finishing. Shelby Williams also prints and laminates vinyl wallcoverings.
For certain chair styles, Shelby Williams purchases components manufactured by
other companies. These components, which are manufactured to the Company's
specifications,

are assembled, finished and upholstered by Shelby Williams. All outsourced
components are available domestically except for rattan, which is indigenous to
the Phillipines and Indonesia. For many of its standard product offerings,
Shelby Williams optimizes its production costs by sourcing the components
produced at its Zacatecas, Mexico, facility.

All manufacturing operations emphasize quality control during the various
production processes. To provide consistency and speed to the finishing process,
the Company utilizes conveyorized paint lines with spray booths and drying ovens
positioned to allow proper drying times between finishing steps. In addition,
Shelby Williams has recently invested in electrostatic wood-finishing systems
which provide superior finishing qualities and are more advantageous from an
environmental standpoint. The Company intends to invest in powder-coating lines
which provide similar advantages for the metal product lines. Management expects
to continue to invest in automated machinery and equipment.

COMPETITION

All aspects of the Company's business are highly competitive. The Company
competes at some level with Falcon Products, Inc., Gasser Chair Co., L & B
Contract Industries, Inc., WinsLoew Furniture Inc., Virco Manufacturing
Corporation and MTS Seating. The Company competes primarily on the basis of
design, quality, service, product pricing and speed of delivery.

The Company believes that none of its principal competitors offers the
complete range of seating products that the Company offers. There can be no
assurance that the Company's principal competitors will not offer a greater
range of seating products or that new entrants will not enter the market.

EMPLOYEES

As of December 31, 1996, the Company had 1,667 full-time employees. Of
these, 1,449 were engaged in manufacturing, 113 in administrative and clerical
positions, and 105 in sales and marketing. Those engaged in manufacturing
included 241 employees in Mexico.

Hourly manufacturing employees at both Morristown, Tennessee, and Canton,
Mississippi, are represented by separate bargaining agreements with contracts
expiring in November 1999 (covering approximately 600 employees) and November
1997 (covering approximately 200 employees), respectively. The Company believes
that its relations with its employees are good.

PROPERTIES

At January 1, 1997, the Company maintained facilities with an aggregate of
approximately 1,700,000 square feet of space for its operations. The Company
considers all of its facilities to be in good operating condition. Currently,
the Company's manufacturing facilities are operating at approximately 85% of

capacity, with wood products facilities operating at over 90% of capacity. The
following table summarizes the principal physical properties, both owned and
leased, used by the Company in its operations:

APPROXIMATE
SQUARE
LOCATION USE FOOTAGE OWNED/LEASED EXPIRATION DATE
- ---------------------------------- -------------------- ------------ --------------------- ------------------

Chicago, IL....................... Showroom/Offices 6,750 Leased July, 2000

Morristown, TN.................... Mfg./Offices 515,960 Owned --

Morristown, TN.................... Mfg./Warehousing 228,000 Owned --

Canton, MS........................ Mfg./Warehousing 406,000 Owned/Leased(1) May, 2001(1)

Statesville, NC................... Mfg./Warehousing 326,670 Owned --

Zacatecas, MX..................... Mfg./Warehousing 90,000 Owned --

Englewood, NJ..................... Mfg./Warehousing 68,000 Leased Dec., 2003(2)

Honolulu, HI...................... Warehousing 45,000 Leased Aug., 2003(2)

Carlstadt, NJ..................... Mfg./Warehousing 35,000 Leased April, 2004

- ------------------------

(1) Approximately 238,100 square feet are owned and 167,900 are leased.

(2) The Company has an option to renew the lease for 10 additional years at a
nominal rental increase.

The Company has showrooms and sales offices in 14 United States cities,
including Atlanta, Chicago, Dallas, Honolulu, Los Angeles, New York and
Plantation, Florida.

MANAGEMENT

The following table sets forth certain information about the Company's
executive officers and directors.

AGE AT
NAME 2/1/97 POSITION
- ----------------------------------------------- ------------ -----------------------------------------

Paul N. Steinfeld.............................. 42 Chairman of the Board of Directors and
Chief Executive Officer

Robert P. Coulter.............................. 54 President and Chief Operating Officer

Manfred Steinfeld.............................. 72 Chairman of the Executive Committee

Peter W. Barile................................ 54 Executive Vice President

Sam Ferrell.................................... 55 Vice President, Finance, Treasurer and
Chief Financial Officer

Robert L. Haag................................. 70 Director

William B. Kaplan.............................. 56 Director

Douglas A. Parker.............................. 39 Director

Herbert L. Roth................................ 73 Director

Trisha Wilson.................................. 49 Director

PAUL N. STEINFELD has been with the Company since 1978. He became a Vice
President in 1979, President of the Company's Chair division in 1981, Executive
Vice President in 1983, Vice Chairman of the Board and Chief Administrative
Officer in 1990, Vice Chairman of the Board and Chief Executive Officer from
May, 1991 to January, 1996, and has served in his present position since
January, 1996. He has been a director of the Company since 1980. He has a B.A.
degree in Hotel, Restaurant and Institutional Management from Michigan State
University.

ROBERT P. COULTER has been with the Company and its predecessors since 1974.
He was Treasurer of the Company from its inception until May, 1990. In 1978 he
became a Vice President, in 1979 Executive Vice President, and in 1981
President, and has served in his present capacity since May, 1990. He has been a
director of the Company since 1978. Mr. Coulter has a B.S. degree in Industrial
Management and Accounting from the University of Tennessee.

MANFRED STEINFELD, co-founder of the original Shelby Williams business and
founder of the Company, served as Chairman of the Board from the incorporation
of the Company until January, 1996, and has served in his present capacity since
January 1996. Prior to May, 1991 he also served as Chief Executive Officer of
the Company. He has been a director of the Company since its inception and is
also a director of Amalgamated Trust & Savings Bank. He has a B.S. degree in
Business Administration from Roosevelt University.

