-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IDaHiJrBDw5frDKtxYjDCf77+SQWpd0tmxiDpO0AkgdDndt0pYZi8go6TEhrPZAv X//F7DBWxuB/0OYbn+doPA== 0000104169-97-000005.txt : 19970623 0000104169-97-000005.hdr.sgml : 19970623 ACCESSION NUMBER: 0000104169-97-000005 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970620 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAL MART STORES INC CENTRAL INDEX KEY: 0000104169 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 710415188 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06991 FILM NUMBER: 97627131 BUSINESS ADDRESS: STREET 1: 702 SOUTHWEST 8TH ST CITY: BENTONVILLE STATE: AR ZIP: 72716 BUSINESS PHONE: 5012734000 MAIL ADDRESS: STREET 1: 702 SOUTHWEST 8TH STREET CITY: BENTONVILLE STATE: AR ZIP: 72716 10-K/A 1 FORM 10-K/A AMENDMENT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended January 31, 1997, or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-6991. WAL-MART STORES, INC. (Exact name of registrant as specified in its charter) Delaware 71-0415188 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) Bentonville, Arkansas 72716 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (501) 273-4000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, par value $.10 New York Stock Exchange per share Pacific Stock Exchange Toronto Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price of these shares on the New York Stock Exchange on March 31, 1997, was $37,486,838,461. For the purposes of this disclosure only, the registrant has assumed that its directors, executive officers and beneficial owners of 5% or more of the registrant's common stock are the affiliates of the registrant. 1 The registrant had 2,265,535,740 shares of Common Stock outstanding as of March 31, 1997. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Shareholders for the fiscal year ended January 31, 1997, are incorporated by reference into Parts I and II of this Form 10-K. Portions of the registrant's Proxy Statement for the Annual Meeting of Shareholders to be held June 6, 1997, are incorporated by reference into Part III of this Form 10-K. 2 The Report of Independent Auditors included in the registrant's Annual Report to Shareholders for the year ended January 31, 1997, was inadvertently omitted in the information incorporated by reference in Item 8 and in Exhibit 13 to Item 14 of Form 10-K. Items 8 and 14 of the registrant's Annual Report on Form 10-K are hereby amended in their entirety as follows: PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is furnished by incorporation by reference of all information under the captions "Consolidated Statements of Income", "Consolidated Balance Sheets", "Consolidated Statements of Shareholders' Equity", "Consolidated Statements of Cash Flows", "Notes to Consolidated Financial Statements" and "Report of Independent Auditors" on Pages 26 through 35 of the Annual Report to Shareholders for the year ended January 31, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. & 2. Consolidated Financial Statements The financial statements listed in the Index to Consolidated Financial Statements, which appears on Page 18, are incorporated by reference herein or filed as part of this Form 10-K. 3. Exhibits The following documents are filed as exhibits to this Form 10-K: 3(a) Restated Certificate of Incorporation of the Company is incorporated herein by reference to Exhibit 3(a) from the Annual Report on Form 10-K of the Company for the year ended January 31, 1989, and the Certificate of Amendment to the Restated Certificate of Incorporation is incorporated herein by reference to Registration Statement on Form S-8 (File Number 33-43315). 3(b) By-Laws of the Company, as amended June 3, 1993, are incorporated herein by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended January 31, 1994. 4(a) Form of Indenture dated as of June 1, 1985, between the Company and Boatmen's Trust Company (formerly Centerre Trust Company) of St. Louis, Trustee, is incorporated 3 herein by reference to Exhibit 4(c) to Registration Statement on Form S-3 (File Number 2-97917). 4(b) Form of Indenture dated as of August 1, 1985, between the Company and Boatmen's Trust Company (formerly Centerre Trust Company) of St. Louis, Trustee, is incorporated herein by reference to Exhibit 4(c) to Registration Statement on Form S-3 (File Number 2-99162). 4(c) Form of Amended and Restated Indenture, Mortgage and Deed of Trust, Assignment of Rents and Security Agreement dated as of December 1, 1986, among the First National Bank of Boston and James E. Mogavero, Owner Trustees, Rewal Corporation I, Estate for Years Holder, Rewal Corporation II, Remainderman, the Company and the First National Bank of Chicago and R.D. Manella, Indenture Trustees, is incorporated herein by reference to Exhibit 4(b) to Registration Statement on Form S-3 (File Number 33-11394). 4(d) Form of Indenture dated as of July 15, 1990, between the Company and Harris Trust and Savings Bank, Trustee, is incorporated herein by reference to Exhibit 4(b) to Registration Statement on Form S-3 (File Number 33-35710). 4(e) Indenture dated as of April 1, 1991, between the Company and The First National Bank of Chicago, Trustee, is incorporated herein by reference to Exhibit 4(a) to Registration Statement on Form S-3 (File Number 33-51344). 