SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 30, 1997.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______to______.
Commission file number 1-6991
WAL-MART STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware ___________71-0415188__________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
702 S.W. Eighth Street
Bentonville, Arkansas ____________72716______________
(Address of principal executive offices)
(501) 273-4000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter periods that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__ No _____
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by the court.
Yes _____ No _____
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.10 Par Value -- 2,264,666,319 shares as of April 30,
1997.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
<CAPTION>
April 30, January 31,
1997 1997
ASSETS (Unaudited) (*Note)
<S> <C> <C>
Cash and cash equivalents $ 726 $ 883
Receivables 854 845
Inventories 15,919 15,897
Other current assets 334 368
Total current assets 17,833 17,993
Property, plant and equipment 23,667 23,182
Less accumulated depreciation 5,172 4,849
Net property, plant and equipment 18,495 18,333
Property under capital leases 2,803 2,782
Less accumulated amortization 819 791
Net property under capital leases 1,984 1,991
Other assets and deferred charges 1,465 1,287
Total assets $39,777 $39,604
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 7,747 $ 7,628
Other current liabilities 4,251 3,329
Total current liabilities 11,998 10,957
Long-term debt 6,957 7,709
Long-term obligations under capital leases 2,307 2,307
Deferred income taxes and other 473 463
Minority Interest 1,060 1,025
Common stock and capital in excess of par value 762 775
Retained earnings 16,653 16,768
Foreign currency translation adjustment ( 433) ( 400)
Total shareholders' equity 16,982 17,143
Total liabilities and shareholders'
equity $39,777 $39,604
</TABLE>
[FN]
<F1>
See accompanying notes to condensed consolidated financial statements.
<F2>
*Note: The balance sheet at January 31, 1997, has been derived from the
audited financial statements at that date, and condensed.
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in millions except per share data)
<CAPTION>
Three Months Ended April 30,
1997 1996
<S> <C> <C>
Net sales $25,409 $22,772
Other income - net 275 235
25,684 23,007
Costs and expenses:
Cost of sales 20,127 18,032
Operating, selling and general
and administrative expenses 4,333 3,848
Interest costs:
Debt 134 169
Capital leases 55 51
24,649 22,100
Income before income taxes 1,035 907
Provision for income taxes 383 336
Net income $ 652 $ 571
Net income per share $ .29 $ .25
Dividends per share $ .0675 $ .0525
Average shareholders' equity $17,063 $14,986
Return for the period on average
shareholders' equity 3.82% 3.81%
Average number of common shares outstanding 2,276 2,293
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
<CAPTION>
Three Months Ended April 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 652 $ 571
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 366 348
Increase in inventories ( 44) ( 217)
Increase in accounts payable 92 948
Noncash items and other 217 ( 10)
Net cash provided by operating activities 1,283 1,640
Cash flows from investing activities:
Net capital additions ( 512) ( 733)
Other investing activities ( 169) 63
Net cash used in investing activities ( 681) ( 670)
Cash flows from financing activities:
Decrease in commercial paper - ( 884)
Dividends paid ( 150) ( 120)
Purchase of Company Stock ( 638) ( 2)
Other financing activities 29 ( 15)
Net cash used in financing
activities ( 759) ( 1,021)
Net decrease in cash and
cash equivalents ( 157) ( 51)
Cash and cash equivalents at beginning
of year 883 83
Cash and cash equivalents at end of
first quarter $ 726 $ 32
Supplemental Disclosure of Cash Flow Information:
Income tax paid $ 260 $ 105
Interest paid 200 225
Capital lease obligations incurred 32 35
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
WAL-MART STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of April 30, 1997, and
the related condensed consolidated statements of income and cash flows
for the three month periods ended April 30, 1997 and 1996, are unaudited.
In the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Interim results
are not necessarily indicative of results for a full year. Certain
reclassifications have been made to the prior year's income statement to
conform to current presentation.
