UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 31, 1998, 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
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, 1998, was $67,141,204,191. 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.
<PAGE 2>
The registrant had 2,239,826,615 shares of Common Stock outstanding as
of March 31, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended January 31, 1998, 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 5, 1998, are incorporated by reference into
Part III and IV 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 included or incorporated by
reference 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: the cost of goods, 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 and other
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.
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WAL-MART STORES, INC.
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED JANUARY 31, 1998
PART I
ITEM 1. BUSINESS
Wal-Mart Stores, Inc. (together with its subsidiaries hereinafter
referred to as the "Company") is the United States' largest retailer
measured by total revenues. During the fiscal year ended January 31, 1998,
the Company had net sales of $117,958,000,000.
(a) Historical Development of Business
Domestically, at January 31, 1998, the Company operated 1,921
discount stores and 441 Supercenters, and 443 Sam's Clubs. A table
summarizing information concerning additions of units and square footage
for domestic discount stores, Supercenters and Sam's Clubs since January
31, 1993, is included as Schedule A to Item I found on page 11 of this
annual report.
During fiscal 1998, a merger of the Mexican joint venture
companies owned by the Company and Cifra, S.A. de C.V. ("Cifra") with and
into Cifra was consummated with an effective merger date of September 1,
1997. The Company received voting shares of Cifra equaling approximately
33.5% of the outstanding voting shares of Cifra in exchange for the
Company's joint venture interests. The Company then acquired 593,100,000
shares of the Series "A" Common Shares and Series "B" Common Shares of
Cifra in a cash tender offer. As a result of the merger and tender offer,
the Company holds approximately 51% of the outstanding voting shares of
Cifra. The results of operations for Cifra since the effective merger date
are included in the Company's results. Prior to the merger, the joint
venture units controlled by the Company were consolidated while those units
controlled by Cifra were accounted for under the equity method. See Note 6
of Notes to Consolidated Financial Statements incorporated by reference in
Item 8 of Part II found on page 16 of this annual report for additional
information regarding our acquisitions. At January 31, 1998, Cifra
operated 28 warehouse clubs, 27 Supercenters, 36 Superamas (traditional
supermarkets), 62 Bodegas (discount stores), 33 Aurreras (combination
stores including both general merchandise and grocery), 38 Suburbias
(specialty department stores) and 178 Vips (restaurants) throughout Mexico.
In fiscal 1998, the Company's subsidiary, Wal-Mart Brasil
Participacoes S.A. acquired the 40% interest of its minority joint venture
partner, Lojas Americanas S.A.(Lojas). On the same day that the minority
interest was acquired, a 5% minority interest was sold to Carlos Alberto
Sicupira, a principal in Banco de Investimentos Garantia S.A., which
indirectly controls Lojas, at the same price per share at which Lojas sold
its minority interest. Because the transaction closed on December 30,
1997, which was the joint venture's fiscal year end, the Company's results
of operations for fiscal 1998 include only the financial results of the
joint venture attributable to the Company's original ownership percentage.
See Note 6 of Notes to Consolidated Financial Statements incorporated by
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reference in Item 8 of Part II found on page 16 of this annual report for
additional information regarding our acquisitions.
In fiscal 1998, the Company along with joint-venture partner,
Dongguan Donghu Industrial Corporation, added one unit in the People's
Republic of China. With the addition of this unit, at January 31, 1998, we
operated three units under various joint venture agreements in the People's
Republic of China.
In fiscal 1998, the Company acquired the Wertkauf hypermarket
chain in Germany, as well as certain real estate. The 21 acquired
hypermarkets are one-stop shopping centers that offer a broad assortment of
high quality general merchandise and food and are similar to the Wal-Mart
Supercenter format in the United States. The transaction closed on December
30, 1997, Wertkauf's fiscal year end. Therefore, the acquired assets are
included in the January 31, 1998, consolidated balance sheet and the
results of operations will be included beginning in fiscal 1999. See Note 6
of Notes to Consolidated Financial Statements incorporated by reference in
Item 8 of Part II found on page 16 of this annual report for additional
information regarding our acquisitions. At January 31, 1998, the Company
operated 21 hypermarkets in Germany.
Internationally, at January 31, 1998, we operated nine units in
Argentina, eight units in Brazil, 144 units in Canada, three units in
China, 21 units in Germany, 402 units in Mexico and 14 units in Puerto
Rico. A table summarizing information concerning additions of units and
square footage for international units operated since fiscal 1993 is
included as Schedule B to Item 1 found on page 12 of this annual report.
