SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended October 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period From to
Commission file number 1-6991
WAL-MART STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0415188
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
702 S.W. Eighth Street
Bentonville, Arkansas 72716
(Address of principal executive offices) (zip code)
(501) 273-4000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by the court.
Yes No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.10 Par Value -- 2,294,544,832 shares as of October 31,
1995.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
<CAPTION>
October 31, January 31,
1995 1995
ASSETS (Unaudited) (*Note)
<S> <C> <C>
Cash and cash equivalents $ 13 $ 45
Receivables 1,212 700
Recoverable costs from sale/leaseback 174 200
Inventories 18,322 14,064
Other current assets 492 329
Total current assets 20,213 15,338
Property, plant, and equipment 20,215 17,090
Less accumulated depreciation 3,543 2,782
Net property, plant, and equipment 16,672 14,308
Property under capital leases 2,253 2,147
Less accumulated amortization 650 581
Net property under capital leases 1,603 1,566
Other assets and deferred charges 1,530 1,607
Total assets $ 40,018 $ 32,819
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper $ 3,686 $ 1,795
Accounts payable 8,530 5,907
Other current liabilities 2,609 2,271
Total current liabilities 14,825 9,973
Long-term debt 8,327 7,871
Long-term obligations under capital leases 1,889 1,838
Deferred income taxes and other 886 411
Common stock and paid-in capital 769 769
Retained earnings 13,597 12,213
Foreign currency translation adjustment ( 275) ( 256)
Total shareholders' equity 14,091 12,726
Total liabilities and shareholders' equity $ 40,018 $ 32,819
</TABLE>
[FN]
<F1>
See accompanying notes to condensed consolidated financial statements.
<F2>
*Note: The balance sheet at January 31, 1995, has been taken from the
audited financial statements at that date, and condensed.
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in millions except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $22,913 $20,418 $66,077 $58,046
Other income 268 235 763 654
23,181 20,653 66,840 58,700
Costs and expenses:
Cost of sales 18,176 16,201 52,467 46,225
Operating, selling
and general and
administrative
expenses 3,801 3,340 10,871 9,356
Interest costs:
Debt 182 133 502 358
Capital leases 49 51 141 157
22,208 19,725 63,981 56,096
Income before taxes 973 928 2,859 2,604
Provision for taxes on
income 361 340 1,061 953
Net income $ 612 $ 588 $ 1,798 $ 1,651
Net income per share $ .27 $ .26 $ .78 $ .72
Dividends per share $ .05 $ .0425 $ .15 $ .1275
Beginning of the year
shareholders' equity $12,726 $10,753 $12,726 $10,753
Return for the period
on beginning of the
year shareholders'
equity 4.81% 5.47% 14.13% 15.36%
Average number of
common shares
outstanding 2,296 2,299 2,296 2,299
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
<CAPTION>
Nine Months Ended October 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $1,798 $1,651
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 938 757
Increase in inventories ( 4,141) ( 4,704)
Increase in accounts payable 2,496 3,689
Noncash items and other ( 547) ( 256)
Net cash provided by operating activities 544 1,137
Cash flows from investing activities:
Net additions of property, plant
and equipment ( 2,832) ( 2,174)
Acquisition of Woolworth Canada, Inc. assets - ( 379)
Recoverable sale/leaseback expenditures - ( 471)
Investment in unconsolidated international
affiliates ( 34) ( 399)
Other investing activities 188 42
Net cash used in investing activities ( 2,678) ( 3,381)
Cash flows from financing activities:
Increase in commercial paper 1,886 1,185
Proceeds from issuance of long-term debt 822 1,693
Payment of long-term debt ( 131) ( 270)
Dividends paid ( 344) ( 293)
Other financing activities ( 131) ( 74)
Net cash provided by financing activities 2,102 2,241
Net decrease in cash and cash equivalents ( 32) ( 3)
Cash and cash equivalents at beginning of year 45 20
Cash and cash equivalents at end of period $ 13 $ 17
Supplemental Disclosure of Cash Flow Information:
Income tax paid $1,285 $1,053
Interest paid 644 462
Capital lease obligations incurred 137 128
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
WAL-MART STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of October 31, 1995,
and the condensed consolidated statements of income and cash flows for
the related periods ended October 31, 1995 and 1994 are unaudited. In
the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Interim results
are not necessarily indicative of results for a full year.
The financial statements and notes are presented in accordance
with the rules and regulations of the Securities and Exchange
Commission and do not contain certain information included in the
Company's annual report. Therefore, the interim statements should be
read with the annual report.
