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.
<TABLE>
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
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
[FN]
<F1>
*1) Wal-Mart store locations relocated or expanded as Wal-Mart Supercenters.
<F2>
*2) Total Opened net of conversions of Wal-Mart stores to Supercenters.
<F>
*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.
<F4>
*4) Includes only stores and clubs that were open at least twelve months as of
January 31 of the previous year.
<TABLE>
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
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
<C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
NET SQUARE FOOTAGE
Fiscal MEXICO CANADA PUERTO RICO ARGENTINA
Year
Ended Net Additions Total* Net Additions Total Net Additions Total Net Additions Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
<C> <C> <C> <C> <C> <C>
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
</TABLE>
[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
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.
<TABLE>
Fiscal 1997 End of Year Store Counts
<CAPTION>
Discount Sam's
Stores Supercenters Clubs
<S> <C> <C> <C>
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
</TABLE>
[FN]
*Includes 3 Superamas, 25 Bodegas, 4 Aurreras, 67 Vips and 7 Suburbias
<TABLE>
11-Year Financial Summary
(Dollar amounts in millions except per share data)
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
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
</TABLE>
[FN]
* On average balances.
<TABLE>
11-Year Financial Summary
(Dollar amounts in millions except per share data)
<CAPTION>
1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
[FN]
* On average balances.
Management's Discussion and Analysis
<TABLE>
Results of Operations
Increases (Decreases) In Consolidated Operating Results Over Prior Year
(Dollars in millions, except per share data)
<CAPTION>
1997 1996
Amount % Amount %
<S> <C> <C> <C> <C>
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%
</TABLE>
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.
<TABLE>
Consolidated Statements of Income
(Amounts in millions except per share data)
<CAPTION>
Fiscal years ended January 31, 1997 1996 1995
<S> <C> <C> <C>
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
</TABLE>
[FN]
See accompanying notes.
<TABLE>
Consolidated Balance Sheets
(Amounts in millions)
<CAPTION>
January 31, 1997 1996
<S> <C> <C>
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
</TABLE>
[FN]
See accompanying notes.
<TABLE>
Consolidated Statements of Shareholders' Equity
(Amounts in millions except per share data)
<CAPTION>
Foreign
Capital in currency
Number Common excess of Retained translation
of shares stock par value earnings adjustment Total
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
[FN]
See accompanying notes.
<TABLE>
Consolidated Statements of Cash Flows
(Amounts in millions)
<CAPTION>
Fiscal years ended January 31, 1997 1996 1995
<S> <C> <C> <C>
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
</TABLE>
[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):
<TABLE>
<CAPTION>
Fiscal years ended January 31, 1997 1996 1995
<S> <C> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
Long-term debt at January 31, 1997, consist of (amounts in millions):
1997 1996
<S> <C> <C> <C>
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
</TABLE>
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):
<TABLE>
<CAPTION>
Fiscal year ending Annual
January 31, maturity
<S> <C>
1998 $ 523
1999 1,024
2000 806
2001 2,018
2002 52
Thereafter 3,809
</TABLE>
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):
<TABLE>
<CAPTION>
Fiscal years ending Minimum
January 31, rentals
<S> <C>
1998 $ 76
1999 76
2000 104
2001 100
2002 94
Thereafter 915
</TABLE>
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
<TABLE>
<CAPTION>
The income tax provision consists of the following(in millions):
1997 1996 1995
<S> <C> <C> <C>
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
</TABLE>
Items that give rise to significant portions of the deferred tax
accounts at January 31, 1997, are as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
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
</TABLE>
A reconciliation of the significant differences between the effective income
tax rate and the federal statutory rate on pretax income follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
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:
</TABLE>
<TABLE>
<CAPTION>
Option price
Shares per share Total
<S> <C> <C> <C>
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
</TABLE>
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
<TABLE>
<CAPTION>
Fiscal Operating Capital
year leases leases
<S> <C> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
Amounts in millions
(except per share information) Quarters ended
1997 April 30, July 31, October 31, January 31,
<S> <C> <C> <C> <C>
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
</TABLE>
Listings Stock Symbol: WMT
New York Stock Exchange
Pacific Stock Exchange
Toronto Stock Exchange
<TABLE>
<CAPTION>
Market Price of Common Stock
Fiscal years ended January 31,
1997 1996
Quarter Hi Low Hi Low
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
Dividends Paid Per Share
Fiscal years ended January 31,
Quarterly
1997 1996
<S> <C> <C> <C>
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
</TABLE>
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
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 883
<SECURITIES> 0
<RECEIVABLES> 845
<ALLOWANCES> 0
<INVENTORY> 15,897
<CURRENT-ASSETS> 17,993
<PP&E> 23,182
<DEPRECIATION> 4,849
<TOTAL-ASSETS> 39,604
<CURRENT-LIABILITIES> 10,957
<BONDS> 0
0
0
<COMMON> 228
<OTHER-SE> 16,915
<TOTAL-LIABILITY-AND-EQUITY> 39,604
<SALES> 104,859
<TOTAL-REVENUES> 106,146
<CGS> 83,663
<TOTAL-COSTS> 101,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 845
<INCOME-PRETAX> 4,850
<INCOME-TAX> 1,794
<INCOME-CONTINUING> 3,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,056
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>