4(f) First Supplemental Indenture dated as of September 9, 1992, to the Indenture dated as of April 1, 1991, between the Company and The First National Bank of Chicago, Trustee, is incorporated herein by reference to Exhibit 4(b) to Registration Statement on Form S-3 (File Number 33-51344). +10(a) Form of individual deferred compensation agreements is incorporated herein by reference to Exhibit 10(b)from the Annual Report on Form 10-K of the Company, as amended, for the year ended January 31, 1986. +10(b) Wal-Mart Stores, Inc. Stock Option Plan of 1984 is incorporated herein by reference to Registration Statement on Form S-8 (File Number 2-94358). +10(c) 1986 Amendment to the Wal-Mart Stores, Inc. Stock Option Plan of 1984 is incorporated herein by reference to Exhibit 10(h) from the Annual Report on Form 10-K of the Company for the year ended January 31, 1987. +10(d) 1991 Amendment to the Wal-Mart Stores, Inc. Stock Option Plan of 1984 is incorporated herein by reference to Exhibit 10(h) from the Annual Report on Form 10-K of the Company for the year ended January 31, 1992. 4 +10(e) 1993 Amendment to the Wal-Mart Stores, Inc. Stock Option Plan of 1984 is incorporated herein by reference to Exhibit 10(i) from the Annual Report on Form 10-K of the Company for the year ended January 31, 1993. +10(f) Wal-Mart Stores, Inc. Stock Option Plan of 1994 is incorporated herein by reference to Exhibit 4(c) to the registration statement on Form S-8 (File Number 33-55325). +10(g) A written description of a consulting agreement by and between Wal-Mart Stores, Inc. and Jack C. Shewmaker, is incorporated herein by reference to the description contained in the third paragraph under the caption "Compensation of Directors" on Page 8 in the Company's definitive Proxy Statement to be filed in connection with the Annual Meeting of the Shareholders to be held on June 6, 1997. +10(h) Wal-Mart Stores, Inc. Director Compensation Plan is incorporated herein by reference to Exhibit 4(d) to Registration Statement on Form S-8 (File Number 333-24259). +10(i) Wal-Mart Stores, Inc. Officer Deferred Compensation Plan is incorporated herein by reference to Exhibit 10(i)from the Annual Report on Form 10-K of the Company for the year ended January 31, 1996. *+10(j) Wal-Mart Stores, Inc. Restricted Stock Plan. **13 All information incorporated by reference in Items 2, 5, 6, 7 and 8 of this Annual Report on Form 10-K from the Annual Report to Shareholders for the year ended January 31, 1997. *21 List of the Company's Subsidiaries *23 Consent of Independent Auditors *27 Financial Data Schedule *Previously filed as an Exhibit to this Annual Report on Form 10-K. **Filed herewith as an Exhibit. +Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K The Company did not file a report on Form 8-K during the last quarter of the fiscal year ended January 31, 1997. 5 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATE: June 19, 1997 BY:/s/David D. Glass David D. Glass President and Chief Executive Officer 6 EX-13 2 Wal-Mart Stores, Inc. Annual Report - Page 19 Fiscal 1997 End of Year Store Counts
Discount Sam's Stores Supercenters Clubs Alabama 54 22 8 Alaska 3 0 3 Arizona 33 0 6 Arkansas 54 22 4 California 95 0 24 Colorado 32 4 10 Connecticut 9 0 3 Delaware 2 1 1 Florida 109 23 31 Georgia 65 22 15 Hawaii 5 0 1 Idaho 9 0 1 Illinois 98 8 24 Indiana 62 11 14 Iowa 45 0 7 Kansas 44 3 5 Kentucky 53 15 5 Louisiana 58 17 9 Maine 19 0 3 Maryland 21 0 10 Massachusetts 25 0 4 Michigan 44 0 21 Minnesota 33 0 9 Mississippi 45 11 4 Missouri 79 29 11 Montana 7 0 1 Nebraska 13 4 3 Nevada 10 0 2 New Hampshire 16 0 4 New Jersey 14 0 6 New Mexico 19 0 3 New York 48 5 17 North Carolina 82 3 14 North Dakota 8 0 2 Ohio 77 0 22 Oklahoma 61 17 6 Oregon 20 0 0 Pennsylvania 49 10 18 Rhode Island 5 0 1 South Carolina 46 6 8 South Dakota 8 0 2 Tennessee 63 25 10 Texas 173 69 51 Utah 14 0 5 Vermont 3 0 0 Virginia 35 14 10 Washington 18 0 2 West Virginia 12 3 3 Wisconsin 54 0 11 Wyoming 9 0 2 U.S. TOTAL 1,960 344 436 Alberta 14 0 0 British Columbia 12 0 0 Manitoba 9 0 0 New Brunswick 4 0 0 Newfoundland 7 0 0 Nova Scotia 7 0 0 NW Territories 1 0 0 Ontario 50 0 0 Quebec 24 0 0 Saskatchewan 8 0 0 CANADA TOTAL 136 0 0 Argentina 0 3 3 Brazil 0 2 3 Mexico 106* 18 28 Puerto Rico 7 0 4 China 0 1 1 Indonesia 0 2 0 INT'L. TOTAL 249 26 39 GRAND TOTAL 2,209 370 475
[FN] *Includes 3 Superamas, 25 Bodegas, 4 Aurreras, 67 Vips and 7 Suburbias Wal-Mart Stores, Inc. Annual Report - Pages 22-23 11-Year Financial Summary (Dollar amounts in millions except per share data)
1997 1996 1995 1994 1993 Operating Results Net sales $104,859 $93,627 $82,494 $67,344 $55,484 Net sales increase 12% 13% 22% 21% 26% Comparative store sales increase 5% 4% 7% 6% 11% Other income-net 1,287 1,122 918 641 501 Cost of sales 83,663 74,564 65,586 53,444 44,175 Operating, selling, and general and administrative expenses 16,788 14,951 12,858 10,333 8,321 Interest costs: Debt 629 692 520 331 143 Capital leases 216 196 186 186 180 Provision for income taxes 1,794 1,606 1,581 1,358 1,171 Net income 3,056 2,740 2,681 2,333 1,995 Per share of common stock: Net income $1.33 1.19 1.17 1.02 .87 Dividends .21 .20 .17 .13 .11 Financial Position Current assets $17,993 $17,331 $15,338 $12,114 $10,198 Inventories at replacement cost 16,193 16,300 14,415 11,483 9,780 Less LIFO reserve 296 311 351 469 512 Inventories at LIFO cost 15,897 15,989 14,064 11,014 9,268 Net property, plant and equipment and capital leases 20,324 18,894 15,874 13,176 9,793 Total assets 39,604 37,541 32,819 26,441 20,565 Current liabilities 10,957 11,454 9,973 7,406 6,754 Long-term debt 7,709 8,508 7,871 6,156 3,073 Long-term obligations under capital leases 2,307 2,092 1,838 1,804 1,772 Shareholders' equity 17,143 14,756 12,726 10,753 8,759 Financial Ratios Current ratio 1.6 1.5 1.5 1.6 1.5 Inventories/ working capital 2.3 2.7 2.6 2.3 2.7 Return on assets* 7.9% 7.8% 9.0% 9.9% 11.1% Return on shareholders' equity* 19.2% 19.9% 22.8% 23.9% 25.3% Other Year-End Data Number of Domestic Wal-Mart stores 1,960 1,995 1,985 1,950 1,848 Number of Domestic Supercenters 344 239 147 72 34 Number of Domestic SAM'S Clubs 436 433 426 417 256 International units 314 276 226 24 10 Average Wal-Mart store size 92,600 91,100 87,600 83,900 79,800 Number of Associates 728,000 675,000 622,000 528,000 434,000 Number of Shareholders of Record 257,215 244,483 259,286 257,946 180,584
