-----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, THlJnDsPTEt0cMyFB9hQlXNghk7a9haPJ8IUwooLe/7EZ2LYADqCrG+TpsHhojeE OOUKtc05IdqU6oRAXDRW+A== 0000104169-97-000003.txt : 19970423 0000104169-97-000003.hdr.sgml : 19970423 ACCESSION NUMBER: 0000104169-97-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970421 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 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06991 FILM NUMBER: 97584381 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 1 FORM 10-K 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. 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. FORWARD-LOOKING STATEMENTS OR INFORMATION This Form 10-K includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this Form 10-K which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), expansion and other development trends of industry segments in which the Company is active, business strategy, expansion and growth of the Company's business and operations and other such matters are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions within the bounds of its knowledge of its business, a number of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by or on behalf of the Company. Many of these factors have previously been identified in filings or statements made by or on behalf of the Company. All phases of the Company's operations are subject to influences outside its control. Any one, or a combination, of these factors could materially affect the results of the Company's operations. These factors include: competitive pressures, inflation, consumer debt levels, currency exchange fluctuations, trade restrictions, changes in tariff and freight rates, interest rate fluctuations and other capital market conditions. Forward- looking statements made by or on behalf of the Company are based on a knowledge of its business and the environment in which it operates, but because of the factors listed above, actual results may differ from those in the forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. WAL-MART STORES, INC. FORM 10-K ANNUAL REPORT FOR THE YEAR ENDED JANUARY 31, 1997 PART I ITEM 1. BUSINESS (a) General Development of Business Wal-Mart Stores, Inc. (together with its subsidiaries hereinafter referred to as the "Company") is America's largest retailer measured by total revenues. During the fiscal year ended January 31, 1997, the Company had net sales of $104,859,000,000. The Company serves customers primarily through the operation of Wal-Mart stores (discount department stores), Sam's Clubs (warehouse membership clubs) and Wal-Mart Supercenters (combination full-line supermarket and discount department stores). Domestically, at January 31, 1997, the Company operated 1,960 Wal- Mart stores, 436 Sam's Clubs, and 344 Wal-Mart Supercenters. A table summarizing information concerning domestic Wal-Mart stores, Sam's Clubs, Wal-Mart Supercenters and other stores operated since January 31, 1992 is set forth in Schedule A to Item I found on page 9 of this annual report. In fiscal 1992, the Company entered into a joint venture in which it has a 50% interest with CIFRA S.A. de C.V. to develop and expand retailing services in Mexico. This was the beginning of Wal-Mart's initiative outside of the United States. Today, our joint venture is Mexico's largest retailer. At January 31, 1997, the joint venture operated 28 warehouse clubs and 18 Wal-Mart Supercenters, along with 106 CIFRA joint venture units throughout Mexico. In fiscal 1993, the Company entered Puerto Rico and at January 31, 1997, operated seven Wal-Mart stores and four Sam's Clubs. In fiscal 1995, the Company acquired 122 Canadian Woolco department stores from Woolworth Canada, Inc., a subsidiary of Woolworth Corporation. The acquisition included all inventory, leasehold interests and other assets at each location. Today Wal-Mart is Canada's leading discount retailer. At January 31, 1997, the Company operated 136 Canadian Wal-Mart stores. In fiscal 1996, the Company entered Brazil through a joint venture in which it has a 60% interest with Lojas Americanas. At January 31, 1997, the joint venture operated two Wal-Mart Supercenters and three warehouse clubs in the greater-Sao Paulo area. Also in fiscal 1996, the Company entered Argentina and at January 31, 1997, operated three Wal-Mart Supercenters and three warehouse clubs in the greater-Buenos Aires region. In fiscal 1997, the Company entered the People's Republic of China. At January 31, 1997, the Company operated one Wal-Mart Supercenter along with joint-venture partner Shenzhen International Trust & Investment Company and one warehouse club along with joint-venture partner, Shenzhen Economic Zone Development Company. In fiscal 1997, the Company entered Indonesia through a franchise agreement. At January 31, 1997, Wal-Mart operated two Wal-Mart Supercenters in the Jakarta area. A table summarizing information concerning international units operated since fiscal 1992 is set forth in Schedule B to Item 1 found on page 10 of this annual report. (b) Financial Information About Industry Segments Sales of merchandise through stores which include Wal-Mart stores, Sam's Clubs and Wal-Mart Supercenters is the only significant industry segment of which the Company is a part. For the financial results of the Company's operations, see the information incorporated by reference in Item 7 and Item 8 of Part II found on page 14 of this annual report. (c) Narrative Description of Business The Company, a Delaware corporation, has its principal offices in Bentonville, Arkansas. Although the Company was incorporated in October 1969, the businesses conducted by its predecessors began in 1945 when Sam M. Walton opened a franchise Ben Franklin variety store in Newport, Arkansas. In 1946, his brother, James L. Walton, opened a similar store in Versailles, Missouri. Until 1962, the Company's business was devoted entirely to the operation of variety stores. In that year, the first Wal-Mart Discount City was opened. In fiscal 1984, the Company opened