PETER W. BARILE has been with the Company and its predecessors since 1968.
He was a Vice President of the Company from its inception to 1983, a Senior Vice
President from 1983 to 1990, and has served in his present capacity since May,
1990. Mr. Barile has a B.A. degree in Science from Lawrence College and an
M.B.A. degree in Manufacturing from the University of Wisconsin.

SAM FERRELL has been with the Company since 1976. He was appointed
Controller in 1978 and Vice President in 1985, and was elected to his present
position in May, 1990. Mr. Ferrell is a Certified Public Accountant with a B.S.
degree in Accounting from Tennessee Technological University.

ROBERT L. HAAG has served as a director of the Company since 1976. He is a
private investor.

WILLIAM B. KAPLAN has served as a director of the Company since 1992. He is
Chairman and CEO of Senior Lifestyle Corporation (development and management of
housing for the elderly).

DOUGLAS A. PARKER has served as a director of the Company since 1996. He is
President and CEO of Leonard Parker Company, Inc. (contract purchasing agents
for the hospitality industry). In addition, when Leonard Parker Company, Inc.
was acquired by Hospitality Worldwide Services, Inc. ("Hospitality") in January,
1997, Mr. Parker became the President and a director of Hospitality. Hospitality
serves the interior requirements for the hospitality industry.

HERBERT L. ROTH has served as a director of the Company since 1976. He is
self-employed as a financial consultant and general manager of several real
estate partnerships. Mr. Roth is also a director of Corcom, Inc.

TRISHA WILSON has served as a director of the Company since 1993. She is
President of Wilson & Associates, Inc. (interior architectural hospitality
design).

SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of shares of the Company's Common Stock on March 3, 1997 by each of
the Selling Stockholders, the shares offered hereby, and the beneficial
ownership of shares after the Offering.

SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE OFFERING AFTER OFFERING
--------------------------- ---------------------------
NAME OF PERCENT OF SHARES BEING PERCENT OF
SELLING STOCKHOLDER NUMBER OUTSTANDING OFFERED NUMBER OUTSTANDING
- ------------------------------------------- ---------- --------------- ------------ ---------- ---------------

Manfred Steinfeld.......................... 2,216,246(1) 25.3%(2) 1,100,000 1,116,246 12.0%(3)

The Fern and Manfred Steinfeld Charitable
Remainder Trust
U/T/A Oct. 17, 1995 ("CRT")............... 331,000(4) 3.8% 331,000 -- --

- ------------------------

(1) Consists of 2,150,646 shares directly owned by Mr. Steinfeld, 1,100,000 of
which are being offered hereby, plus the following shares, as to all of
which Mr. Steinfeld disclaims beneficial ownership: (i) 25,054 shares owned
by his wife; (ii) 488 shares owned by The Steinfeld Foundation, an Illinois
not-for-profit corporation, of which Mr. Steinfeld is an officer and Mr.
Steinfeld, his wife and his son, Paul N. Steinfeld, are the directors; and
(iii) 40,058 shares held by Mr. Steinfeld, Paul N. Steinfeld, Robert P.
Coulter and Sam Ferrell as trustees of the Company's Employee Stock
Ownership Plan. Does not include the 331,000 shares owned by the CRT in
order to avoid duplication.

(2) If the shares as to which Mr. Steinfeld disclaims beneficial ownership are
excluded, this percentage would be 24.6%.

(3) If the shares as to which Mr. Steinfeld disclaims beneficial ownership are
excluded, this percentage would be 11.3%.

(4) Mr. Steinfeld is settlor and a trustee with sole power as trustee to vote
and dispose of said shares; Mr. Steinfeld's wife is the other trustee of the
CRT.

Manfred Steinfeld is the founder of the Company and has been an officer and
director of the Company since its incorporation. See "Management."

UNDERWRITING

Under the terms and subject to conditions set forth in the underwriting
agreement (the "Underwriting Agreement") among the Company, the Selling
Stockholders and each of the Underwriters named below (the "Underwriters"), for
whom Lazard Freres & Co. LLC and Interstate/Johnson Lane Corporation are acting
as the representatives (the "Representatives"), each of the Underwriters has
severally agreed to purchase, and the Company and the Selling Stockholders have
agreed to sell, the respective number of shares of Common Stock set forth
opposite its name below:

NUMBER
OF SHARES
----------

Lazard Freres & Co. LLC..............................................................................

Interstate/Johnson Lane Corporation..................................................................

----------

Total............................................................................................ 2,000,000
----------
----------

The Company and the Selling Stockholders are obligated to sell and the
Underwriters are obligated to purchase all of the 2,000,000 shares of Common
Stock offered hereby if any are purchased.

The Company and the Selling Stockholders have been advised by the
Representatives that the several Underwriters propose to offer the shares
offered hereby directly to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a discount of $ to certain other dealers. After
the offering made by this Prospectus, the offering price and such concessions
may be changed by the Representatives.

The Company and Manfred Steinfeld granted to the Underwriters an option
exercisable for 30 days from the date of this Prospectus, to purchase up to
150,000 additional shares of Common Stock from each, for an aggregate of 300,000
shares of Common Stock at the offering price, less underwriting discounts and
commissions, as set forth on the cover page of this Prospectus. The Underwriters
may exercise such option only pro rata among the Company and Manfred Steinfeld
and solely for the purpose of covering over-allotments incurred in the sale of
the shares of Common Stock offered hereby. To the extent such option to purchase
is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase and the Company and Manfred Steinfeld will be obligated
to sell approximately the same percentage of such additional shares as the
number set forth next to such Underwriter's name in the preceding table bears to
2,000,000.