[FN] * On average balances. 11-Year Financial Summary (Dollar amounts in millions except per share data)
1992 1991 1990 1989 1988 1987 Operating Results Net sales $43,887 $32,602 $25,811 $20,649 $15,959 $11,909 Net sales increase 35% 26% 25% 29% 34% 41% Comparative store sales increase 10% 10% 11% 12% 11% 13% Other income-net 403 262 175 137 105 85 Cost of sales 34,786 25,500 20,070 16,057 12,282 9,053 Operating, selling, and general and administrative expenses 6,684 5,152 4,070 3,268 2,599 2,008 Interest costs: Debt 113 43 20 36 25 10 Capital leases 153 126 118 99 89 76 Provision for income taxes 945 752 632 488 441 396 Net income 1,609 1,291 1,076 838 628 451 Per share of common stock: Net income .70 .57 .48 .37 .28 .20 Dividends .09 .07 .06 .04 .03 .02 Financial Position Current assets $8,575 $6,415 $4,713 $3,631 $2,905 $2,353 Inventories at replacement cost 7,857 6,207 4,751 3,642 2,855 2,185 Less LIFO reserve 473 399 323 291 203 154 Inventories at LIFO cost 7,384 5,808 4,428 3,351 2,652 2,031 Net property, plant and equipment and capital leases 6,434 4,712 3,430 2,662 2,145 1,676 Total assets 15,443 11,389 8,198 6,360 5,132 4,049 Current liabilities 5,004 3,990 2,845 2,066 1,744 1,340 Long-term debt 1,722 740 185 184 186 179 Long-term obligations under capital leases 1,556 1,159 1,087 1,009 867 764 Shareholders' equity 6,990 5,366 3,966 3,008 2,257 1,690 Financial Ratios Current ratio 1.7 1.6 1.7 1.8 1.7 1.8 Inventories/ working capital 2.1 2.4 2.4 2.1 2.3 2.0 Return on assets* 12.0% 13.2% 14.8% 14.6% 13.7% 12.6% Return on shareholders' equity* 26.0% 27.7% 30.9% 31.8% 31.8% 30.4% Other Year-End Data Number of Domestic Wal-Mart stores 1,714 1,568 1,399 1,259 1,114 980 Number of Domestic Supercenters 10 9 6 3 2 Number of Domestic SAM'S Clubs 208 148 123 105 84 49 International units Average Wal-Mart store size 74,700 70,700 66,400 63,500 61,500 59,000 Number of Associates 371,000 328,000 271,000 223,000 183,000 141,000 Number of Shareholders of Record 150,242 122,414 79,929 80,270 79,777 32,896
[FN] * On average balances. Wal-Mart Stores, Inc. Annual Report - Page 24-26 Management's Discussion and Analysis Results of Operations Increases (Decreases) In Consolidated Operating Results Over Prior Year (Dollars in millions, except per share data)
1997 1996 Amount % Amount % Revenues: Net sales $11,232 12% $11,133 13% Other income-net 165 15% 204 22% 11,397 12% 11,337 14% Costs and Expenses: Cost of sales 9,099 12% 8,978 14% Operating, selling and general and administrative expenses 1,837 12% 2,093 16% Interest Costs: Debt (63) (9%) 172 33% Capital leases 20 10% 10 5% 10,893 12% 11,253 14% Income Before Income Taxes 504 12% 84 2% Provision for Income Taxes 188 12% 25 2% Net Income $316 12% $59 2% Net Income Per Share $.14 12% $.02 2%
Net Sales The sales increase in fiscal 1997 was attributable to the Company's expansion program and comparative store sales increases of 5%. Expansion for fiscal 1997 included the opening of 59 Wal-Mart stores, 105 Supercenters (including the conversion of 92 Wal-Mart stores), 9 SAM'S Clubs, and 38 international units. The majority of the sales increase resulted from Wal-Mart stores and Supercenters while International sales grew to approximately 4.8% of the total sales in fiscal 1997 from 4.0% in fiscal 1996. SAM'S Club sales as a percentage of total sales decreased from 20.4% in fiscal 1996 to 18.9% in fiscal 1997. The sales increase of 13% in fiscal 1996 was attributable to the Company's expansion program and comparative store sales increases of 4%. Expansion for fiscal 1996 included the opening of 92 Wal-Mart stores, 92 Supercenters (including the conversion of 80 Wal-Mart stores), 9 SAM'S Clubs and 50 International units. International sales accounted for approximately 2.1% of the sales increase with the remainder primarily attributable to Wal-Mart stores and Supercenters. SAM'S Club sales as a percentage of total sales decreased from 22.9% in fiscal 1995 to 20.4% in fiscal 1996. Costs and Expenses Cost of sales as a percentage of sales increased .2% in fiscal 1997 and .1% in fiscal 1996 when compared to the preceding year. The increase in fiscal 1997 is due in part to one-time markdowns in the third quarter resulting from a strategic decision to reduce the merchandise assortment in selected categories. Cost of sales also increased approximately .3% due to a larger percentage of consolidated sales from departments within Wal-Mart stores which have lower markon percents, and to the Company's continuing commitment of always providing low prices. These increases were offset by approximately .2% because SAM'S Club comprised a lower percentage of consolidated sales in 1997 at a lower contribution to gross margin than the stores. The increase in fiscal 1996 was due to lower initial markons and a larger percentage of consolidated sales from departments within Wal-Mart stores which