The financial statements and notes are presented in accordance with
the rules and regulations of the Securities and Exchange Commission and
do not contain certain information included in the Company's annual
report. Therefore, the interim statements should be read with the annual
report.
NOTE B. INVENTORIES
Inventories are valued at the lower of cost or market value, using
the last-in, first-out (LIFO) method for substantially all inventories.
Quarterly inventory determinations under LIFO are partially based on
assumptions as to inventory levels at the end of the fiscal year, sales
and the rate of inflation for the year. If the first-in, first-out
(FIFO) method of accounting had been used by the Company, inventories at
April 30, 1997 would have been $304 million higher than reported, an
increase in the LIFO reserve of $8 million from January 31, 1997. If the
FIFO method had been used at April 30, 1996, inventories would have been
$316 million higher than reported, an increase in the LIFO reserve of $5
million from January 31, 1996.
NOTE C. SUBSEQUENT EVENT
In June 1997, the Company announced an agreement that, if
consummated will result in a merger of the Mexican joint venture
companies of Wal-Mart Stores, Inc. and Cifra, S.A. de C.V.(Cifra) with
and into Cifra. Prior to the merger, Cifra will pay a dividend to its
existing shareholders in the amount of $300 million. Under the
agreement, the Company will receive approximately 38% to 40% of the
outstanding voting shares of Cifra for the Company's joint venture
interest. The Company will make a public tender offer of approximately
$1.2 billion to acquire an additional 12% to 13% of Cifra's outstanding
voting shares. After the merger and tender offer, the Company expects to
own a majority of the voting stock of Cifra. Consummation of the proposed
transactions are conditioned upon the approval of the proposed merger by
Cifra's shareholders, receipt of applicable regulatory approvals and the
successful completion of the public tender offer. If consummated, it is
expected that Cifra's financial results will be consolidated in the
Company's consolidated financial statements. The transaction should not
have a material impact on the fiscal 1998 consolidated operating results.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The quarter ended April 30, 1997, consisted of 89 days compared to
90 days in the quarter ended April 30, 1996. In spite of one fewer day in
the quarter, sales increased 12% due to an increase in comparable store
sales of 6%, International sales increases of 32%, and the Company's
expansion activities. Domestic expansion activity in the first quarter of
fiscal 1998 included two new Wal-Mart stores, one new Supercenter, two
new Sam's Clubs, and the conversion of 17 Wal-Mart stores to
Supercenters. International expansion included the addition of three
units in Mexico. International sales accounted for 5% of total sales
this quarter compared to 4% in last year's first quarter. Sam's Clubs
sales as a percentage of total sales fell from 20% in last year's quarter
to 18% this quarter.
At April 30, 1997, the Company had 1,945 Wal-Mart stores, 362
Supercenters, and 438 Sam's Clubs in the United States, along with 6
Argentina units, 5 Brazilian units, 136 Canadian Wal-Mart stores, 2
stores in China, 2 Indonesian Supercenters (operated under a franchise
agreement), 153 units in Mexico, and 11 units in Puerto Rico. This
compares with 1,977 Wal-Mart stores, 267 Supercenters, and 432 Sam's
Clubs in the United States, along with three units in Argentina, five
units in Brazil, 134 Canadian Wal-Mart stores, 130 units in Mexico, and
11 units in Puerto Rico at the same time last year.
The Company's gross profit as a percentage of sales decreased
slightly from 20.82% in the first quarter of fiscal 1997 to 20.79% during
the first quarter of fiscal 1998. The net change is comprised of a
higher mix of food sales which have lower markon percents. This decrease
in gross profit is offset because Sam's Clubs comprised a lower
percentage of consolidated sales in fiscal 1998 at a lower contribution
to gross margin than the stores.
Operating, selling, general, and administrative expenses increased
as a percentage of sales from 16.90% during the first quarter of fiscal
1997 to 17.05% for the first quarter of fiscal 1997. The increase in the
expenses as a percentage of sales is due to higher payroll and benefit
cost resulting from investments in front end service and in setting
seasonal modulars during the first quarter. Additionally, because Sam's
Clubs expenses as a percentage of sales are lower than the overall
expense rate the decrease in Sam's Clubs sales discussed above increases
the expense rate.