The Company, the Selling Stockholders and the Company's executive officers
(including executive officers who serve on the Company's Board of Directors)
(who, upon consummation of the Offering, will beneficially own an aggregate of
1,918,725 shares of Common Stock) have agreed to not sell, without the consent
of Lazard Freres & Co. LLC, any shares of Common Stock for a period of 180 days
after the date of this Prospectus. The Company's outside directors (who, upon
consummation of the Offering, will beneficially own in the aggregate 189,187
shares of Common Stock) have agreed to not sell, without the consent of Lazard
Freres & Co. LLC, any shares of Common Stock for a period of 90 days after the
date of this Prospectus.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities
that may be incurred in connection with this offering, including liabilities
under the Securities Act.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company and the Selling Stockholders by D'Ancona &
Pflaum, Chicago, Illinois, and for the Underwriters by Mayer, Brown & Platt,
Chicago, Illinois. Walter Roth, a partner of D'Ancona & Pflaum and Secretary of
the Company, beneficially owns 14,600 shares of the Company's Common Stock; and
other members of D'Ancona & Pflaum own additional shares of such Common Stock,
which ownership is not material in the aggregate.

EXPERTS

The consolidated financial statements of the Company and subsidiaries as of
December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 appearing in the Registration Statement of which this
Prospectus is a part have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and certain other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judicial Plaza, Washington,
D.C. 20549 at prescribed rates. In addition, electronic copies of such reports,
proxy statements and other information may be accessed on the World Wide Web via
the Commission's EDGAR database at its website (http://www.sec.gov). The
Company's Common Stock is listed on the NYSE and the above materials may also be
inspected at the office of the NYSE at 20 Broad Street, New York New York,
10005.

The Company has filed a Registration Statement on Form S-3 with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of the Company's Common Stock offered hereby (the
"Registration Statement"). This Prospectus, which is a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits filed as a part thereof, which may be
obtained from the Commission in the manner set forth above. Any statements
contained herein or in any document incorporated by reference herein concerning
the provisions of any contract or other document are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in its entirety by such reference.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated herein by reference: (1) Annual Report on Form 10-K for the fiscal
year ended December 31, 1996; and (2) the description of the Company's Common
Stock contained in the registration statement on Form 8-A filed with the
Commission under the Exchange Act on April 3, 1987, File No. 1-9457, together
with any amendment or report filed for the purpose of updating such description.

All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference herein and shall be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated by
reference herein or contained in this Prospectus shall be deemed to be modified
or superseded for purposes hereof to the extent that a statement contained
herein (or in any other subsequently filed document which also is incorporated
by reference herein) or in a supplement hereto modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus except as so modified or superseded.

This Prospectus incorporates by reference documents which are not presented
herein or delivered herewith. These documents (other than exhibits, unless such
exhibits are specifically incorporated by reference) are available, without
charge, to any person, including any beneficial owner, to whom this Prospectus
is delivered upon written or oral request directed to: Shelby Williams
Industries, Inc., 150 Shelby Williams Drive, Morristown, Tennessee 37813
(telephone number 800-732-8464 or 423-586-7000; fax number 423-586-2260),
attention, Sam Ferrell, Vice President of Finance and Chief Financial Officer.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors........................................................ F-2

Consolidated Statements of Income for the Years Ended December 31, 1996, 1995 and
1994................................................................................. F-3

Consolidated Balance Sheets as of December 31, 1996 and 1995.......................... F-4

Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and
1994................................................................................. F-5

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996,
1995 and 1994........................................................................ F-6

Notes to Consolidated Financial Statements............................................ F-7

F-1

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Shelby Williams Industries, Inc.

We have audited the accompanying consolidated balance sheets of Shelby
Williams Industries, Inc., as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Shelby Williams
Industries, Inc., as of December 31, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

January 30, 1997
Atlanta, Georgia

F-2

SHELBY WILLIAMS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------

NET SALES....................................................... $ 172,431,000 $ 166,776,000 $ 159,072,000
Cost of goods sold.............................................. 133,231,000 130,189,000 126,401,000
Restructuring charge............................................ -- -- 5,575,000
Selling, general and administrative expenses.................... 25,765,000 25,974,000 25,402,000
-------------- -------------- --------------
13,435,000 10,613,000 1,694,000
-------------- -------------- --------------
OTHER DEDUCTIONS (INCOME):
Interest expense................................................ 969,000 1,257,000 1,207,000
Interest income................................................. (18,000) (9,000) --
Miscellaneous expense (income).................................. (44,000) (65,000) 106,000
-------------- -------------- --------------
907,000 1,183,000 1,313,000
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES...................................... 12,528,000 9,430,000 381,000
-------------- -------------- --------------
INCOME TAXES:
Current......................................................... 3,638,000 2,452,000 429,000
Deferred........................................................ 473,000 198,000 (413,000)
-------------- -------------- --------------
4,111,000 2,650,000 16,000
-------------- -------------- --------------
NET INCOME...................................................... $ 8,417,000 $ 6,780,000 $ 365,000
NET INCOME PER SHARE............................................ $ 0.96 $ 0.76 $ 0.04
Weighted average number of common shares outstanding............ 8,805,000 8,955,000 9,049,000

See accompanying notes.