have lower markon percents. This increase is offset by approximately .3% because SAM'S Club comprised a lower percentage of consolidated sales in 1996 at a lower contribution to gross margin than the stores. Operating, selling and general and administrative expenses as a percentage of sales were flat in fiscal 1997 when compared to fiscal 1996 and increased .4% in fiscal 1996 when compared to fiscal 1995. As sales in SAM'S Club decreased as a percentage of total sales, the Company's operating, selling and general and administrative expenses as a percentage of sales increased approximately .1% due to a lower expense to sales percentage at SAM'S Club compared to the stores and Supercenters. This increase was offset through expense control in all of the operating formats. Approximately .2% of the increase in fiscal 1996 was due to increases in payroll and related benefit costs. The remainder of the increase resulted primarily from a lower percentage of sales attributable to SAM'S Club and a higher percentage of sales attributable to international operations. SAM'S Club operating, selling and general and administrative expenses as a percentage of sales were lower than the Wal-Mart stores and Supercenters while international expenses were slightly higher. The Company adopted Statement of Financial Accounting Standard (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in fiscal 1997. The statement requires entities to review long-lived assets and certain intangible assets in certain circumstances, and if the value of the assets is impaired, an impairment loss shall be recognized. The Company's existing accounting policies were such that this pronouncement did not materially affect the Company's financial position or results of operations. Interest Cost Interest cost decreased in fiscal 1997 compared to fiscal 1996 due to lower average daily short-term borrowings and through retirement of maturing debt. The Company was able to reduce short-term debt through enhanced operating cash flows and lower capital spending. Interest cost increased in fiscal 1996 compared to 1995 due to increased indebtedness and increased average short-term borrowing rates. The increased indebtedness was primarily due to the Company's expansion program. See Note 2 of Notes to Consolidated Financial Statements for additional information on interest and debt. International Operations The Company has wholly owned operations in Argentina, Canada and Puerto Rico, and through joint ventures in Brazil, China and Mexico. International operations remain immaterial to total Company operations. However, their sales growth in fiscal 1997 exceeded all other operating formats. As a group, the international operations were profitable in fiscal 1997. Liquidity and Capital Resources Cash Flow Information Cash flow provided from operations was $5.9 billion in fiscal 1997, up from $2.4 billion in fiscal 1996. The increase was primarily due to a greater emphasis on inventory management that resulted in lowering unit inventory levels. Although consolidated net sales increased by 12% in fiscal 1997, consolidated inventories decreased slightly from the prior year end. After funding capital expenditures of more than $2.6 billion, operating cash flow provided an excess of almost $3.3 billion. This enabled the Company to reduce short-term borrowings, retire maturing debt and pay dividends. At January 31, 1997, the Company eliminated short term borrowings and had $883 million invested in cash and cash equivalents. The Company anticipates that cash flows from operations will continue to exceed future capital expenditures. The excess cash flows generated may be used to purchase Company stock, pay dividends or for other investing or financing needs. Company Stock Purchases and Common Stock Dividends In fiscal 1997, the Company purchased over 8 million shares of its common stock for $208 million. Subsequent to January 31, 1997, the Company announced plans to purchase up to $2 billion of its common stock over the next 18 months. Additionally, the Company increased the dividend 29% to $.27 per share for fiscal 1998. Expansion Domestically, the Company plans to open approximately 50 new Wal-Mart stores, and 100 Supercenters. Approximately 70 of the Supercenters will come from relocations or expansions of existing Wal-Mart stores. The Company also plans to open 5 to 10 new SAM'S Clubs and 4 distribution centers. International expansion includes 30 to 35 new Wal-Mart stores, Supercenters, and SAM'S Clubs in Argentina, Brazil, Canada, China, Mexico and Puerto Rico. Total planned capital expenditures for 1998 approximates $3 billion. The Company plans to primarily finance expansion with operating cash flows. Borrowing Information The Company had committed lines of credit of $2,450 million with 34 banks and informal lines with various banks totaling an additional $2,450 million which were used to support short-term borrowing and commercial paper. These lines of credit and their anticipated cyclical increases will be sufficient to finance the seasonal buildups in merchandise inventories and for other cash requirements. The Company anticipates generating sufficient operating cash flow to fund all capital expenditures and accordingly, does not plan to finance future capital expenditures with debt. However, the Company may desire to obtain long-term financing for other uses of cash or for strategic reasons. The Company foresees no difficulty in obtaining long-term financing in view of its excellent credit rating and favorable