NOTE B. INVENTORIES
Inventories are valued at the lower of cost or market value, using
the last-in, first-out (LIFO) method for substantially all inventories.
Quarterly inventory determinations under LIFO are partially based on
assumptions as to inventory levels at the end of the fiscal year, sales
and the rate of inflation for the year. If the first-in, first-out
(FIFO) method of accounting had been used by the Company, inventories
at October 31, 1995 would have been $364 million higher than reported,
an increase in the LIFO reserve of $13 million from January 31, 1995,
and unchanged from July 31, 1995. If the FIFO method had been used at
October 31, 1994, inventories would have been $449 million higher than
reported, a decrease of $20 million from January 31, 1994, and a
decrease of $41 million from July 31, 1994.
NOTE C. LONG-TERM DEBT
During the nine months ended October 31, 1995, the Company sold
$250 million in aggregate principal amount of 7.00% notes due April 27,
1998, and $200 million in aggregate principal amount of 6.75% notes due
May 24, 2002, outside the United States in the European market. In
addition, the Company sold $300 million in aggregate principal amount
of 6.75% notes due May 15, 2002, under the Company's available shelf
registration statements filed with the Securities and Exchange
Commission. Pursuant to these shelf registration statements, the
Company has registered debt securities, after giving effect to the sale
of notes in the aggregate principal amounts of $300 million mentioned
above, aggregating $751 million which it may issue in the future.
Subsequent to October 31, 1995, the Company sold $250 million in
aggregate principal amount of 6.125% notes due November 21, 2000
outside the United States in the European market. The notes sold
outside the United States have not been registered under the Securities
Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Increased sales during the nine months ended October 31, 1995,
were attributable to an increase in comparable Wal-Mart and Supercenter
store sales of 6%, an increase in Sam's Clubs' comparable stores sales
of 2%, and to the Company's recent expansion activities. Domestic
expansion activity for the nine months ended October 31, 1995, included
54 new Wal-Mart stores, ten new Supercenters, eight new Sam's Clubs,
along with the conversion of 77 Wal-Mart stores to Supercenters, and
the relocation or expansion of 68 Wal-Mart stores and three Sam's
Clubs. The pattern of increased sales during the quarter ended October
31, 1995 is consistent with the growth in sales for the nine month
period discussed above. International expansion included entry into
Brazil with two Sam's Clubs, and into Argentina with one Sam's Club.
Additionally, the Company expanded in Puerto Rico with two Wal-Mart
stores and two Sam's Clubs, in Canada with the addition of six Wal-Mart
stores, and in Mexico with 24 units. International sales accounted for
3.6% of total sales during the first nine months of this year compared
to 1.6% in last year's nine month period, and 3.9% in the third quarter
of fiscal 1996 compared to 1.9% in last year's third quarter. Sam's
Clubs' sales as a percentage of total sales fell from 23.1% in fiscal
1995 to 21.1% in fiscal 1996, and fell from 22.3% in last year's third
quarter to 20.6% in this year's third quarter.
At October 31, 1995, the Company had 1,965 Wal-Mart stores, 234
Supercenters, and 432 Sam's Clubs in the United States, along with 129
Canadian Wal-Mart stores, 3 Hong Kong Value Clubs, 2 Clubs in Brazil,
one Club in Argentina, 11 units in Puerto Rico, and 120 units in
Mexico.
The Company's gross profit as a percentage of sales increased from
20.65% in the third quarter of fiscal 1995 to 20.67% during the third
quarter of fiscal 1996, and from 20.36% for the nine months ended
October 31, 1994, to 20.60% for the nine months ended October 31, 1995.
The increases were primarily due to changes in the percentages of total
sales generated by certain operating units. This increase was offset
somewhat by the charges to income from using the last-in, first-out
(LIFO) valuation for inventories as described in Note B to the
Condensed Consolidated Financial Statements. The decrease in Sam's
Clubs' sales as a percentage of total sales favorably impacts the gross
profit percentage as Sam's Clubs' gross profit percentage is lower than
the Company's overall gross profit percentage.
Operating, selling and general and administrative expenses
increased from 16.36% during the third quarter of fiscal 1995 to 16.59%
during the third quarter of fiscal 1996, and from 16.12% for the nine
months ended October 31, 1994, to 16.45% for the nine months ended
October 31, 1995. The increases were primarily due to changes in the
percentages of total sales generated by certain operating units as
discussed above. Because Sam's Clubs' expenses as a percentage of
sales are lower than the Company's overall expense rate and because
international expenses as a percentage of sales are higher than the
overall rate, the expense rate has increased.