its first three Sam's Clubs, and in fiscal 1988, its first Wal-Mart Supercenter. Through the years, the Company has made certain strategic acquisitions that have supported the growth of the Wal-Mart stores, clubs and Supercenters; such as the acquisition of ten full-service and four specialty distribution centers through the purchase of McLane Company, Inc. which sells and distributes merchandise to the convenience store industry and a variety of other retailers; the acquisition of selected assets of Pace Membership Warehouse, Inc. and the acquisition of selected assets related to 122 Canadian Woolco stores from Woolworth Canada, Inc., a subsidiary of Woolworth Corporation. General. The Company operates Wal-Mart stores in all 50 states. The average size of a Wal-Mart store is approximately 92,600 square feet with store sizes generally ranging between 30,000 and 150,000 square feet of building area. The Company operates Wal-Mart Supercenter stores in 23 states, and the average size of a Supercenter store is 183,300 square feet. The Company operates Sam's Clubs in 48 states. The average size of a Sam's Club is approximately 121,200 square feet, and club sizes generally range between 90,000 and 150,000 square feet of building area. The Company operates Wal-Mart stores, Sam's Clubs and Wal-Mart Supercenters in Argentina, Canada and Puerto Rico, and under joint venture or franchise agreements in Brazil, China, Indonesia and Mexico. During the last fiscal year, no single store or club location accounted for as much as 1% of sales or net income. Merchandise. Wal-Mart stores are generally organized with 40 departments and offer a wide variety of merchandise, including apparel for women, girls, men, boys and infants. Each store also carries curtains, fabrics and notions, candy, stationery and books, shoes, housewares, hardware, electronics, home furnishings, small appliances, automotive accessories, horticulture and accessories, sporting goods, toys, cameras and supplies, health and beauty aids, pharmaceuticals and jewelry. Nationally advertised merchandise accounts for a majority of sales in the stores. The Company markets lines of merchandise under the store brands "Sam's American Choice", "Great Value", "Ol' Roy" and "Equate". The Company also markets lines of merchandise under licensed brands; some of which include "Faded Glory", "Kathie Lee", "Better Homes & Gardens", "White Stag", "McKids", "Popular Mechanics" and "Catalina". During the fiscal year ended January 31, 1997, domestic sales of general merchandise at Wal-Mart stores and Supercenters (which are subject to seasonal variance), including licensed departments, by product category were as follows: PERCENTAGE CATEGORY OF SALES Softgoods/domestics.............. 25% Hardgoods........................ 25 Stationery and candy............. 11 Pharmaceuticals.................. 10 Records and electronics.......... 9 Sporting goods and toys.......... 8 Health and beauty aids........... 8 Shoes............................ 2 Jewelry.......................... 2 100% Sales in pharmaceuticals are a combination of owned and licensed departments. While these percentages include sales of licensed departments, the Company records only the rentals received from the licensee as other income. Sam's offers bulk displays of name brand hardgood merchandise, some softgoods and institutional size grocery items. Each Sam's also carries jewelry, sporting goods, toys, tires, stationery and books. Most clubs have fresh food departments which include bakery, meat and produce. McLane offers a wide variety of grocery and non-grocery products, including perishable and non-perishable items. The non-grocery products consist primarily of tobacco products, hardgood merchandise, health and beauty aids, toys and stationery. McLane is a wholesale distributor that sells its merchandise to a variety of retailers, including the Company's Wal-Mart stores, Supercenters and Sam's Clubs. Operations. Except for extended hours during certain holiday seasons, the majority of the Wal-Mart stores are open from 9:00 a.m. to 9:00 p.m. six days a week, and from 12:30 p.m. to 5:30 p.m. on Sundays, with the remainder of the stores being closed on Sunday. An increasing number of Wal-Mart stores and almost all of the Supercenter stores are open 24 hours each day. Wal-Mart stores maintain uniform prices, except where lower prices are necessary to meet local competition. Sales are primarily on a self-service, cash-and-carry basis with the objective of maximizing sales volume and inventory turnover while minimizing expenses. Bank credit card programs, operated without recourse to the Company, are available in all stores. During the year, the Company launched a co-branded credit card program through Chase Manhattan Bank. This card is also operated without recourse to the Company. Wal-Mart stores and Supercenters maintain a "satisfaction guaranteed" program to promote customer goodwill and acceptance. Sam's Clubs are membership only, cash-and-carry operations. However, a financial service credit card program (Discover Card) is available in all clubs and the "Sam's Direct" commercial finance program and "Business Revolving Credit" are available to qualifying business members. Also, a "Personal Credit" program is available to qualifying club members. Any credit issued under these programs are without recourse to the Company. Club members include businesses and those individuals who are members of certain qualifying organizations, such as government and state employees and credit union members. Both business and individual members have an annual membership fee of $25 for the primary membership card. Operating hours vary among Sam's Clubs, but they are generally open Monday through Friday from 10:00 a.m. to 8:30 p.m. Most Sam's are open Saturday from 9:30 a.m. to 8:30 p.m. and on Sunday from 11:00 a.m. to 6:00 p.m. Distribution. During the 1997 fiscal year, approximately 84% of the Wal-Mart stores' and Supercenters' purchases were shipped from Wal- Mart's 34 distribution