experiences in the debt market in the past few years. In addition to the available credit lines mentioned above, the Company may sell up to $751 million of public debt under shelf registration statements previously filed with the Securities and Exchange Commission. Foreign Currency Translation All foreign operations are measured in their local currencies with the exception of Brazil, operating in a highly inflationary economy, which reports operations using U.S. dollars. Beginning in fiscal 1998, Mexico will report as a highly inflationary economy. All foreign operations as a group are immaterial to the Company's consolidated results of operations and financial position. In fiscal 1997, the foreign currency translation adjustment decreased by $12 million to $400 million primarily due to a favorable exchange rate in Canada. The cumulative foreign currency translation adjustments of $412 and $256 million in fiscal 1996 and 1995, respectively, were primarily due to operations in Mexico. The Company periodically purchases forward contracts on firm commitments to minimize the risk of foreign currency fluctuations. None of these contracts were significant during the year, and those outstanding at January 31, 1997 were insignificant to the Company's financial position. The Company minimizes its exposure to the risk of devaluation of foreign currencies by operating in local currencies and through buying forward contracts on some known transactions. Forward-Looking Statements Certain statements contained in Management's Discussion and Analysis and elsewhere in this annual report are forward-looking statements. These statements discuss, among other things, expected growth, future revenues and future performance. The forward-looking statements are subject to risks and uncertainties, including, but not limited to, competitive pressures, inflation, consumer debt levels, currency exchange fluctuations, trade restrictions, changes in tariff and freight rates, capital market conditions and other risks indicated in the Company's filings with the Securities and Exchange Commission. Actual results may materially differ from anticipated results described in these statements. Wal-Mart Stores, Inc. Annual Report - Page 26 Consolidated Statements of Income (Amounts in millions except per share data)
Fiscal years ended January 31, 1997 1996 1995 Revenues: Net sales $104,859 $93,627 $82,494 Other income-net 1,287 1,122 918 106,146 94,749 83,412 Costs and Expenses: Cost of sales 83,663 74,564 65,586 Operating, selling and general and administrative expenses 16,788 14,951 12,858 Interest Costs: Debt 629 692 520 Capital leases 216 196 186 101,296 90,403 79,150 Income Before Income Taxes 4,850 4,346 4,262 Provision for Income Taxes Current 1,974 1,530 1,572 Deferred (180) 76 9 1,794 1,606 1,581 Net Income $3,056 $2,740 $2,681 Net Income Per Share $1.33 $1.19 $1.17
[FN] See accompanying notes. Wal-Mart Stores, Inc. Annual Report - Page 27 Consolidated Balance Sheets (Amounts in millions)
January 31, 1997 1996 Assets Current Assets: Cash and cash equivalents $ 883 $ 83 Receivables 845 853 Inventories At replacement cost 16,193 16,300 Less LIFO reserve 296 311 Inventories at LIFO 15,897 15,989 Prepaid expenses and other 368 406 Total Current Assets 17,993 17,331 Property, Plant and Equipment, at Cost: Land 3,689 3,559 Building and improvements 12,724 11,290 Fixtures and equipment 6,390 5,665 Transportation equipment 379 336 23,182 20,850 Less accumulated depreciation 4,849 3,752 Net property, plant and equipment 18,333 17,098 Property under capital lease 2,782 2,476 Less accumulated amortization 791 680 Net property under capital leases 1,991 1,796 Other Assets and Deferred Charges 1,287 1,316 Total Assets $39,604 $37,541 Liabilities and Shareholders' Equity Current Liabilities: Commercial paper $ - $2,458 Accounts payable 7,628 6,442 Accrued liabilities 2,413 2,091 Accrued income taxes 298 123 Long-term debt due within one year 523 271 Obligations under capital leases due within one year 95 69 Total Current Liabilities 10,957 11,454 Long-Term Debt 7,709 8,508 Long-Term Obligations Under Capital Leases 2,307 2,092 Deferred Income Taxes and Other 463 400 Minority Interest 1,025 331 Shareholders' Equity Preferred stock ($.10 par value; 100 shares authorized, none issued) Common stock ($.10 par value; 5,500 shares authorized, 2,285 and 2,293 issued and outstanding in 1997 and 1996, respectively) 228 229 Capital in excess of par value 547 545 Retained earnings 16,768 14,394 Foreign currency translation adjustment (400) (412) Total Shareholders' Equity 17,143 14,756 Total Liabilities and Shareholders' Equity $39,604 $37,541
[FN] See accompanying notes. Wal-Mart Stores, Inc. Annual Report - Page 28 Consolidated Statements of Shareholders' Equity (Amounts in millions except per share data)
Foreign Capital in currency Number Common excess of Retained translation of shares stock par value earnings adjustment Total Balance - January 31, 1994 2,299 $230 $536 $9,987 $ - $10,753 Net income 2,681 2,681 Cash dividends $.17 per share) (391) (391) Purchase of Company stock (3) (4) (64) (68) Foreign currency translation adjustment (256) (256) Other 1 7 7 Balance - January 31, 1995 2,297 230 539 12,213 (256) 12,726 Net income 2,740 2,740 Cash dividends ($.20 per share) (458) (458) Purchase of Company stock (5) (4) (101) (105) Foreign currency translation adjustment (156) (156) Other 1 (1) 10 9 Balance - January 31, 1996 2,293 229 545 14,394 (412) 14,756 Net income 3,056 3,056 Cash dividends ($.21 per share) (481) (481) Purchase of Company stock (8) (7) (201) (208) Foreign currency translation adjustment 12 12 Other (1) 9 8 Balance - January 31, 1997 2,285 $228 $547 $16,768 $(400) $17,143
