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 July 31, 1996.
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)
(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 periods 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 -- 2,293,719,958 shares as of July 31, 1996.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
<CAPTION>
July 31, January 31,
1996 1996
ASSETS (Unaudited) (*Note)
<S> <C> <C>
Cash and cash equivalents $ 24 $ 83
Receivables 879 853
Inventories 16,375 15,989
Other current assets 680 406
Total current assets 17,958 17,331
Property, plant and equipment 22,226 20,850
Less accumulated depreciation 4,348 3,752
Net property, plant and equipment 17,878 17,098
Property under capital leases 2,629 2,476
Less accumulated amortization 736 680
Net property under capital leases 1,893 1,796
Other assets and deferred charges 1,169 1,316
Total assets $38,898 $37,541
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper $ 1,823 $ 2,458
Accounts payable 7,204 6,442
Other current liabilities 2,641 2,554
Total current liabilities 11,668 11,454
Long-term debt 8,496 8,508
Long-term obligations under capital leases 2,204 2,092
Deferred income taxes and other 739 731
Common stock and capital in excess of par value 774 774
Retained earnings 15,428 14,394
Foreign currency translation adjustment ( 411) ( 412)
Total shareholders' equity 15,791 14,756
Total liabilities and shareholders'
equity $38,898 $37,541
</TABLE>
[FN]
<F1>
See accompanying notes to condensed consolidated financial statements.
<F2>
*Note: The balance sheet at January 31, 1996, 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 Six Months Ended
July 31, July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $25,587 $22,723 $48,359 $43,163
Other income - net 257 284 487 497
25,844 23,007 48,846 43,660
Costs and expenses:
Cost of sales 20,376 18,095 38,440 34,290
Operating, selling
and general and
administrative
expenses 4,130 3,693 7,941 7,070
Interest costs:
Debt 163 165 332 320
Capital leases 55 47 106 93
24,724 22,000 46,819 41,773
Income before income taxes 1,120 1,007 2,027 1,887
Provision for income taxes 414 374 750 700
Net income $ 706 $ 633 $ 1,277 $ 1,187
Net income per share $ .31 $ .28 $ .56 $ .52
Dividends per share $ .0525 $ .05 $ .105 $ .10
Beginning of the year
shareholders' equity $14,756 $12,726 $14,756 $12,726
Return for the period
on beginning of the
year shareholders'
equity 4.78% 4.97% 8.65% 9.33%
Average number of
common shares
outstanding 2,294 2,296 2,293 2,296
</TABLE>
[FN]
<F1>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
<CAPTION>
Six Months Ended July 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,277 $ 1,187
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 707 604
Increase in inventories ( 385) ( 887)
Increase in accounts payable 778 411
Noncash items and other 68 ( 462)
Net cash provided by operating activities 2,445 853
Cash flows from investing activities:
Net capital additions ( 1,395) ( 1,710)
Other investing activities 40 1
Net cash used in investing activities ( 1,355) ( 1,709)
Cash flows from financing activities:
(Decrease)increase in commercial paper ( 614) 325
Proceeds from issuance of long-term debt - 777
Payment of long-term debt ( 259) ( 5)
Dividends paid ( 241) ( 230)
Other financing activities ( 35) ( 50)
Net cash (used in) provided by financing
activities ( 1,149) 817
Net decrease in cash and cash equivalents ( 59) ( 39)
Cash and cash equivalents at beginning
of year 83 45
Cash and cash equivalents at end of
period $ 24 $ 6
Supplemental Disclosure of Cash Flow Information:
Income tax paid $ 784 $ 973
Interest paid 454 406
Capital lease obligations incurred 170 108
</TABLE>
[FN]
<F1>
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 July 31, 1996, and the
related condensed consolidated statements of income and cash flows for
the periods ended July 31, 1996 and 1995 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
July 31, 1996, would have been $321 million higher than reported, an
increase in the LIFO reserve of $10 million from January 31, 1996, and an
increase of $5 million from April 30, 1996. If the FIFO method had been
used at July 31, 1995, inventories would have been $364 million higher
than reported, an increase in the LIFO reserve of $13 million from
January 31, 1995, and an increase of $5 million from April 30, 1995.