Interest expense increased $47 million in the third quarter of
fiscal 1996 and $128 million in the nine months ended October 31, 1995
when compared to the same periods in fiscal 1995. The increases are
due to additional borrowings used to finance the Company's expansion
program and increased short term borrowing rates.
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", was issued in March, 1995. 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. This statement will
be effective for the Company's fiscal year end January 31, 1997. The
Company's existing accounting policies are such that this pronouncement
will not have a material effect on the Company's financial position or
results of operations.
"Accounting for Stock-Based Compensation", SFAS No. 123, was
issued in October, 1995, and will be effective for the Company's fiscal
year end, January 31, 1997. The statement relates to the measurement
of compensation of stock options issued to employees. The statement
gives entities a choice of recognizing related compensation expense by
adopting a new fair value method determination or to continue to
measure compensation using the former standard. If the former standard
for measurement is elected, SFAS No. 123 requires supplemental
disclosure to show the effects of using the new measurement criteria.
The Company intends to continue using the measurement prescribed by the
former standard, and accordingly, this pronouncement will not have an
effect on the Company's financial position or results of operations.
Liquidity and Capital Resources
Cash flows provided by operating activities were $544 million in
the first nine months of fiscal 1996 compared to $1,137 million in the
first nine months of fiscal 1995. The decrease is primarily due to
inventories increasing at a higher rate than accounts payable in fiscal
1996 when compared to 1995. Cash flows from operations along with
commercial paper increases of $1,886 million and long-term debt
proceeds of $822 million were used to finance capital expenditures of
$2,832 million, invest in international operations, and pay dividends.
During the nine months ended October 31, 1995, the Company sold
$250 million in aggregate principal amount of 7.00% notes due April 27,
1998, and $200 million in aggregate principal amount of 6.75% notes due
May 24, 2002 outside the United States in the European Market. In
addition, the Company sold $300 million in aggregate principal amount
of 6.75% notes due May 15, 2002 under the Company's available shelf
<PAGE>
registration statements filed with the Securities and Exchange
Commission. Pursuant to these shelf registration statements, the
Company has registered debt securities, after giving effect to the sale
of notes in the aggregate principal amount of $300 million mentioned
above, aggregating $751 million which it may issue in the future.
Subsequent to October 31, 1995, the Company sold $250 million in
aggregate principal amount of 6.125% notes due November 21, 2000
outside the United States in the European market. The notes sold
outside the United States have not been registered under the Securities
Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.
In the third quarter of fiscal 1996, the Company repaid $100
million in aggregate principal amount of 10.875% debentures due August
15, 2000. Cash flow provided by operations along with the available
debt under the shelf registration statements should be adequate to fund
the Company's expansion program, operational and other cash needs.
At October 31, 1995, the Company has total assets of $40,018
million, compared with $32,819 million at January 31, 1995. The
increase was primarily due to property additions of $2.8 billion and an
increase in inventory of $4.3 billion. Working capital at October 31,
1995 was $5,388 million, up $23 million from January 31, 1995. The
ratio of current assets to current liabilities was 1.4 to 1.0 at
October 31, 1995 and October 31, 1994, and 1.5 to 1.0 at January 31,
1995.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following document is filed an an exhibit to this Form
10-Q:
Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the quarter
ended October 31, 1995.
SIGNATURES
Pursuant to the requirements 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.
WAL-MART STORES, INC.
Date: December 5, 1995 /s/David D. Glass
David D. Glass
President and
Chief Executive Officer
Date: December 5, 1995 /s/John B. Menzer
John B. Menzer
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 1,212
<ALLOWANCES> 0
<INVENTORY> 18,322
<CURRENT-ASSETS> 20,213
<PP&E> 20,215
<DEPRECIATION> 3,543
<TOTAL-ASSETS> 40,018
<CURRENT-LIABILITIES> 14,825
<BONDS> 0
<COMMON> 229
0
0
<OTHER-SE> 13,862
<TOTAL-LIABILITY-AND-EQUITY> 40,018
<SALES> 66,077
<TOTAL-REVENUES> 66,840
<CGS> 52,467
<TOTAL-COSTS> 63,981
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 643
<INCOME-PRETAX> 2,859
<INCOME-TAX> 1,061
<INCOME-CONTINUING> 1,798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,798
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