(b) Financial information about the Company's industry segments
The Company is principally engaged in the operation of mass
merchandising stores which serve our customers primarily through the
operation of three segments.
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which the Company has adopted in the current year.
We identify our segments based on management responsibility within the
United States and geographically for all international units. The Wal-Mart
Stores segment includes the Company's discount stores and Supercenters in
the United States. The Sam's Club segment includes the warehouse membership
clubs in the United States. The international segment includes all
operations in Argentina, Brazil, Canada, China, Germany, Mexico and Puerto
Rico. For the financial results of the Company's operating segments, see
Note 9 of Notes to Consolidated Financial Statements incorporated by
reference in Item 8 of Part II found on page 16 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,
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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 (discount store) was opened. In fiscal 1984, the
Company opened its first three Sam's Clubs, and in fiscal 1988, its first
Wal-Mart Supercenter (combination full-line supermarket and discount
store). In fiscal 1992, the Company began its first international
initiative when the Company entered into a joint venture in which it had a
50% interest with Cifra. Our international presence has continued to
expand and at January 31, 1998, we had operations in six countries and
Puerto Rico.
WAL-MART STORES OPERATING SEGMENT
The Wal-Mart Stores segment which includes the Company's discount
stores and Supercenters in the United States had sales of $83,820,000,000,
$74,840,000,000 and $66,271,000,000 for the three years ended January 31,
1998, 1997, and 1996, respectively. During the most recent fiscal year, no
single discount store or Supercenter location accounted for as much as 1%
of total Company sales or net income. See Note 9 of Notes to Consolidated
Financial Statements incorporated by reference in Item 8 of Part II found
on page 16 of this annual report for additional information regarding our
segments.
General. We operate Wal-Mart discount stores in all 50 states.
The average size of a discount store is approximately 93,400 square feet.
Wal-Mart Supercenters are located in 28 states and the average size of a
Supercenter is 182,200 square feet. Our Supercenter prototypes range in
size from 110,000 square feet to 234,000 square feet.
Merchandise. Wal-Mart discount stores and the general
merchandise area of the Supercenters 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 domestics,
fabrics and notions, stationery and books, shoes, housewares, hardware,
electronics, home furnishings, small appliances, automotive accessories,
horticulture and accessories, sporting goods, toys, pet food and
accessories, cameras and supplies, health and beauty aids, pharmaceuticals
and jewelry. In addition, the stores offer an assortment of grocery
merchandise, with the assortment in Supercenters being broader and
including meat, produce, deli, bakery, dairy, frozen foods and dry grocery.
Nationally advertised merchandise accounts for a majority of
sales in the stores. The Company markets lines of merchandise under store
brands including but not limited to "Sam's American Choice", "One Source",
"Great Value", "Ol' Roy" and "Equate". The Company also markets lines of
merchandise under licensed brands; some of which include "Faded Glory",
"Kathie Lee", "White Stag", "Better Homes & Gardens", "Popular Mechanics",
"Catalina", "McKids", "Basic Equipment" and "House Beautiful".
</PAGE 5>
<PAGE 6>
During the fiscal year ended January 31, 1998, sales in discount
stores and Supercenters (which are subject to seasonal variance) by product
category were as follows:
PERCENTAGE
CATEGORY OF SALES
Hardgoods........................ 23
Softgoods/domestics.............. 21
Grocery, candy and tobacco....... 14
Pharmaceuticals.................. 9
Records and electronics.......... 9
Sporting goods and toys.......... 8
Health and beauty aids........... 7
Stationery ...................... 5
Shoes............................ 2
Jewelry.......................... 2
100%
Operations. Hours of operations vary by location, but generally
range from 7:00 a.m. to 11:00 p.m. six days a week, and from 10:00 a.m. to
8:00 p.m. on Sunday for discount stores and Supercenters. In addition, an
increasing number of discount stores and almost all of the Supercenters are
open 24 hours each day. Wal-Mart discount stores and Supercenters 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.
Seasonal Aspects of Operations. The Wal-Mart Stores operating
segment'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. Our discount stores compete with other discount,
department, drug, variety and specialty stores, many of which are national
chains. The Wal-Mart Supercenters compete with other supercenter-type
stores, discount stores, supermarkets and specialty stores, many of which
are national or regional chains. As of January 31, 1998, based on net
sales, the Wal-Mart Stores segment 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 "Everyday Low Price", "Item Merchandising", "Store-
Within-a-Store" 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.