NOTE C. SUBSEQUENT EVENTS
During the second quarter of fiscal 1997, the Company entered into an
agreement to sell six photo finishing plants and accompanying
distribution network and entered into long-term photo finishing services
and supply agreements with the purchaser. The Company anticipates
receiving proceeds of approximately $464 million from the sale which
should be consummated during the Company's third quarter. A significant
portion of the proceeds will be allocated to the long-term service and
supply agreements and recognized in income in future periods.
Subsequent to July 31, 1996, the Company acquired certain stock of a real
estate investment trust (REIT) and third party investors acquired the
balance of the REIT's stock for $632 million. The primary effect of these
and certain related transactions on the Company's consolidated financial
statements in the third quarter of fiscal 1997 will be the recognition of
the cash proceeds and the recognition of the corresponding outside
investor interest in the REIT.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Increased sales for the six month period ending July 31, 1996 were
attributable to an increase in comparable sales in the Wal-Mart stores
and Supercenters of 5%, an increase in Sam's Clubs comparable sales of
1%, and to the Company's expansion activities. Domestic expansion for
the six month period included 22 new Wal-Mart stores, five new
Supercenters, five new Sam's Clubs (four were closed), along with the
conversion of 59 Wal-Mart stores to Supercenters, and the relocation or
expansion of nine Wal-Mart stores. International expansion included the
addition of three Wal-Mart stores in Canada, one Supercenter in
Argentina, and eight Mexican units. International sales accounted for 4%
of total sales in fiscal 1997 compared with 3% in fiscal 1996. Sam's
Clubs sales as a percentage of total sales fell from 21% in fiscal 1996
to 19% in fiscal 1997.
At July 31, 1996 the Company had 1,958 Wal-Mart stores, 303 Supercenters,
and 434 Sam's Clubs in the United States , along with four units in
Argentina, five units in Brazil, 134 Wal-Mart stores in Canada, 134 units
in Mexico and 11 units in Puerto Rico. This compares with 1,977 Wal-Mart
stores, 188 Supercenters and 431 Sam's Clubs in the United States, along
with one unit in Brazil, 127 Wal-Mart stores in Canada, 107 units in
Mexico, and eight units in Puerto Rico at the same time last year.
On August 12, 1996, the Company grand opened a Supercenter and Sam's Club
in Shenzhen, China under joint venture agreements.
The Company's gross profit as a percentage of sales was 20.37% in the
second quarter of fiscal 1997, equal with the second quarter of fiscal
1996, and down slightly from 20.56% for the first six months in fiscal
1996 to 20.51% in fiscal 1997. The gross profit for domestic operations
was up for the quarter and for the six month period ended July 31,
1996, compared with the previous year periods. The increase is primarily
due to changes in the percentages of total sales generated by certain
operating units. 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, general, and administrative expenses decreased as a
percentage of sales from 16.25% during the second quarter of fiscal 1996
to 16.14% during the second quarter of fiscal 1997, and increased
slightly from 16.38% for the six month period ended July 31, 1995, to
16.42% for the six month period ended July 31, 1996.
In the first quarter of fiscal 1997, 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." 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
effect on the Company's financial position or results of operations.
The Company also adopted SFAS No. 123 "Accounting for Stock-Based
Compensation" in the first quarter of fiscal 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 elected to continue to use the measurement prescribed by the
former standard, and accordingly, the pronouncement had no effect on the
Company's financial position or results of operations. The Company will
present the supplemental disclosure in the fiscal 1997 annual report.
Interest expense increased $6 million in the second quarter of fiscal
1997 and $25 million in the six month period ended July 31, 1996, when
compared with the same periods in fiscal 1996. As a percentage of sales,
interest expense is down for both the quarter and six month period ended
July 31, 1996. Interest expense is trending downward primarily due to
lower short term borrowings resulting from an increase in operating cash
flow.