centers, five located in both Arkansas and Texas; two in California, Florida, Indiana, Mississippi, New York and South Carolina; and one each in Alabama, Colorado, Georgia, Iowa, Kansas, Kentucky, New Hampshire, Ohio, Pennsylvania, Utah, Virginia and Wisconsin. The balance was shipped directly to the stores from suppliers. Each distribution center is designed to serve the distribution needs of approximately 80 to 140 stores, depending on the size of the center. The size of these distribution centers ranges from approximately 700,000 to 1,600,000 square feet. Sam's Clubs receive the majority of their merchandise via direct shipment from suppliers rather than from the Company's distribution centers. The McLane distribution centers buy, sell and distribute merchandise, primarily to the convenience store industry and they also service Wal-Mart stores, Supercenters and Sam's Clubs. The McLane Company has 19 distribution centers with two located in Arizona, California, Texas and Virginia, and one each in Colorado, Florida, Georgia, Illinois, Kentucky, Mississippi, Missouri, New York, North Carolina, Utah and Washington. Merchandising. Substantially all purchasing and merchandising for all stores is controlled from the home offices of the Company through centralized buying and planning practices. During the fiscal year 1997, no single supplier accounted for more than 4.6% of the Company's purchases. Store Management. Every retail outlet is managed by a store manager or club general manager and one or more assistant store or club managers. The Company is committed to ongoing training programs for managers, assistant managers and department managers in an effort to assure well trained future store management. Fiscal 1998 Expansion Plans. Domestically, the Company plans to open approximately 50 new Wal-Mart stores and 100 Supercenters. Approximately 70 of the new Supercenters will come from relocations or expansions of existing Wal-Mart stores. The Company also plans to open five to ten new Sam's Clubs and four distribution centers. International expansion includes 30 to 35 new Wal-Mart stores, Supercenters and Sam's Clubs in Argentina, Brazil, Canada, China, Indonesia, Mexico and Puerto Rico. The Company expenses its start-up costs for each new unit during the first full month of operation. Delays may be experienced in projected opening dates because of construction problems, weather and other reasons. There can be no assurance that planned expansion will proceed as scheduled. Seasonal Aspects of Operations. The Company's business is seasonal to a certain extent. Generally, the highest volume of sales occurs in the fourth fiscal quarter and the lowest volume occurs during the first fiscal quarter. Competition. The Company's Wal-Mart stores compete with other discount, department, drug, variety and specialty stores, many of which are national chains. Sam's Clubs compete with wholesale clubs, as well as with discount retailers, wholesale grocers and general merchandise wholesalers and distributors. The Wal-Mart Supercenters compete with other supercenter- type stores, discount stores, supermarkets and specialty stores, many of which are national or regional chains. The Company also competes with the other stores for new store sites. As of January 31, 1997, based on net sales, the Company ranked first among all retail department store chains and among all discount department store chains. The Company's competitive position within the industry is largely determined by its ability to offer value and service to its customers. The Company has many programs designed to meet the competitive needs of its industry. These include the "Everyday Low Price", "Item Merchandising", "Store-Within-a-Store", "Our Business is Saving Your Business Money" and "Buy America" programs. Although the Company believes it has had a major influence in most of the retail markets in which its stores are located, there is no assurance that this will continue. Employees (Associates). As of January 31, 1997, the Company had approximately 728,000 associates, an increase of approximately 53,000 associates for the year. Part-time associates are primarily sales personnel. Most associates participate in incentive programs which provide the opportunity to receive addition compensation based upon the Company's productivity or profitability. The Company maintains profit sharing plans under which most full- and many part-time associates participate following one year of employment with the Company. Annual contributions, based on the profitability of the Company, are made at the sole discretion of the Company. For the fiscal years ended January 31, 1992 through 1997, the Company has contributed approximately $130,000,000, $166,000,000, $166,000,000, $175,000,000, $204,000,000 and $247,000,000, respectively. The Company also offers an associate stock ownership plan that provides for the voluntary purchase of the Company's common stock with a 15% match by the Company on up to $1,800 of annual stock purchases. The Company also has stock option plans that provide certain management associates an opportunity to share in the long-term success of the Company. At January 31, 1997, approximately 7,000 management associates had been awarded stock options by the Company. WAL-MART STORES, INC. AND SUBSIDIARIES SCHEDULE A TO ITEM 1 - DOMESTIC STORE COUNT AND NET SQUARE FOOTAGE GROWTH YEARS ENDED JANUARY 31, 1992 THROUGH 1997
STORE COUNT Fiscal Year Wal-Mart Ended Wal-Mart Stores Sam's Clubs Supercenters Total*3) Ending Jan 31, Opened Closed Conversions*1) Total Opened Closed Total Opened Total Opened*2) Closed Balance Balance Forward 1,568 148 9 1,725 1992 148 1 1 1,714 61 1 208 1 10 209 2 1,932 1993 159 1 24 1,848 48 0 256 24 34 207 1 2,138 1994 141 2 37 1,950 162 1 417 38 72 304 3 2,439 1995 109 5 69 1,985 21 12 426 75 147 136 17 2,558 1996 92 2 80 1,995 9 2 433 92 239 113 4 2,667 1997 59 2 92 1,960 9 6 436 105 344 81 8 2,740