[FN] See accompanying notes. Wal-Mart Stores, Inc. Annual Report - Page 29 Consolidated Statements of Cash Flows (Amounts in millions)
Fiscal years ended January 31, 1997 1996 1995 Cash flows from operating activities Net income $ 3,056 $ 2,740 $ 2,681 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,463 1,304 1,070 Increase in accounts receivable (58) (61) (84) Decrease/(increase) in inventories 99 (1,850) (3,053) Increase in accounts payable 1,208 448 1,914 Increase in accrued liabilities 430 29 496 Deferred income taxes (180) 76 9 Other (88) (303) (127) Net cash provided by operating activities 5,930 2,383 2,906 Cash flows from investing activities Payments for property, plant and equipment (2,643) (3,566) (3,734) Proceeds from sale of photo finishing plants 464 Acquisition of assets from Woolworth Canada, Inc. (352) Sale/leaseback arrangements 502 Other investing activities 111 234 (208) Net cash used in investing activities (2,068) (3,332) (3,792) Cash flows from financing activities (Decrease)/increase in commercial paper (2,458) 660 220 Proceeds from issuance of long-term debt 1,004 1,250 Net proceeds from formation of real estate investment trust (REIT) 632 Purchase of Company stock (208) (105) (68) Dividends paid (481) (458) (391) Payment of long-term debt (541) (126) (37) Payment of capital lease obligations (74) (81) (70) Other financing activities 68 93 7 Net cash (used in)/provided by financing activities (3,062) 987 911 Net increase in cash and cash equivalents 800 38 25 Cash and cash equivalents at beginning of year 83 45 20 Cash and cash equivalents at end of year $ 883 $ 83 $ 45 Supplemental disclosure of cash flow information Income tax paid $ 1,791 $ 1,785 $ 1,390 Interest paid 851 866 658 Capital lease obligations incurred 326 365 193
[FN] See accompanying notes. Wal-Mart Stores, Inc. Annual Report - Pages 30-34 Notes To Consolidated Financial Statements 1 Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of subsidiaries. Significant intercompany transactions have been eliminated in consolidation. Segment Information The Company and its subsidiaries are principally engaged in the operation of mass merchandising stores located in all 50 states, Argentina, Canada and Puerto Rico, and through joint ventures in Brazil, China and Mexico. Cash and Cash Equivalents The Company considers investments with a maturity of three months or less when purchased to be cash equivalents. Inventories Inventories are stated principally at cost (last-in, first-out), which is not in excess of market, using the retail method for inventories in Wal-Mart stores and Supercenters. Pre-opening Costs Costs associated with the opening of stores are expensed during the first full month of operations. The costs are carried as prepaid expenses prior to the store opening. Interest during Construction In order that interest costs properly reflect only that portion relating to current operations, interest on borrowed funds during the construction of property, plant and equipment is capitalized. Interest costs capitalized were $44 million, $50 million and $70 million in 1997, 1996 and 1995, respectively. Depreciation and Amortization Depreciation and amortization for financial statement purposes is provided on the straight-line method over the estimated useful lives of the various assets. For income tax purposes, accelerated methods are used with recognition of deferred income taxes for the resulting temporary differences. Long-Lived Assets In fiscal 1997, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The statement requires entities to review long-lived assets and certain intangible assets in certain circumstances, and if the value of the assets is impaired, an impairment loss shall be recognized. Due to the Company's previous accounting policies, this pronouncement had no material effect on the Company's financial position or results of operations. Operating, Selling and General and Administrative Expenses Buying, warehousing and occupancy costs are included in operating, selling and general and administrative expenses. Net Income per Share Net income per share is based on the weighted average outstanding common shares. The dilutive effect of stock options is insignificant and consequently has been excluded from the earnings per share computations. Stock Options Proceeds from the sale of common stock issued under the stock option plans and related tax benefits which accrue to the Company are accounted for as capital transactions, and no charges or credits are made to income in connection with the plans. Estimates and Assumptions The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2 Commercial Paper and Long-Term Debt Information on short-term borrowings and interest rates is as follows (dollar amounts in millions):
Fiscal years ended January 31, 1997 1996 1995 Maximum amount outstanding at month-end $ 2,209 $ 3,686 $ 2,729 Average daily short-term borrowings 1,091 2,106 1,693 Weighted average interest rate 5.3% 5.9% 4.4%
At January 31, 1997, the Company had committed lines of credit of $2,450 million with 34 banks and informal lines of credit with various banks totaling an additional $2,450 million, which were used to support short-term borrowings and commercial paper. Short-term borrowings under these lines of credit bear interest at or below the prime rate.