F-3

SHELBY WILLIAMS INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
--------------------------
1996 1995
------------ ------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 1,039,000 $ 2,376,000
Accounts receivable, less allowance for doubtful accounts of $402,000 in 1996 and
$423,000 in 1995.................................................................. 25,224,000 25,198,000
Inventories:
Raw materials..................................................................... 11,615,000 12,349,000
Work in process................................................................... 4,414,000 4,598,000
Finished goods.................................................................... 11,194,000 11,488,000
------------ ------------
27,223,000 28,435,000
Prepaid expenses.................................................................... 3,691,000 3,247,000
------------ ------------
Total current assets.................................................................. 57,177,000 59,256,000
Excess of cost over net assets of acquired companies.................................. 169,000 178,000
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and land improvements 2,930,000 2,876,000
Buildings and leasehold improvements................................................ 22,969,000 25,408,000
Machinery and equipment............................................................. 24,207,000 25,029,000
------------ ------------
50,106,000 53,313,000
Less accumulated depreciation and amortization...................................... 24,145,000 24,082,000
------------ ------------
25,961,000 29,231,000
OTHER ASSETS.......................................................................... 1,371,000 1,242,000
------------ ------------
$ 84,678,000 $ 89,907,000

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................................... $ -- $ 5,900,000
Accounts payable.................................................................... 9,002,000 10,425,000
Customer deposits on orders in process.............................................. 3,690,000 3,245,000
Accrued liabilities................................................................. 4,172,000 6,787,000
Income taxes........................................................................ 1,707,000 828,000
Current portion of long-term debt................................................... 1,000,000 55,000
------------ ------------
Total current liabilities............................................................. 19,571,000 27,240,000
Long-term debt........................................................................ 7,000,000 8,840,000
Deferred income taxes................................................................. 2,137,000 2,103,000
Commitments (see notes)
STOCKHOLDERS' EQUITY:
Common stock, $.05 par value; authorized 30,000,000 shares; issued 11,814,000 shares
(1995--11,779,000)................................................................ 591,000 589,000
Capital in excess of par value...................................................... 8,143,000 7,855,000
Retained earnings................................................................... 69,172,000 63,398,000
Pension liability adjustment........................................................ (789,000) (908,000)
------------ ------------
77,117,000 70,934,000
Less common stock held in treasury; 3,047,000 shares at cost (1995--2,879,000)...... 21,147,000 19,210,000
------------ ------------
Total stockholders' equity............................................................ 55,970,000 51,724,000
------------ ------------
$ 84,678,000 $ 89,907,000

See accompanying notes.

F-4

SHELBY WILLIAMS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
-------------- ------------- -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 8,417,000 $ 6,780,000 $ 365,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 2,656,000 2,833,000 2,707,000
Assets abandoned and impaired in restructuring.................. -- -- 1,799,000
Provision for losses on accounts receivable..................... 139,000 323,000 308,000
Equity change in affiliate...................................... -- 50,000 (303,000)
Changes in assets and liabilities net of effects from sale of
facility:
Accounts receivable........................................... (165,000) (1,397,000) 234,000
Inventories................................................... (389,000) 27,000 (10,000)
Prepaid expenses.............................................. (580,000) (387,000) 155,000
Accounts payable and accrued liabilities...................... (3,493,000) 356,000 660,000
Income taxes payable.......................................... 879,000 441,000 (1,471,000)
Increase in deferred taxes...................................... 34,000 123,000 81,000
Pension liability adjustment.................................... 119,000 (37,000) 540,000
Other........................................................... 452,000 89,000 (67,000)
-------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................... 8,069,000 9,201,000 4,998,000
-------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of facility...................................... 2,000,000 -- --
Proceeds from disposal of property, plant and equipment............. 5,000 70,000 1,000
Capital expenditures................................................ (1,189,000) (2,252,000) (2,228,000)
-------------- ------------- -------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES.................... 816,000 (2,182,000) (2,227,000)
-------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayment) of short-term borrowings................. (5,900,000) (2,550,000) 1,450,000
Principal payments of long-term debt................................ (32,000) (49,000) (43,000)
Sale of common stock under stock option plan........................ 290,000 169,000 19,000
Purchase of common stock for the treasury........................... (1,937,000) (1,335,000) (1,049,000)
Dividends declared and paid......................................... (2,643,000) (2,511,000) (2,533,000)
-------------- ------------- -------------
NET CASH USED BY FINANCING ACTIVITIES............................... (10,222,000) (6,276,000) (2,156,000)
-------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents................ (1,337,000) 743,000 615,000
Cash and cash equivalents at beginning of year...................... 2,376,000 1,633,000 1,018,000
-------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................ $ 1,039,000 $ 2,376,000 $ 1,633,000
Supplemental cash flow information:
Cash paid during the year for:
Interest........................................................ $ 969,000 $ 1,263,000 $ 1,207,000
Income taxes.................................................... 3,277,000 2,061,000 1,766,000
-------------- ------------- -------------
$ 4,246,000 $ 3,324,000 $ 2,973,000

See accompanying notes.

F-5

SHELBY WILLIAMS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
-----------------------------------------------------------------------------------------
COMMON STOCK
------------------------ CAPITAL IN PENSION TREASURY
SHARES EXCESS OF RETAINED LIABILITY STOCK, AT
ISSUED AMOUNT PAR VALUE EARNINGS ADJUSTMENT COST TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------

BALANCE AT DECEMBER 31,
1993 11,756,000 $ 588,000 $ 7,668,000 $61,297,000 $(1,411,000) $(16,826,000) $51,316,000
Net income................. -- -- -- 365,000 -- -- 365,000
Pension liability
adjustment............... -- -- -- -- 540,000 -- 540,000
Sale of common stock under
stock option plan........ 2,000 -- 19,000 -- -- -- 19,000
Common stock purchased for
treasury (105,000
shares).................. -- -- -- -- -- (1,049,000) (1,049,000)
Cash dividends--$.28 per
share.................... -- -- -- (2,533,000) -- -- (2,533,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31,
1994..................... 11,758,000 588,000 7,687,000 59,129,000 (871,000) (17,875,000) 48,658,000
Net income................. -- -- -- 6,780,000 -- -- 6,780,000
Pension liability
adjustment............... -- -- -- -- (37,000) -- (37,000)
Sale of common stock under
stock option plan........ 21,000 1,000 168,000 -- -- -- 169,000
Common stock purchased for
treasury (120,000
shares).................. -- -- -- -- -- (1,335,000) (1,335,000)
Cash dividends--$.28 per
share.................... -- -- -- (2,511,000) -- -- (2,511,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31,
1995..................... 11,779,000 589,000 7,855,000 63,398,000 (908,000) (19,210,000) 51,724,000
Net income................. -- -- -- 8,417,000 -- -- 8,417,000
Pension liability
adjustment............... -- -- -- -- 119,000 -- 119,000
Sale of common stock under
stock option plan........ 35,000 2,000 288,000 -- -- -- 290,000
Common stock purchased for
treasury (168,000
shares).................. -- -- -- -- -- (1,937,000) (1,937,000)
Cash dividends--$.30 per
share.................... -- -- -- (2,643,000) -- -- (2,643,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31,
1996..................... 11,814,000 $ 591,000 $ 8,143,000 $69,172,000 $ (789,000) $(21,147,000) $55,970,000

See accompanying notes.