NET SQUARE FOOTAGE Fiscal Year Ended Wal-Mart Stores Sam's Clubs Wal-Mart Supercenters Total Sales Per Jan 31, Net Additions Total Net Additions Total Net Additions Total Net Additions Sq. Ft. Sq.Ft.*4) Balance Forward 110,385,973 15,938,838 1,733,701 128,058,512 1992 17,729,395 128,115,368 7,320,510 23,259,348 180,545 1,914,246 25,230,450 153,288,962 $ 306.33 1993 19,251,060 147,366,428 7,444,530 30,703,878 4,037,493 5,951,739 30,733,083 184,022,045 325.86 1994 16,185,442 163,551,870 19,670,804 50,374,682 6,762,080 12,713,819 42,618,326 226,640,371 324.42 1995 10,109,978 173,661,848 1,335,742 51,710,424 14,087,725 26,801,544 25,533,445 252,173,816 336.10 1996 8,188,223 181,850,071 825,020 52,535,444 16,791,559 43,593,103 25,804,802 277,978,618 335.13 1997 ( 193,017) 181,657,054 298,692 52,834,136 19,661,947 63,255,050 19,767,622 297,746,240 337.35
[FN] *1) Wal-Mart store locations relocated or expanded as Wal-Mart Supercenters. *2) Total Opened net of conversions of Wal-Mart stores to Supercenters. *3) The Company also operated 63 Bud's Discount City units at January 31, 1997. These units are not included in the above store counts or square footage totals. *4) Includes only stores and clubs that were open at least twelve months as of January 31 of the previous year. WAL-MART STORES, INC. AND SUBSIDIARIES SCHEDULE B TO ITEM 1 - INTERNATIONAL STORE COUNT AND NET SQUARE FOOTAGE GROWTH YEARS ENDED JANUARY 31, 1992 THROUGH 1997
STORE COUNT Fiscal MEXICO CANADA PUERTO RICO ARGENTINA Year Wal-Mart Sam's Wal-Mart Wal-Mart Sam's Wal-Mart Sam's Ended Supercenters Clubs Total* Stores Total Stores Clubs Total Supercenters Clubs Total 1992 0 2 2 0 0 0 0 0 0 0 0 1993 0 3 3 0 0 2 0 2 0 0 0 1994 2 7 9 0 0 3 2 5 0 0 0 1995 11 22 33 123 123 5 2 7 0 0 0 1996 13 28 41 131 131 7 4 11 1 2 3 1997 18 28 46 136 136 7 4 11 3 3 6 Fiscal BRAZIL INDONESIA CHINA Year Wal-Mart Sam's Wal-Mart Wal-Mart Sam's Ended Supercenters Clubs Total Supercenters Total Supercenters Clubs Total 1992 0 0 0 0 0 0 0 0 1993 0 0 0 0 0 0 0 0 1994 0 0 0 0 0 0 0 0 1995 0 0 0 0 0 0 0 0 1996 2 3 5 0 0 0 0 0 1997 2 3 5 2 2 1 1 2
NET SQUARE FOOTAGE Fiscal MEXICO CANADA PUERTO RICO ARGENTINA Year Ended Net Additions Total* Net Additions Total Net Additions Total Net Additions Total 1992 162,535 162,535 0 0 0 0 0 0 1993 143,000 305,535 0 0 229,647 229,647 0 0 1994 946,717 1,252,252 0 0 339,260 568,907 0 0 1995 3,537,080 4,789,332 14,651,969 14,651,969 266,279 835,186 0 0 1996 1,091,123 5,880,455 872,446 15,524,415 478,848 1,314,034 438,787 438,787 1997 1,032,603 6,913,058 572,803 16,097,218 0 1,314,034 625,369 1,064,156 Fiscal BRAZIL INDONESIA CHINA Year Ended New Additions Total Net Additions Total Net Additions Total 1992 0 0 0 0 0 0 1993 0 0 0 0 0 0 1994 0 0 0 0 0 0 1995 0 0 0 0 0 0 1996 772,221 772,221 0 0 0 0 1997 0 772,221 360,503 360,503 316,656 316,656
[FN] * Through a joint venture, the Company also operated 25 discount stores, four combination stores, three supermarkets, seven specialty department stores and 67 restaurants as of January 31, 1997. These units are not included in the above store counts or square footage totals. ITEM 2. PROPERTIES The number and location of Wal-Mart stores, Supercenters and Sam's Clubs is incorporated by reference to the table under the caption "Fiscal 1997 End of Year Store Counts" on Page 19 of the Annual Report to Shareholders for the year ended January 31, 1997. The Company owns 1,232 properties on which domestic Wal-Mart stores and Supercenters are located and 280 of the properties on which domestic Sam's are located. In some cases, the Company owns the land associated with leased buildings. New buildings, both leased and owned, are constructed by independent contractors. The remaining buildings in which its present stores are located are either leased from a commercial property developer, leased pursuant to a sale/leaseback arrangement or leased from a local governmental entity through an industrial revenue bond transaction. All of the Company's leases for its stores provide for fixed annual rentals and, in many cases, the leases provide for additional rent based on sales volume. The Company operated 34 Wal-Mart distribution facilities and 19 McLane distribution facilities at January 31, 1997. These distribution facilities are primarily owned by the Company, and several are subject to mortgage securing loans. Some of the distribution facilities are leased under industrial development bond financing arrangements and provide the option of purchasing these facilities at the end of the lease term for nominal amounts. The Company leases properties on which Canadian Wal-Mart stores are located. The Company owns four properties on which Puerto Rico operating units are located with the remaining units being leased. The Company owns properties on which the operating units in Argentina, Brazil, China and Mexico are located. The Company owns office facilities in Bentonville, Arkansas that serve as the home office and owns additional office facilities in Temple, Texas. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceedings and no properties of the Company are subject to any material pending legal proceeding, other than routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the last quarter of the year ended January 31, 1997. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The following information is furnished with respect to each of the executive officers of the Company, each of whom is elected by and serves at the pleasure of the Board of Directors. The business experience shown for each officer has been his principal occupation for at least the past five years. Current Position Name Business Experience Held Since Age David D. Glass President and Chief Executive 1988 61 Officer. S. Robson Walton Chairman. From 1985 until his 1992 52 election as Chairman in 1992, he served as Vice Chairman. Donald G. Soderquist Vice Chairman and Chief Operating 1988 63 Officer. Paul R. Carter Executive Vice President - 1995 56 Wal-Mart Stores, Inc. and President - Wal-Mart Realty Company. Prior to 1995, he served as Executive Vice President and Chief Financial Officer. Thomas M. Coughlin Executive Vice President - 1995 48 Store Operations. Prior to 1995, he served as Senior Vice President - Specialty Divisions. David Dible Executive Vice President 1995 49 Specialty Divisions. Prior to 1995, he served as Senior Vice President - Merchandising. Joseph S. Hardin, Jr. Executive Vice President - 1995 52 Wal-Mart Stores, Inc. and President and Chief Executive Officer of Sam's Club Division. Prior to October 1995, he served as Executive Vice President - Wal-Mart Stores, Inc. and Chief Operating Officer of Wal-Mart Stores Division. Prior to January 1995, he served as President and Chief Executive Officer of McLane Company, Inc. Prior to 1993, he served as Executive Vice President - Logistics and Personnel Adminis- tration. Mr. Hardin announced his intention to leave the Company in April, 1997. Bob L. Martin Executive Vice President - 1993 48 Wal-Mart Stores, Inc. and President and Chief Executive Officer of Wal-Mart International Division. Prior to 1993, he served as Executive Vice President - Corporate Information Systems. John B. Menzer Executive Vice President and 1995 46 Chief Financial Officer since September 1995. Prior to September 1995, he served as President and Chief Operating Officer of Ben Franklin Retail Stores, Inc. H. Lee Scott, Jr. Executive Vice President - 1995 48 Merchandising. Prior to October 1995, he served as Executive Vice President - Logistics. Prior to that, he served as Senior Vice President - Logistics. Nicholas J. White Executive Vice President - 1989 52 Wal-Mart Supercenter Division. Prior to 1989, he served as Executive Vice President - Sam's Clubs. William G. Rosier President and Chief Executive 1995 48 Officer of McLane Company, Inc. Prior to 1995, he served as Senior Vice President - Marketing and Customer Services for McLane. James A. Walker, Jr. Senior Vice President and 1995 50 Controller. Prior to 1995, he served as Vice President and Controller. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The information required by this item is incorporated by reference of the information "Number of Shareholders of Record" under the caption "11 Year Financial Summary" on Pages 22 and 23, and all the information under the captions "Market Price of Common Stock", "Listings - Stock Symbol: WMT" and "Dividends Paid Per Share" on page 37 of the Annual Report to Shareholders for the year ended January 31, 1997. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated by reference of all information under the caption "11 Year Financial Summary" on Pages 22 and 23 of the Annual Report to Shareholders for the year ended January 31, 1997. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is furnished by incorporation by reference of all information under the caption "Management's Discussion and Analysis" on Pages 24 through 26 of the Annual Report to Shareholders for the year ended January 31, 1997. 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" and "Notes to Consolidated Financial Statements" on Pages 26 through 34 of the Annual Report to Shareholders for the year ended January 31, 1997. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by this item with respect to the Company's directors and compliance by the Company's directors, executive officers and certain beneficial owners of the Company's Common Stock with Section 16(a) of the Securities Exchange Act of 1934 is furnished by incorporation by reference of all information under the captions entitled "Item 1:Election of Directors" on Pages 1 through 3 and "Section 16(a) Beneficial Ownership Reporting Compliance" on Page 10 and 11 of the Company's Proxy Statement for its Annual Meeting of Shareholders to be held on Friday, June 6, 1997 (the "Proxy Statement"). The information required by this item with respect to the Company's executive officers appears at Item 4A of Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is furnished by incorporation by reference of all information under the caption entitled "Executive Compensation", subcaptions "Summary Compensation Table", "Option Grants for Fiscal Year Ended January 31, 1997", and "Option Exercises and Fiscal Year End Option Values" on Pages 4 through 6, and "Compensation Committee Interlocks and Insider Participation" and "Compensation of Directors" on Page 8 of the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is furnished by incorporation by reference of all information under the caption "Equity Securities and Principal Holders of Wal-Mart Stock" on Pages 10 and 11 of the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is furnished by incorporation by reference of all information under the caption "Interest of Management in Certain Transactions" on Page 9 of the Proxy Statement. 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 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. +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. *+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 *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. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Annual Report to Shareholders (page) Covered by Report of Independent Auditors: Consolidated Statements of Income for each of the three years in the period ended January 31, 1997 26 Consolidated Balance Sheets at January 31, 1997 and 1996 27 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended January 31, 1997 28 Consolidated Statements of Cash Flows for each of the three years in the period ended January 31, 1997 29 Notes to Consolidated Financial Statements, except Note 8 30-34 Not Covered by Report of Independent Auditors: Note 8 - Quarterly Financial Data (Unaudited) 34 All schedules have been omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements, including the notes thereto. 