Interest expense decreased $31 million in the first quarter of
fiscal 1998 compared to the same period in fiscal 1997. The decrease is
primarily due to the elimination of commercial paper enabled by enhanced
cash flows, reduced capital spending and lower inventory levels.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
January 31, 1998. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will be
excluded. The impact will not result in a change to earnings per share
for the first quarter ended April 30, 1997 and April 30, 1996, as
presented.
Liquidity and Capital Resources
Cash flows provided by operating activities were $1,283 million in
the first quarter of fiscal 1998 compared to $1,640 million in the first
quarter of fiscal 1997. The Company continues to generate substantial
operating cash flow through greater emphasis on inventory management. The
substantial operating cash flow and cash balance at the beginning of the
year enabled the Company to purchase $638 million of Company stock, pay
dividends of $150 million, and invest $512 million in capital
expenditures.
At April 30, 1997, the Company had total assets of $39,777 million
compared with $39,604 million at January 31, 1997. Working capital at
April 30, 1997 was $5,835 million down $1,201 million from January 31,
1997. The ratio of current assets to current liabilities was 1.5 to 1.0
at April 30, 1997 and April 30, 1996 and 1.6 to 1.0 at January 31, 1997.
The decrease in working capital is primarily due to the current
classification of $750 million of debt which matures in the first quarter
of fiscal 1999. Additionally, the Company has $500 million of debt
maturing in September 1997.
In March 1997, the Company announced its intention to purchase up to
$2 billion of its common stock over the next 18 months. The Company also
increased dividends by 29% in fiscal 1998 to $.27 per share. The
purchase of Company stock and the payment of dividends decreased total
shareholders' equity from January 31, 1997.
As described in the notes to the condensed consolidated financial
statements, the Company announced an agreement in which through a merger
and tender offer, it would acquire a majority of the voting stock of
Cifra S.A. de C.V. for $1.2 billion. If consummated, the transaction
should not have a material impact on the fiscal 1998 consolidated
operating results. The Company anticipates funding the tender offer with
available cash and short-term financing.
The Company anticipates that it will continue to generate
significant operating cash flow. 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. Under
shelf registration statements previously filed with the Securities and
Exchange Commission the Company may issue debt securities aggregating
$751 million. Operating cash flow along with the Company's ability to
obtain short-term or long-term financing should provide sufficient cash
to use for capital expenditures, pay dividends, meet maturing debt
demands, and continue the common stock purchase plan.
PART II. OTHER INFORMATION
Item 5. Other Information
The Private Securities Litigation Reform Act of 1995 ("the Act")
provides a safe harbor for forward-looking statements made by or on
behalf of the Company. Certain statements contained in Management's
Discussion and Analysis and in other Company filings are forward-looking
statements. These statements discuss among other things, expected growth,
future revenues, future cash flows 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.
Item 6. Exhibits and Reports on Form 8-K
(a) The following document is filed as an exhibit to this Form
10-Q:
Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the quarter ended
April 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAL-MART STORES, INC.
Date: June 10, 1997 /s/David D. Glass________________
David D. Glass
President and
Chief Executive Officer
Date: June 10, 1997 /s/John B. Menzer________________
John B. Menzer
Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
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<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1997
<CASH> 726
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<RECEIVABLES> 854
<ALLOWANCES> 0
<INVENTORY> 15,919
<CURRENT-ASSETS> 17,833
<PP&E> 23,667
<DEPRECIATION> 5,172
<TOTAL-ASSETS> 39,777
<CURRENT-LIABILITIES> 11,998
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0
0
<COMMON> 226
<OTHER-SE> 16,756
<TOTAL-LIABILITY-AND-EQUITY> 39,777
<SALES> 25,409
<TOTAL-REVENUES> 25,684
<CGS> 20,127
<TOTAL-COSTS> 24,649
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</TABLE>