F-6

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996, 1995 AND 1994

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Shelby Williams designs, manufactures and distributes products for the
contract furniture market. The Company has a significant position in the
hospitality and food service markets through its SHELBY WILLIAMS seating line,
KING ARTHUR line of function room furniture and STERNO accessories. It serves
the healthcare, university, office furniture and other institutional markets
through its THONET division with healthcare and dormitory furniture, including
chairs and tables, and ergonomically designed office seating products, desks and
credenzas. The Company also distributes vinyl wallcoverings for residential,
hotel and office use under the name SELLERS & JOSEPHSON, and markets other
textile products to the architectural and design community through SW TEXTILES.
The Company distributes floor coverings and other textile products, as well as
Shelby Williams products, in Hawaii and the entire Pacific Basin, through PHF.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
items and transactions have been eliminated in consolidation.

REVENUE RECOGNITION

Sales are recognized when the products are shipped and include export sales
of $14,719,000 for 1996, $15,538,000 for 1995, and $16,279,000 for 1994.

INCOME TAXES

Income tax expense includes Federal and state income taxes currently payable
and deferred taxes arising from temporary differences between the tax bases of
assets or liabilities and their reported amounts in the financial statements.

CASH AND CASH EQUIVALENTS

Cash equivalents include highly liquid investments, with original maturities
of three months or less, that are readily convertible to known amounts of cash.

INVENTORIES

Inventories are carried at the lower of cost or market, determined by the
last-in, first-out (LIFO) method. The current replacement cost of inventories
exceeded carrying value by approximately $10,123,000 at December 31, 1996 and
$10,019,000 at December 31, 1995.

As a result of the difference between the method of allocating the cost of
acquisitions in 1976, 1987 and 1988 for financial reporting purposes, and the
method used for income tax purposes, the Company's tax basis in the inventories
is approximately $24,266,000 at December 31, 1996 and $25,478,000 at December
31, 1995.

F-7

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT

Depreciation and amortization of property, plant and equipment is provided
using the straight-line method over the estimated useful lives of the respective
assets.

POSTEMPLOYMENT BENEFITS

The Company provides certain postemployment benefits. Payments of these
benefits in the past have been infrequent and are not estimable, thus the
Company records these benefits on an event basis.

OTHER SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. As a result of significant deductibles in its insurance
coverage for liability and worker's compensation claims, the Company provides
amounts which management believes are sufficient to cover the associated
liabilities.

SHORT-TERM BORROWINGS

The Company has unsecured lines of credit amounting to $20,000,000 at
interest rates of prime or less. At December 31, 1996, all of these lines were
unused. The weighted average interest rate on short-term borrowings outstanding
on December 31, 1995 was 6.7%.

COMMITMENTS

LEASES

The Company leases certain manufacturing facilities under operating leases
which expire over the next nine years. The Company also leases showroom space
under operating leases expiring over the next five years.

Future minimum rental payments required under operating leases that have
initial or remaining non-cancelable lease terms in excess of one year as of
December 31, 1996 are:

YEAR ENDING
DECEMBER 31,
------------

1997............................................................................ $1,662,000
1998............................................................................ 1,640,000
1999............................................................................ 1,251,000
2000............................................................................ 1,162,000
2001............................................................................ 729,000
Subsequent to 2001.............................................................. 1,201,000
------------
Total minimum lease payments.................................................... $7,645,000
------------
------------

Total rental expense for all operating leases aggregated $1,912,000 in 1996,
$2,008,000 in 1995, and $1,998,000 in 1994.

F-8

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

COMMON STOCK INFORMATION (UNAUDITED)

The following table sets forth the high and low sales prices of the
Company's common stock as reported by the New York Stock Exchange.

SALES PRICES
--------------------
HIGH LOW
--------- ---------

1995
1st Quarter.............................................................. 10 1/4 7 1/2
2nd Quarter.............................................................. 11 3/4 9
3rd Quarter.............................................................. 13 3/4 11 3/4
4th Quarter.............................................................. 13 1/2 11 3/8
1996
1st Quarter.............................................................. 12 7/8 10 5/8
2nd Quarter.............................................................. 12 1/2 10 1/8
3rd Quarter.............................................................. 13 1/2 10 5/8
4th Quarter.............................................................. 14 3/4 12 1/4

At December 31, 1996, there were approximately 3,000 holders of record of
the Company's common stock, including individual participants in security
position listings.