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: April 21, 1997 BY:/s/David D. Glass David D. Glass President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: DATE: April 21, 1997 /s/S. Robson Walton S. Robson Walton Chairman of the Board DATE: April 21 , 1997 /s/David D. Glass David D. Glass President, Chief Executive Officer and Director DATE: April 21 , 1997 /s/Donald G. Soderquist Donald G. Soderquist Vice Chairman, Chief Operating Officer and Director DATE: April 21, 1997 /s/Paul R. Carter Paul R. Carter Executive Vice President, President - Wal-Mart Realty Company and Director DATE: April 21, 1997 /s/John B. Menzer John B. Menzer Executive Vice President and Chief Financial Officer (Principal Financial Officer) DATE: April 21, 1997 /s/James A. Walker, Jr. James A. Walker, Jr. Senior Vice President and Controller (Principal Accounting Officer) DATE: April 21, 1997 /s/John A. Cooper, Jr. John A. Cooper, Jr. Director DATE: April 21, 1997 /s/Stephen Friedman Stephen Friedman Director DATE: April 21, 1997 _________________________________ Stanley C. Gault Director DATE: April 21, 1997 /s/Frederick S. Humphries Frederick S. Humphries Director DATE: April 21, 1997 /s/E. Stanley Kroenke E. Stanley Kroenke Director DATE: April 21, 1997 /s/Elizabeth A. Sanders Elizabeth A. Sanders Director DATE: April 21, 1997 /s/Jack C. Shewmaker Jack C. Shewmaker Director DATE: April 21, 1997 /s/Paula Stern Paula Stern Director DATE: April 21, 1997 /s/John T. Walton John T. Walton Director EX-10 2 WAL-MART STORES, INC. RESTRICTED STOCK PLAN Purpose. Wal-Mart Stores, Inc. ("Wal-Mart") believes it is important to provide incentives to Wal-Mart's Associates through participation in the ownership of Wal-Mart. This Restricted Stock Plan (the "Plan") is established to provide incentives to those Associates receiving Awards under this Plan to enhance their job performance, to remain or become associated with Wal-Mart and its Affiliates, and to increase the success of Wal-Mart. The Plan is not limited to executive officers of Wal-Mart, but will be available to provide incentives to any Associate that the Committee believes has made or may make a significant contribution to Wal-Mart or an Affiliate of Wal-Mart. Definitions. When used in the Plan, the following words have the definitions given to them below. "Affiliate" means any corporation, company limited by shares, partnership, limited liability company, business trust, other entity, or other business association that is controlled by Wal-Mart. "Associate" means any individual who is employed by Wal-Mart or one of its Affiliates. "Award" means the award of Restricted Stock under this Plan and the terms and conditions on which that award is made. "Board of Directors" means the Board of Directors of Wal-Mart. "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "Committee" means (1) as to Associates who are Section 16 Persons, the Compensation Committee and 2) as to all other Associates, the committee that administers the Wal-Mart Stores, Inc. Stock Option Plan of 1994 or any successor stock option plan for persons other than Section 16 Persons. "Compensation Committee" means the Compensation and Nominating Committee of the Board of Directors. "Dividend Plan" means the Wal-Mart Stores, Inc. Dividend Reinvestment Plan. "Recipient" means an Associate who has received an Award. "Restricted Stock" means Shares awarded to a Recipient under this Plan that remain subject to a Restriction and all non-cash proceeds of such Shares that become and remain subject to a Restriction. "Restriction" means the contractual condition(s) contained in an Award that if not met will result in the forfeiture to Wal-Mart of some or all of the Shares issued to the Recipient pursuant to such Award and the non-cash proceeds of such Shares. "Section 16 Person" means any Associate who is required to file reports under Section 16 of the Securities Exchange Act of 1934, as amended. "Shares" means shares of the Common Stock, $.10 par value per share, of Wal-Mart. Shares Subject to the Plan.Wal-Mart has reserved a total of 10,000,000 Shares for issuance under the Plan. These Shares may be authorized, but unissued Shares, or treasury Shares held by Wal-Mart or an Affiliate. Any Shares previously awarded to Recipient that have been forfeited to Wal-Mart may be awarded again under the Plan. No fractional shares may be issued under the Plan. If a stock split occurs with respect to the Shares, the number of Shares reserved for issuance pursuant to the Plan shall be proportionately increased. If a reverse stock split occurs with respect to the Shares, the number of Shares reserved for issuance pursuant to the Plan shall be proportionately decreased. Administration. The Committee will administer the Plan and make Awards. The Committee shall have these duties as to the Plan: (1) to establish any rules, procedures, and written forms that will govern the Plan and assist in the Plan's general administration; (2) when a situation is not expressly addressed by the Plan, to interpret the Plan's pertinent provisions and apply them to the situation; (3) when a situation is not expressly addressed by the terms of an Award or those terms are subject to interpretation, to interpret the pertinent terms of that Award and apply them to the situation; (4) to assist in the resolution of any dispute arising about the Plan or an Award; (5) to recommend amendments of the Plan to the Board of Directors; (6) to determine those Associates to whom Awards will be made; (7) to set the terms and conditions of those Awards; (8) to amend the terms of an Award; (9) to waive any conditions or obligations of a Recipient under or with respect to an Award; and (10) to administer the terms of each Award made and monitor the compliance of the Recipient with the terms and conditions of the Award. The Committee may act at its discretion in the discharge of the foregoing duties. The Committee will not have the right to amend the terms or conditions of any Award without the consent of the Recipient if the amendment would affect the terms and conditions of the Award in a materially adverse manner unless the Committee has expressly retained the right to do so in the terms and conditions of the Award. Subject to the foregoing, the Committee may amend any Award under which a Recipient still holds Restricted