Distribution. During the 1998 fiscal year, approximately 83% of
the Wal-Mart discount stores' and Supercenters' purchases were shipped from
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Wal-Mart's 38 distribution centers, seven of which are grocery distribution
centers. The balance of merchandise purchased was shipped directly to the
stores from suppliers. The 38 centers are located throughout the
continental United States. Five distribution centers are located in each of
Arkansas and Texas; three in South Carolina; two in each of California,
Florida, Indiana, Mississippi and New York; and one in each of Alabama,
Colorado, Georgia, Iowa, Illinois, Kansas, Kentucky, New Hampshire, North
Carolina, Ohio, Pennsylvania, Tennessee, Utah, Virginia and Wisconsin. Each
distribution center serves the distribution needs of approximately 80 to
100 stores, depending on the size of the center. The size of these
distribution centers ranges from approximately 600,000 to 1,700,000 square
feet.
SAM'S CLUB OPERATING SEGMENT
The Sam's Club segment which includes the warehouse membership
clubs in the United States had sales of $20,668,000,000, $19,785,000,000
and $19,068,000,000 for the three years ended January 31, 1998, 1997, and
1996, respectively. During the most recent fiscal year, no single club
location accounted for as much as 1% of total Company sales or net income.
See Note 9 of Notes to Consolidated Financial Statements incorporated by
reference in Item 8 of Part II found on page 16 of this annual report for
additional information regarding our segments.
General. The Company operates Sam's Clubs in 48 states. The
average size of a Sam's Club is approximately 120,900 square feet, and club
sizes generally range between 90,000 and 150,000 square feet of building
area.
Merchandise. Sam's offers bulk displays of name brand hardgood
merchandise, some softgoods and institutional size grocery items. Each
Sam's also carries software and electronic goods, jewelry, sporting goods,
toys, tires, stationery and books. Most clubs have fresh food departments
which include bakery, meat and produce.
Operations. 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.
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 is 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. In fiscal 1998, both business and
individual members paid an annual membership fee of $25 for the primary
membership card with a spouse card available for an additional $10.
Beginning in fiscal 1999, the annual membership fee for a business member
increased to $30 for the primary membership card with a spouse card
</PAGE 7>
<PAGE 8>
available at no additional cost. The annual membership fee for an
individual member increased to $35 for the primary membership card with a
spouse card available at no additional cost.
Seasonal Aspects of Operations. The Sam's Club operating
segment'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. Sam's Clubs compete with warehouse clubs, as well
as with discount retailers, wholesale grocers and general merchandise
wholesalers and distributors. The Company also competes with others for new
store sites. As of January 31, 1998, based on net sales, the Sam's Club
segment ranked second among all warehouse clubs.
Distribution. During fiscal 1998, approximately 60% of the Sam's
Club purchases were shipped from distribution facilities, eight of which
are food distribution facilities. The balance was shipped directly to the
clubs from suppliers. A combination of Company owned and operated
facilities and third-party facilities comprises the overall distribution
structure.
INTERNATIONAL OPERATING SEGMENT
The International Segment includes operations of the Company's
wholly-owned subsidiaries in Argentina, Canada, Germany and Puerto Rico,
joint ventures in China and majority-owned subsidiaries in Brazil and
Mexico. Sales for the three years ended January 31, 1998, 1997, and 1996
were $7,517,000,000, $5,002,000,000 and $3,712,000,000, respectively.
During the most recent fiscal year, no single location accounted for as
much as 1% of total Company sales or net income. See Note 9 of Notes to
Consolidated Financial Statements incorporated by reference in Item 8 of
Part II found on page 16 of this annual report for additional information
regarding our segments.
General. Operating formats vary by country, but include Wal-Mart
discount stores in Canada and Puerto Rico; Supercenters in Argentina,
Brazil, Mexico and under joint venture agreements in China; Sam's Clubs in
Argentina, Brazil, Mexico, Puerto Rico and under joint venture agreements
in China; Hypermarkets in Germany and Superamas, Bodegas, Aurreras,
Suburbias and Vips in Mexico.
Merchandise. The merchandising strategy in the International
operating segment is similar to that of domestic segments in the breadth
and scope of merchandise offered for sale. While brand name merchandise
accounts for a majority of sales, several store brands not found in the
United States have been developed to serve customers in the different
markets in which the International segment operates. In addition, steps
have been taken to develop relationships with local vendors in each country
to ensure reliable sources of quality merchandise.
Operations. The hours of operation for operating units in the
international division vary by country and by individual markets within
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countries depending upon local and national ordinances governing hours of
operation. While sales are primarily on a cash-and-carry basis, credit
cards or other consumer finance programs exist in certain markets to
facilitate the purchase of goods by the customer.