The Company declared and paid cash dividends on its common stock during the
last two fiscal years as follows:

CASH DIVIDEND PER
COMMON SHARE
PERIOD 1996 1995
- ---------------------------------------------------------------------------------------------- --------- ---------

1st Quarter................................................................................... $ .07 $ .07
2nd Quarter................................................................................... .07 .07
3rd Quarter................................................................................... .08 .07
4th Quarter................................................................................... .08 .07
--- ---
$ .30 $ .28
--- ---
--- ---

F-9

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

QUARTERLY RESULTS (UNAUDITED)

Summarized quarterly results for the years ended December 31, 1996, 1995 and
1994 are as follows:

NET INCOME
1996 NET SALES GROSS PROFIT NET INCOME PER SHARE
- ------------------------------------------------------ -------------- ------------- -------------- -----------

First................................................. $ 40,734,000 $ 9,091,000 $ 1,745,000 $ .20
Second................................................ 43,548,000 9,894,000 2,032,000 .23
Third................................................. 43,250,000 9,905,000 2,200,000 .25
Fourth................................................ 44,899,000 10,310,000 2,440,000 .28
-------------- ------------- -------------- -----
Total................................................. $ 172,431,000 $ 39,200,000 $ 8,417,000 $ .96
-------------- ------------- -------------- -----
-------------- ------------- -------------- -----

NET INCOME
1995 NET SALES GROSS PROFIT NET INCOME PER SHARE
- ------------------------------------------------------ -------------- ------------- -------------- -----------

First................................................. $ 39,301,000 $ 8,400,000 $ 1,325,000 $ .15
Second................................................ 42,352,000 9,277,000 1,702,000 .19
Third................................................. 42,518,000 9,379,000 1,874,000 .21
Fourth................................................ 42,605,000 9,531,000 1,879,000 .21
-------------- ------------- -------------- -----
Total................................................. $ 166,776,000 $ 36,587,000 $ 6,780,000 $ .76
-------------- ------------- -------------- -----
-------------- ------------- -------------- -----

NET INCOME
NET INCOME (LOSS) PER
1994 NET SALES GROSS PROFIT (LOSS) SHARE
- ------------------------------------------------------ -------------- ------------- -------------- -----------

First................................................. $ 38,122,000 $ 7,723,000 $ 785,000 $ .09
Second................................................ 40,208,000 8,340,000 1,104,000 .12
Third................................................. 38,859,000 7,858,000 876,000 .10
Fourth................................................ 41,883,000 3,175,000* (2,400,000)* (.27)*
-------------- ------------- -------------- -----
Total................................................. $ 159,072,000 $ 27,096,000* $ 365,000* $ .04*
-------------- ------------- -------------- -----
-------------- ------------- -------------- -----

- ------------------------

* See "Restructuring Charge" below for a description of the charge recorded in
the fourth quarter of 1994 and its effect on operations.

STOCK OPTION PLANS

Under the Company's incentive stock option plan and directors' stock option
plan, options are granted to key employees and directors to purchase the
Company's common stock at not less than fair market value at date of grant. At
December 31, 1996 and 1995, there were 350,000 and 385,000 shares, respectively,
reserved for issuance under the plans. Of options granted, 16,000 in both 1996
and 1995 have five-year terms and vest and become fully exercisable at the end
of six months' service. The remaining options granted in 1996 and 1995 have
five-year terms and vest and become exercisable in 1/3 increments after 15
months, 30 months, and 45 months, respectively, of continued employment.

The intrinsic value method is used in accounting for stock-based awards
under the Company's stock option plans. Because the exercise price of the
Company's stock options at least equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

F-10

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

STOCK OPTION PLANS (CONTINUED)
A summary of the Company's stock option activity, and related information
for years ended December 31 follows:

1994 1995 1996
------------------------------ ------------------------------ ------------------------------
OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE
----------- ----------------- ----------- ----------------- ----------- -----------------

Outstanding beginning of
year......................... 107 $ 8.69 95 $ 8.46 119 $ 8.30
Granted....................... -- -- 48 8.01 63 12.25
Exercised..................... (2) 8.38 (20) 8.38 (35) 8.38
Forfeited..................... (10) 10.86 (4) 8.38 -- --
----- ------ ----------- ------ ----------- ------
Outstanding end of year....... 95 $ 8.46 119 $ 8.30 147 $ 9.97
Exercisable at end of year.... 62 $ 8.47 87 $ 8.39 79 $ 9.14
Weighted-average fair value of
options granted during the
year......................... $ 2.44 $ 3.68

Exercise prices for options outstanding as of December 31, 1996 ranged from
$7.94 to $12.25. The weighted-average remaining contractual life of those
options is 2.7 years.

The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996, respectively: risk-free interest rates of 6.5%;
dividend yields of 2.7%; volatility factors of the expected market price of the
Company's common stock of .33 and .32; and a weighted-average expected life of
the option of five years.

The effect of applying the fair value method to the Company's stock-based
awards results in net income and earnings per share that are not materially
different from amounts reported.

LONG-TERM DEBT

1996 1995
------------ ------------

Long-term debt at December 31, 1996, and 1995 consisted of the following:
7.8% senior notes due in quarterly installments of $1,000,000 in October 1997
through July 1999................................................................. $ 8,000,000 $ 8,000,000
13% capitalized lease obligation, due in monthly installments of $14,000 (including
interest); final $863,000 discharged by assignment with sale of related facility
in August 1996.................................................................... -- 895,000
------------ ------------
8,000,000 8,895,000
Less amounts due within one year...................................................... 1,000,000 55,000
------------ ------------
$ 7,000,000 $ 8,840,000
------------ ------------
------------ ------------

The terms of the senior note agreement restrict the payment of dividends and
the acquisition of stock for the treasury until the indebtedness is paid in
full. At December 31, 1996 there was $6,939,000 available for payment of
dividends and the acquisition of stock for the treasury. In addition, the
Company is

F-11

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

LONG-TERM DEBT (CONTINUED)
restricted as to the incurrence of additional indebtedness and the amount of
leases which may be entered into. The Company is in compliance with all such
restrictions.

RESTRUCTURING CHARGE

Due to increases in lumber prices and increased competition primarily from
imported products, the Company made changes in its product and manufacturing
strategies during December 1994, designed to make the Company more competitive
in the industry. The plan was to exit certain portions of the Company's
enterprise by selling an upholstery business with a related manufacturing
facility and discontinuing a part of the product lines in the healthcare,
university and office markets, resulting in closure of another plant. The
Company anticipated completing the restructuring by December 31, 1995; however,
the sale of the upholstery business was not completed until August 1996. The
planned discontinuance of a part of the product lines in the healthcare,
university and office markets was completed in 1995 resulting in the reduction
of operations of that plant by approximately 75 percent. The Company planned to
move the remaining production to other facilities and close the plant by
September 30, 1996, but changing economic conditions, particularly labor
shortages at those other facilities, necessitated changing the plan to continue
the reduced level of production, which is mainly in a portion of the plant owned
by the Company. This minor change does not affect the original restructuring
provision.