Long-term debt at January 31, 1997, consist of (amounts in millions): 1997 1996 8 5/8% Notes due April 2001 $ 750 $ 750 5 7/8% Notes due October 2005 597 750 7 1/2% Notes due May 2004 500 500 9 1/10% Notes due July 2000 500 500 6 1/8% Notes due October 1999 500 500 5 1/2% Notes due March 1998 500 500 7 8/10%-8 1/4% Obligations from sale/leaseback transactions due 201 4 466 478 6 1/2% Notes due June 2003 454 500 7 1/4% Notes due June 2013 445 500 7% - 8% Obligations from sale/leaseback transactions due 2013 314 318 6 3/4% Notes due May 2002 300 300 8 1/2% Notes due September 2024 250 250 6 3/4% Notes due October 2023 250 250 8% Notes due September 2006 250 250 6 1/8% Eurobond due November 2000 250 250 6 7/8% Eurobond due June 1999 250 250 5 1/8% Eurobond due October 1998 250 250 7 % Eurobond due April 1998 250 250 6 3/8% Notes due March 2003 228 250 6 3/4% Eurobond due May 2002 200 200 5 1/2% Notes due September 1997 500 Other 205 212 $ 7,709 $ 8,508
Long-term debt is unsecured except for $206 million which is collateralized by property with an aggregate carrying value of approximately $347 million. Annual maturities of long-term debt during the next 5 years are (in millions):
Fiscal year ending Annual January 31, maturity 1998 $ 523 1999 1,024 2000 806 2001 2,018 2002 52 Thereafter 3,809
The Company has agreed to observe certain covenants under the terms of its note and debenture agreements, the most restrictive of which relates to amounts of additional secured debt and long-term leases. The Company has entered into sale/leaseback transactions involving buildings while retaining title to the underlying land. These transactions were accounted for as financings and are included in long- term debt and the annual maturities schedules above. The resulting obligations are amortized over the lease terms. Future minimum lease payments for each of the five succeeding years as of January 31, 1997 are (in millions):
Fiscal years ending Minimum January 31, rentals 1998 $ 76 1999 76 2000 104 2001 100 2002 94 Thereafter 915
The fair value of the Company's long-term debt approximates $7,836 million based on the Company's current incremental borrowing rate for similar types of borrowing arrangements. At January 31, 1997 and 1996, the Company had letters of credit outstanding totaling $811 million and $551 million, respectively. These letters of credit were issued primarily for the purchase of inventory. Under shelf registration statements previously filed with the Securities and Exchange Commission the Company may issue debt securities aggregating $751 million. The Company has entered into an interest rate swap on an obligation which amortizes through 2006. The Company swapped a fixed rate of 6.97% for a variable short-term rate on a notional amount of $630 million amortizing down to $203 million with semi annual settlements. The variable rate was 5.45% at the last settlement. This interest rate swap is accounted for by recording the net interest received or paid as an adjustment to interest expense on a current basis. Gains or losses resulting from market movements are not recognized. An increase in short term rates would cause the Company an insignificant additional interest cost. 3 Defined Contribution Plan The Company maintains a profit sharing plan under which most full and many part- time Associates become participants following one year of employment. Annual contributions, based on the profitability of the Company, are made at the sole discretion of the Company. Contributions were $247 million, $204 million and $175 million in 1997, 1996 and 1995, respectively. 4 Income Taxes
The income tax provision consists of the following(in millions): 1997 1996 1995 Current Federal $ 1,769 $ 1,342 $ 1,394 State and local 201 188 178 International 4 Total current tax provision 1,974 1,530 1,572 Deferred Federal (97) 119 7 State and local (9) 15 2 International (74) (58) Total deferred tax (benefit) provision (180) 76 9 Total provision for income taxes $ 1,794 $ 1,606 $ 1,581
Items that give rise to significant portions of the deferred tax accounts at January 31, 1997, are as follows (in millions):
1997 1996 1995 Deferred tax liabilities: Property, plant and equipment $ 721 $ 617 $ 518 Inventory 145 135 88 Other 45 19 8 Total deferred tax liabilities 911 771 614 Deferred tax assets: Amounts accrued for financial reporting purposes not yet deductible for tax purposes 295 204 230 International, principally asset basis difference 231 101 Capital leases 169 147 114 Deferred revenue 113 Other 68 49 33 Total deferred tax assets 876 501 377 Net deferred tax liabilities $ 35 $ 270 $ 237
A reconciliation of the significant differences between the effective income tax rate and the federal statutory rate on pretax income follows:
1997 1996 1995 Statutory tax rate 35.0% 35.0% 35.0% State income taxes, net of federal income tax benefit 2.2% 3.1% 2.7% International (1.3%) (0.8%) Other 1.1% (0.3%) (0.6%) 37.0% 37.0% 37.1%