Liquidity and Capital Resources
Cash flows provided by operating activities were $2,445 million during
the first six months of fiscal 1997 compared with $853 million in the
first six months of fiscal 1996. The increase is primarily due to a
greater increase in accounts payable and accrued liabilities and a
smaller increase in inventories during the first six months of fiscal
1997. The increased operating cash flow provided an excess of $809
million after investing $1,395 million in capital assets and paying
dividends of $241 million.
Under shelf registration statements previously filed with the Securities
and Exchange Commission, the Company may issue debt securities
aggregating $751 million. Cash flow provided by operations along with
available debt under the shelf registration statements and the Company's
ability to obtain short term financing should be adequate to fund the
Company's expansion program and to provide for other cash needs.
During the third quarter, the Company anticipates receiving net cash
proceeds of approximately $1,096 million from the transactions disclosed
in note C of the "Notes to Condensed Consolidated Financial Statements"
included on page 5 of this Form 10-Q. The Company plans to use the cash
proceeds received to reduce indebtedness.
At July 31, 1996, the Company had total assets of $38,898 million
compared with $37,541 million at January 31, 1996. Working capital at
July 31, 1996 was $6,290 million up $413 million from January 31, 1996.
The ratio of current assets to current liabilities was 1.5 to 1.0 at July
31, 1996, January 31, 1996 and July 31, 1995.
PART II. OTHER INFORMATION
Item 4. Submission of Matter to a Vote of Security Holders
The Company's Annual Shareholders' Meeting was held June 7, 1996, in
Fayetteville, Arkansas. At that meeting, the shareholders elected for
one-year terms all persons nominated for directors as set forth in the
Company's proxy statement dated April 10, 1996. The table below sets
forth the results of voting at the Annual Meeting:
<TABLE>
Against or Broker
For Withheld Abstentions Non-Votes
Election of Directors:
<S> <C> <C> <C> <C>
Paul R. Carter 2,048,832,222 10,452,011 0 0
John A. Cooper, Jr. 2,049,349,991 9,934,242 0 0
Stephen Friedman 2,048,918,136 10,366,097 0 0
Stanley C. Gault 2,045,995,750 13,288,483 0 0
David D. Glass 2,048,411,315 10,872,918 0 0
Dr. Frederick S. Humphries 2,048,778,486 10,505,747 0 0
E. Stanley Kroenke 2,048,916,059 10,368,174 0 0
Elizabeth A. Sanders 2,049,169,886 10,114,347 0 0
Jack C. Shewmaker 2,046,074,047 13,210,186 0 0
Donald G. Soderquist 2,049,080,378 10,203,855 0 0
Dr. Paula Stern 2,048,734,428 10,549,805 0 0
John T. Walton 2,049,147,991 10,136,242 0 0
S. Robson Walton 2,049,166,659 10,117,574 0 0
</TABLE>
Item 5. Other Information
The Private Securities Litigation Reform Act of 1995 ("the Act") provides
a safe harbor for forward-looking statements made by or on behalf of the
Company. All statements, other than statements of historical facts, 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. To take advantage of the safe harbor provided by the
Act, Wal-Mart is identifying certain factors that 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,
political instability, 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.
Item 6. Exhibits and Reports on Form 8-K
(a) The following document is filed as 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
July 31, 1996.
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: September 9, 1996 /s/David D. Glass________________
David D. Glass
President and
Chief Executive Officer
Date: September 9, 1996 /s/John B. Menzer________________
John B. Menzer
Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 24
<SECURITIES> 0
<RECEIVABLES> 879
<ALLOWANCES> 0
<INVENTORY> 16,375
<CURRENT-ASSETS> 17,958
<PP&E> 22,226
<DEPRECIATION> 4,348
<TOTAL-ASSETS> 38,898
<CURRENT-LIABILITIES> 11,668
<BONDS> 0
0
0
<COMMON> 230
<OTHER-SE> 15,561
<TOTAL-LIABILITY-AND-EQUITY> 38,898
<SALES> 48,359
<TOTAL-REVENUES> 48,846
<CGS> 38,440
<TOTAL-COSTS> 46,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 438
<INCOME-PRETAX> 2,027
<INCOME-TAX> 750
<INCOME-CONTINUING> 1,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,277
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