At December 31, 1995, accrued liabilities included $439,000 related to the
above, primarily to return the leased portion of the plant being closed to
original condition. These costs were paid and charged against the liability in
1996, completing the plan.

Components of the 1994 charge were as follows:
Write-downs resulting from discontinuance of product lines:
Inventory, to net realizable value............................................ $2,565,000
Catalogs and other sales materials............................................ 416,000
Cost related to plants:
Abandonment of leasehold improvements and other fixed assets.................. 1,301,000
Cost to return leased plant to original condition............................. 471,000
Other cost, principally severance............................................. 324,000
Other assets impaired:
Write-off of goodwill of upholstery business which will not be recovered upon
its sale.................................................................... 498,000
----------
$5,575,000
----------
----------

The revenues and net operating income for the upholstery business that was
sold are as follows:

1996 1995 1994
------------ ------------ ------------

Revenues................................................................ $ 5,858,000 $ 8,963,000 $ 7,925,000
Net operating income.................................................... 182,000 325,000 188,000

The charge was recorded in the fourth quarter of 1994 and reduced the net
income of the year by $3,850,000 or $.43 per share. Excluding the restructuring
charge, 1994 net income was $4,215,000, or $.47 per share.

F-12

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

RETIREMENT PLANS

The Company has several defined benefit pension plans covering essentially
all of its employees in the United States. The benefits are based on years of
service, and for salaried employees, average annual compensation. The Company's
practice is to fund amounts which are required by statute and applicable
regulations and which are tax deductible.

Assumptions used in the accounting were:

AS OF DECEMBER 31,
------------------------
1996 1995
----- -----

Discounts rates................................................................................. 8.5% 8.0%
Rates of increase in compensation levels........................................................ 3.5% 3.5%
Expected long-term rate of return on assets..................................................... 8.5% 8.5%

Net defined benefit pension cost for 1996, 1995, and 1994 included the
following components:

1996 1995 1994
------------ ------------- ------------

Service cost-benefits earned during period............................. $ 966,000 $ 1,062,000 $ 1,114,000
Interest cost on projected benefit obligations......................... 1,151,000 1,088,000 892,000
Net amortization and deferral.......................................... 62,000 1,504,000 (524,000)
Actual return on plan assets........................................... (1,128,000) (2,128,000) 16,000
------------ ------------- ------------
Total pension plan expense............................................. $ 1,051,000 $ 1,526,000 $ 1,498,000
------------ ------------- ------------
------------ ------------- ------------

The following table sets forth the funded status of the Company's defined
benefit pension plans and amounts recognized in the accompanying consolidated
balance sheets as of December 31, 1996 and 1995.

1996 1995
------------- -------------

Actuarial present value of vested benefit obligations.............................. $ 14,696,000 $ 13,281,000
Actuarial present value of accumulated benefit obligations......................... $ 15,235,000 $ 13,842,000
Actuarial present value of projected benefit obligations for service rendered to
date.............................................................................. $ 15,983,000 $ 15,495,000
Plan assets at fair value, primarily cash equivalents and publicly traded stocks
and bonds, including 46,000 shares of Shelby Williams Industries, Inc. common
stock (1995--22,000 shares)....................................................... 15,142,000 12,084,000
------------- -------------
Projected benefit obligations in excess of plan assets............................. 841,000 3,411,000
Unrecognized net assets being recognized over remaining service period............. 188,000 213,000
Unrecognized net loss.............................................................. (2,669,000) (3,379,000)
Unrecognized prior service credit (cost)........................................... 231,000 (589,000)
Adjustment required to recognize minimum liability................................. 1,502,000 2,102,000
------------- -------------
Pension-related liability included in accrued liabilities.......................... $ 93,000 $ 1,758,000
------------- -------------
------------- -------------

The Company has an employee stock ownership plan covering essentially all
salaried employees. Contributions are determined annually at the discretion of
the Company but not to exceed the amount allowable as a deduction for federal
income tax purposes. The contributions were $63,000 for 1996, $70,000 for 1995,
and $72,000 for 1994. The plan held 40,000 shares of the Company's common stock
at December 31, 1996 and 35,000 shares at December 31, 1995.

F-13

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

RETIREMENT PLANS (CONTINUED)
Retirement plan expense was $1,114,000, $1,596,000, and $1,570,000 for 1996,
1995, and 1994, respectively.

INCOME TAXES

Deferred income tax liabilities (assets) for differences in tax bases and
amounts in the financial statements were as follows:

AS OF DECEMBER 31,
--------------------------
1996 1995
------------ ------------

Current:
Allocated costs of acquisition inventories..................................... $ 1,005,000 $ 1,005,000
Pension liability.............................................................. (13,000) (411,000)
Restructuring related liabilities.............................................. -- (149,000)
Other--net..................................................................... (364,000) (335,000)
------------ ------------
Total included in current income taxes........................................... 628,000 110,000
------------ ------------
Noncurrent:
Property, plant and equipment.................................................. 2,062,000 1,868,000
Other.......................................................................... 75,000 235,000
------------ ------------
Total noncurrent deferred income taxes........................................... 2,137,000 2,103,000
------------ ------------
Net deferred tax liabilities..................................................... $ 2,765,000 $ 2,213,000
------------ ------------
------------ ------------

The components of income tax expense are as follows:

YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------

Current:
Federal............................................................... $ 3,026,000 $ 2,350,000 $ 415,000
State................................................................. 612,000 102,000 14,000
------------ ------------ ------------
3,638,000 2,452,000 429,000
Deferred:
Federal............................................................... 473,000 198,000 (413,000)
------------ ------------ ------------
$ 4,111,000 $ 2,650,000 $ 16,000
------------ ------------ ------------
------------ ------------ ------------

F-14

SHELBY WILLIAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

INCOME TAXES (CONTINUED)
Income tax expense differs from amounts computed by applying the Federal
statutory tax rate to income before income taxes as follows:

YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------

Statutory rate......................................................... $ 4,260,000 $ 3,206,000 $ 129,000
State income taxes, net of Federal tax benefit........................ 404,000 67,000 9,000
Other................................................................. (553,000) (623,000) (122,000)
------------ ------------ ------------
$ 4,111,000 $ 2,650,000 $ 16,000
------------ ------------ ------------
------------ ------------ ------------
Effective rate........................................................ 32.8% 28.1% 4.2%

F-15

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

--------------------------

TABLE OF CONTENTS

PAGE
---------

Prospectus Summary............................. 3
Use of Proceeds................................ 8
Price Range of Common Stock and Dividends...... 8
Capitalization................................. 9
Selected Financial Information................. 10
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 12
Business....................................... 15
Management..................................... 20
Selling Stockholders........................... 21
Underwriting................................... 22
Legal Matters.................................. 23
Experts........................................ 23
Available Information.......................... 23
Incorporation of Certain Information by
Reference..................................... 23
Index to Consolidated Financial Statements..... F-1

2,000,000 SHARES

[LOGO]

SHELBY WILLIAMS
INDUSTRIES, INC.

COMMON STOCK
--------------

PROSPECTUS

--------------

LAZARD FRERES & CO. LLC

INTERSTATE/JOHNSON LANE
CORPORATION

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following tables sets forth the various expenses in connection with the
issuance and distribution of the securities being registered. All of the amounts
shown are estimates except the Securities and Exchange Commission registration
fee and the N.A.S.D. filing fee. Approximately 28% of such expenses will be paid
by the Registrant and 72% of such expenses will be paid pro rata by the Selling
Stockholders.

Securities and Exchange Commission registration Fee............... $ 11,457
N.A.S.D. filing fee............................................... 4,281
Printing expenses................................................. 100,000
Transfer agent fees and expenses.................................. 1,000
Accounting fees and expenses...................................... 25,000
Legal fees and expenses........................................... 35,000
Miscellaneous..................................................... 23,262
---------
$ 200,000
---------
---------

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a
corporation, under certain circumstances, to indemnify its directors and
officers (including reimbursement for expenses incurred). The Registrant's
certificate of incorporation and by-laws provide for such indemnification to the
extent permitted by the provisions of Delaware Law. Such indemnification may
extend to certain liabilities under the Securities Act of 1933, as amended (the
"Act"). The Registrant also maintains insurance protection for its directors and
officers against certain liabilities arising out of the performance of their
duties in such capacities, which may include certain liabilities under the Act.
Reference is also made to Section 10 of the Underwriting Agreement (Exhibit 1.1
hereto) with respect to undertakings to indemnify the Registrant, its directors
and officers and each person who controls the Registrant within the meaning of
the Act, against certain civil liabilities, including certain liabilities under
the Act.

See "Item 17. Undertakings" for a description of the Securities and Exchange
Commission's position regarding such indemnification provisions.

ITEM 16. EXHIBITS

EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------

1.1 Form of Underwriting Agreement*

4.1 Registrant's Certificate of Incorporation and all amendments thereto
(incorporated by reference to Exhibit 3.1 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1987)

4.2 Bylaws of the Registrant, as amended (incorporated by reference to Exhibit
3.2 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995)

5.1 Opinion of D'Ancona & Pflaum regarding the validity of the securities

23.1 Consent of D'Ancona & Pflaum (included in Exhibit 5.1)

23.1 Consent of Ernst & Young LLP

24.1 Power of Attorney

- ------------------------

*To be filed by amendment

II-1

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on this 3rd day of March,
1997.

SHELBY WILLIAMS INDUSTRIES, INC.
(Registrant)

By: /s/ PAUL N. STEINFELD
-----------------------------------------
Paul N. Steinfeld
CHAIRMAN OF THE BOARD

II-3

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURES TITLES DATE
- ------------------------------ -------------------------- -------------------

/s/ PAUL N. STEINFELD Chairman of the Board and
- ------------------------------ Director (Principal March 3, 1997
Paul N. Steinfeld Executive Officer)

/s/ ROBERT P. COULTER*
- ------------------------------ President and Director March 3, 1997
Robert P. Coulter

/s/ MANFRED STEINFELD*
- ------------------------------ Chairman of the Executive March 3, 1997
Manfred Steinfeld Committee and Director

Vice President of Finance,
/s/ SAM FERRELL* Treasurer and Assistant
- ------------------------------ Secretary (Principal March 3, 1997
Sam Ferrell Financial and Accounting
Officer)

/s/ ROBERT L. HAAG*
- ------------------------------ Director March 3, 1997
Robert L. Haag

/s/ WILLIAM B. KAPLAN*
- ------------------------------ Director March 3, 1997
William B. Kaplan

/s/ DOUGLAS A. PARKER*
- ------------------------------ Director March 3, 1997
Douglas A. Parker

/s/ HERBERT L. ROTH*
- ------------------------------ Director March 3, 1997
Herbert L. Roth

/s/ TRISHA WILSON*
- ------------------------------ Director March 3, 1997
Trisha Wilson

*By: /s/ PAUL N. STEINFELD
-------------------------
Paul N. Steinfeld March 3, 1997
ATTORNEY-IN-FACT

II-4

EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------

5.1 Opinion of D'Ancona & Pflaum regarding the validity of the securities
23.1 Consent of Ernst & Young LLP
24.1 Power of Attorney