Stock if the Committee determines such amendment is in the best interests of Wal-Mart. If an Award is intended to qualify for the performance-based compensation exception under Section 162(m)(4)(C) of the Code, the Compensation Committee will exercise its discretion to qualify the Award for such exception. The Awards. (1) Wal-Mart, acting through the Committee and consistent with the purposes of this Plan, may make Awards to such Associates as the Committee may determine in its sole discretion. (2) Each Award shall have those terms and conditions of Awards that are expressly set forth in, or are required, by this Plan and such other terms and conditions as the Committee making the Award may determine in its discretion. (3) During the Restriction period as to any Recipient's Restricted Stock, the Recipient shall receive the dividends paid on the Restricted Stock and shall not be required to return such dividends to Wal-Mart in the event of the forfeiture of the Restricted Stock. In addition, during the Restriction period as to any Recipient's Restricted Stock, the Recipient shall receive the proceeds of the Restricted Stock in any stock split, reverse stock split, recapitalization, or other change in the capital structure of Wal-Mart, which proceeds shall automatically and without need for any other action become Restricted Stock and be subject to the Restriction then existing as to the Recipient's Restricted Stock. Such Restriction will thereafter apply proportionately to all of the Recipient's Restricted Stock, including such proceeds. (4) The Recipient shall be entitled to vote the Restricted Stock during the Restriction period. (5) The Restricted Stock will be issued to each Recipient subject to the understanding that, during the Restriction period, the Recipient shall not have the right to sell, transfer, assign, convey, pledge, hypothecate, grant any security interest in or mortgage on, or otherwise dispose of or encumber any shares of Restricted Stock or any interest therein. As a result of such retention of rights in the Restricted Stock by Wal-Mart, except as required by any law, neither any shares of the Restricted Stock nor any interest therein shall be subject in any manner to any forced or involuntary sale, transfer, conveyance, pledge, hypothecation, encumbrance, or other disposition or to any charge, liability, debt, or obligation of the Recipient, whether as the direct or indirect result of any action of the Recipient or any action taken in any proceeding, including any proceeding under any bankruptcy or other creditors' rights law. Any action attempting to effect any such transaction shall be null, void, and without effect. (6) Unless expressly provided for in the Award made to a Recipient, any Restricted Stock held by a Recipient at the time the Recipient ceases to be an Associate for any reason whatsoever shall be forfeited by the Recipient to Wal-Mart and automatically re-conveyed to Wal-Mart. (7) The Committee may withhold any amounts necessary to collect any withholding taxes with respect to any Award or upon the fulfillment of the Restriction in such Award. These provisions may include, at the discretion of the Committee, the withholding of shares of the Restricted Stock granted in the Award to provide for payment of the withholding amount. (8) The making of Awards and issuance of any Restricted Stock is subject to compliance by Wal-Mart with all applicable laws. Wal-Mart need not issue or transfer Restricted Stock pursuant to the Plan unless Wal-Mart's legal counsel has approved all legal matters in connection with the issuance and delivery of the Restricted Stock. (9) Once the conditions in a Restriction are met as to any shares of Restricted Stock held by a Recipient, those Shares shall be free of all of the terms and conditions of the related Award and the Recipient shall be entitled to hold and dispose of the Shares free of any and all restrictions, except any restrictions on the transfer or disposition of such Shares as are imposed by applicable law. Evidence of Share Ownership. The Restricted Stock will be book-entry shares only unless the Committee decides to issue certificates to evidence shares of the Restricted Stock. Any stock certificate or certificates representing the Restricted Stock issued to a Recipient (each a "Certificate") that is so issued shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THE WAL-MART STORES, INC. RESTRICTED STOCK PLAN (THE "PLAN") AND ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS ON THEIR TRANSFER AND TO FORFEITURE TO WAL-MART STORES, INC. IF CERTAIN CONDITIONS ARE NOT MET. SUCH RESTRICTIONS AND CONDITIONS ARE SET FORTH IN THE PLAN AND IN THE AWARD PURSUANT TO WHICH SUCH SHARES WERE ISSUED TO THE REGISTERED HOLDER THEREOF. Wal-Mart will place stop-transfer instructions with respect to all Restricted Stock on its stock transfer records. Any Certificate issued will be held in escrow by the Committee for the mutual benefit of the Recipient and Wal-Mart in accordance with such rules for such escrow as the Committee may establish pending the fulfillment of the Restriction and compliance with the other terms and conditions of the Award. If any shares of Restricted Stock are forfeited in accordance with the terms and conditions of the Award and this Plan, the forfeited shares of Restricted Stock shall be automatically re-conveyed to Wal-Mart. Any Certificate representing the forfeited shares of Restricted Stock shall be canceled. The Recipient must deliver to the Committee a stock power, executed in blank, relating to the shares of the Restricted Stock at the time the Award is granted and the Restricted Stock issued. Such a stock power must be given to the Committee as to any Certificate issued to a Recipient. Section 162(m)(4)(C) Matters. The Compensation Committee may grant an Award that provides for a Restriction as to Restricted Stock that is based on performance-based criteria and that is intended to qualify for the performance-based exception under Section 162(m)(4)(C) of the