5 Acquisitions In fiscal 1995, the Company acquired selected assets related to 122 Woolco stores in Canada from Woolworth Canada, Inc., a subsidiary of Woolworth Corporation, for approximately $352 million, recording $221 million of leasehold and location value which is being amortized over 20 years. This transaction has been accounted for as a purchase. The results of operations for the acquired units since the dates of their acquisitions have been included in the Company's results. Pro forma results of operations are not presented due to the insignificant differences from the historical results. 6 Stock Option Plans At January 31, 1997, 74 million shares of common stock were reserved for issuance under stock option plans. The options granted under the stock option plans expire 10 years from the date of grant. Options granted prior to November 17, 1995, may be exercised in nine annual installments. Options granted on or after November 17, 1995, may be exercised in seven annual installments. The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options because the alternative fair value accounting provided under FASB Statement 123, "Accounting for Stock-Based Compensation," requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. The effect of applying the fair value method of Statement 123 to the Company's option plan would result in net income and net income per share that are not materially different from the amounts reported in the Company's consolidated financial statements. Further information concerning the options is as follows:
Option price Shares per share Total Shares under option January 31, 1994 15,876,000 $ 1.43-30.82 $298,248,000 Options granted 4,125,000 21.63-26.75 95,689,000 Options canceled (1,013,000) 1.43-30.82 (23,127,000) Options exercised (1,019,000) 2.08-27.25 (7,829,000) January 31, 1995 17,969,000 2.78-30.82 362,981,000 Options granted 7,114,000 23.50-24.75 167,959,000 Options canceled (1,953,000) 3.75-30.82 (43,873,000) Options exercised (1,101,000) 2.78-25.38 (9,678,000) January 31, 1996 22,029,000 4.94-30.82 477,389,000 Options granted 11,466,000 22.25-25.25 265,931,000 Options canceled (2,110,000) 5.78-30.82 (49,109,000) Options exercised (999,000) 4.94-25.75 (10,327,000) January 31, 1997 30,386,000 $ 6.50-30.82 $683,884,000 (6,448,000 shares exerciseable) Shares available for option January 31, 1996 52,946,000 January 31, 1997 43,590,000
7 Long-term lease Obligations The Company and certain of its subsidiaries have long-term leases for stores and equipment. Rentals (including, for certain leases, amounts applicable to taxes, insurance, maintenance, other operating expenses, and contingent rentals) under all operating leases were $561 million, $531 million and $479 million in 1997, 1996 and 1995. Aggregate minimum annual rentals at January 31, 1997, under non- cancelable leases are as follows (in millions): 7 Long-term Lease Obligations
Fiscal Operating Capital year leases leases 1998 $ 435 $ 317 1999 379 316 2000 364 314 2001 332 311 2002 321 311 Thereafter 2,913 3,245 Total minimum rentals $ 4,744 4,814 Less estimated executory costs 79 Net minimum lease payments 4,735 Less imputed interest at rates ranging from 6.1% to 14.0% 2,333 Present value of minimum lease payments $ 2,402
Certain of the leases provide for contingent additional rentals based on percentage of sales. Such additional rentals amounted to $51 million, $41 million and $42 million in 1997, 1996 and 1995, respectively. Substantially all of the store leases have renewal options for additional terms from five to 25 years at comparable rentals. The Company has entered into lease commitments for land and buildings for 30 future locations. These lease commitments with real estate developers provide for minimum rentals for 20 years, excluding renewal options. If consummated based on current cost estimates, they will approximate $27 million annually over the lease terms. 8 Quarterly Financial Data (Unaudited)
Amounts in millions Quarters ended (except per share information) April 30, July 31, October 31, January 31, 1997 Net sales $ 22,772 $ 25,587 $ 25,644 $ 30,856 Cost of sales 18,064 20,376 20,450 24,773 Net income 571 706 684 1,095 Net income per share $.25 $.31 $.30 $.48 1996 Net sales $ 20,440 $ 22,723 $ 22,913 $ 27,551 Cost of sales 16,196 18,095 18,176 22,097 Net income 553 633 612 942 Net income per share $.24 $.28 $.27 $.41
Wal-Mart Stores, Inc. Annual Report - Page 35 Report of Independent Auditors The Board of Directors and Shareholders Wal-Mart Stores, Inc. We have audited the accompanying consolidated balance sheets of Wal-Mart Stores, Inc. and Subsidiaries as of January 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended January 31, 1997. 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 Wal-Mart Stores, Inc. and Subsidiaries at January 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 31, 1997, in conformity with generally accepted accounting principles. /s/Ernst & Young Tulsa, Oklahoma March 21, 1997 Wal-Mart Stores, Inc. Annual Report - Page 37 Listings Stock Symbol: WMT New York Stock Exchange Pacific Stock Exchange Toronto Stock Exchange
Market Price of Common Stock Fiscal years ended January 31, 1997 1996 Quarter Hi Low Hi Low April 30 $24.50 $20.88 $26.00 $23.13 July 31 $26.25 $22.88 $27.50 $23.00 October 31 $28.13 $24.50 $26.00 $21.63 January 31 $27.00 $22.13 $24.75 $19.25
Dividends Paid Per Share Fiscal years ended January 31, Quarterly 1997 1996 April 8 $ 0.0525 April 14 $ 0.05 July 8 $ 0.0525 July 10 $ 0.05 October 7 $ 0.0525 October 3 $ 0.05 January 17 $ 0.0525 January 5 $ 0.05
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