Code (a "162 Award"). In granting any 162 Award, the Compensation Committee shall comply fully with the regulations promulgated with respect to Section 162(m) of the Code. Limitations of Wal-Mart's and the Affiliates' Liability and Obligations. Receiving an Award or being the owner of Restricted Stock shall not: (a) give the Recipient any rights except as expressly set forth in this Plan or in the Award and except as a stockholder of Wal-Mart with respect to the Restricted Stock alone; (b) be considered a contract of employment or give the Recipient any right to continued employment, or to hold any position, with Wal-Mart or any Affiliate; (c) create any fiduciary or other obligation of Wal-Mart or any Affiliate to take any action or provide to the Recipient any assistance or dedicate or permit the use of any assets of Wal-Mart or any Affiliate that would permit the Recipient to be able to attain any performance criteria stated in the Recipient's Award; (d) create any trust or any fiduciary or other duty or obligation of Wal-Mart or any Affiliate to engage in any particular business, continue to engage in any particular business, engage in any particular business practices, or sell any particular product or products; or (e) create any obligation of Wal-Mart or any Affiliate that shall be greater than the obligations of Wal-Mart or such Affiliate to any general unsecured creditor of Wal-Mart or the Affiliate. The entry into, the change of, or a discontinuation of a particular business, line of business, business practice, or transaction shall not be, and shall not be deemed to be, an amendment or termination of this Plan or any Award. If Wal-Mart or an Affiliate terminates a Recipient's employment or other position with Wal-Mart or the Affiliate, the potential value of any Restricted Stock that must be returned to Wal-Mart will not be an element of any damages that the Recipient may have for any termination of employment or other relationship in violation of any contractual or other rights the Recipient may have. No Liability of Committee Members. No member of the Committee shall be personally liable by reason of this Plan, any Award granted hereunder, or any agreement or other instrument entered into or executed by the Committee member in his or her capacity as a member of the Committee nor as a result of any mistake of judgment made in good faith. Wal-Mart shall indemnify and hold harmless each member of the Committees and each other officer and director of Wal-Mart or any Affiliate that has any duty or power relating to the administration of this Plan against any liability, obligation, cost or expense incurred by such person arising out of any act or omission to act in connection with the Plan or any Award unless that act or omission to act constitutes gross negligence, malfeasance, bad faith or fraud of such person. Amendment and Termination of the Plan. The Board of Directors may amend or terminate this Plan at any time without the approval of the Recipients or any other person, except to the extent any such action is required to be approved by the stockholders of Wal-Mart in connection with any outstanding or future 162 Awards. No Award as to which Restricted Stock remains outstanding at the time of any amendment or termination of the Plan will be affected by such amendment or termination. Governing Law. This Plan shall be governed by and construed in accordance with the laws of the State of Arkansas, except that any matters relating to the internal governance of Wal-Mart shall be governed by the General Corporation Law of Delaware. EX-13 3 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 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. 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. 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. 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. 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. 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. 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 (except per share information) Quarters ended 1997 April 30, July 31, October 31, January 31, 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
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
EX-21 4 EXHIBIT 21 SUBSIDIARIES OF WAL-MART STORES, INC. NAME UNDER PERCENT OF WHICH DOING EQUITY BUSINESS STATE OF SECURITIES OTHER THAN SUBSIDIARY INCORPORATION OWNED SUBSIDIARY'S McLane Company, Inc., Texas 100% Wal-Mart and its subsidiaries Wal-Mart Property Company Delaware 100% NA EX-23 5 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Wal-Mart Stores, Inc. of our report dated March 21, 1997, included in the 1997 Annual Report to Shareholders of Wal-Mart Stores, Inc. We also consent to the incorporation by reference of our report dated March 21, 1997, with respect to the consolidated financial statements of Wal-Mart Stores, Inc. incorporated by reference in this Annual Report (Form 10-K) for the year ended January 31, 1997, in the following registration statements and related prospectuses. The Wholesale Club, Inc. Incentive Stock Option Plan of Wal-Mart Stores, Inc. Form S-8 File No. 33-42617 Associate Stock Purchase Plan of Wal-Mart Stores, Inc. Form S-8 File No. 2-64662 Stock Option Plan of 1984 of Wal-Mart Stores, Inc., as Form S-8 File No. 2-94358 amended and 33-43315 Stock Option Plan of 1994 of Wal-Mart Stores, Inc. Form S-8 File No. 33-55325 Debt Securities and Pass- Through Certificates of Wal-Mart Stores, Inc. Form S-3 File No. 33-55725 Director Compensation Plan of Wal-Mart Stores, Inc. Form S-8 File No. 333-24259 Debt Securities of Wal-Mart Stores, Inc. Form S-3 File No. 33-53125 Dividend Reinvestment and Stock Purchase Plan of Wal-Mart Stores, Inc. Form S-3 File No. 333-2089 ERNST & YOUNG LLP Tulsa, Oklahoma April 18, 1997 EX-27 6
5 YEAR JAN-31-1997 JAN-31-1997 883 0 845 0 15,897 17,993 23,182 4,849 39,604 10,957 0 0 0 228 16,915 39,604 104,859 106,146 83,663 101,296 0 0 845 4,850 1,794 3,056 0 0 0 3,056 1.33 1.33
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