Seasonal Aspects of Operations. The International operating
segment's business is seasonal to a certain extent. Generally, the highest
volume of sales occurs in the fourth fiscal quarter. The seasonality of
the business varies by country due to different national and religious
holidays, festivals and customs, as well as different climatic conditions.
Competition. The International operating segment competes with a
variety of local national and international chains in the discount,
department, drug, variety, specialty and wholesale sectors of the retail
market. The segment's competitive position is determined, to a large
extent, by its ability to offer its customers everyday low prices on
quality merchandise that offers exceptional value. In Supercenters, our
ability to effectively operate the food departments has a major impact on
the segment's competitive position in the markets where we operate.
Distribution. The International segment operates export
consolidation facilities in Miami, Florida; Seattle, Washington; and
Laredo, Texas in support of product flow to its Mexican, Asian, and Latin
American markets. In addition, distribution facilities are located in
Argentina, Brazil, Canada, China and Mexico which process and flow both
imported and domestic product to the operating units. Operationally, the
principle focus is on crossdocking product, while maintaining stored
inventory is minimized. During fiscal 1998, approximately 70% of the
International merchandise purchases flowed through these distribution
facilities. The balance was shipped directly to the stores from suppliers.
A combination of Company owned and operated facilities and third-party
facilities comprises the overall distribution structure for International
logistics.
OTHER
The sales reported in the "Other" category included in Note 9 of
Notes to Consolidated Financial Statements incorporated by reference in
Item 8 of Part II found on page 16 of this annual report result from sales
to third parties by McLane Company, Inc. (McLane). McLane is a wholesale
distributor that sells its merchandise to a variety of retailers, primarily
to the convenience store industry and it also services Wal-Mart discount
stores, Supercenters and Sam's Clubs. Sales to third parties for the three
years ended January 31, 1998, 1997, and 1996 were $5,953,000,000,
$5,232,000,000 and $4,576,000,000 respectively. 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 has 19 distribution centers from which its customers,
including the Company, are served. The distribution centers are located in
the continental United States with two located in each of Arizona,
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California, Texas and Virginia, and one each in Colorado, Florida, Georgia,
Illinois, Kentucky, Mississippi, Missouri, New York, North Carolina, Utah
and Washington.
Employees (Associates).
As of January 31, 1998, the Company employed approximately 825,000
associates worldwide, with approximately 720,000 in the United States and
105,000 internationally. Most associates participate in incentive programs
which provide the opportunity to receive additional compensation based upon
the Company's productivity or profitability.
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<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
SCHEDULE A TO ITEM 1 - DOMESTIC STORE COUNT AND NET SQUARE FOOTAGE GROWTH
YEARS ENDED JANUARY 31, 1993 THROUGH 1998
<CAPTION>
STORE COUNT
Fiscal Year Wal-Mart Wal-Mart
Ended Discount Stores Supercenters Sam's Clubs Total
Ending
Jan 31, Opened Closed Conversions*1) Total Opened Total Opened Closed Total Opened*2) Closed Balance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Forward 1,714 10 208 1,932
1993 159 1 24 1,848 24 34 48 0 256 207 1 2,138
1994 141 2 37 1,950 38 72 162 1 417 304 3 2,439
1995 109 5 69 1,985 75 147 21 12 426 136 17 2,558
1996 92 2 80 1,995 92 239 9 2 433 113 4 2,667
1997 59 2 92 1,960 105 344 9 6 436 81 8 2,740
1998 37 1 75 1,921 97 441 8 1 443 67 2 2,805
</TABLE>
<TABLE>
<CAPTION>
NET SQUARE FOOTAGE
Fiscal Year Wal-Mart Wal-Mart
Ended Discount Stores Supercenters Sam's Clubs Total Sales Per
Jan 31, Net Additions Total Net Additions Total Net Additions Total Net Additions Sq. Ft. Sq.Ft.*3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Forward 128,115,368 1,914,246 23,259,348 153,288,962
1993 19,251,060 147,366,428 4,037,493 5,951,739 7,444,530 30,703,878 30,733,083 184,022,045 325.86
1994 16,185,442 163,551,870 6,762,080 12,713,819 19,670,804 50,374,682 42,618,326 226,640,371 324.42
1995 10,109,978 173,661,848 14,087,725 26,801,544 1,335,742 51,710,424 25,533,445 252,173,816 336.10
1996 8,188,223 181,850,071 16,791,559 43,593,103 825,020 52,535,444 25,804,802 277,978,618 335.13
1997 ( 103,486) 181,746,585 19,661,948 63,255,051 298,692 52,834,136 19,857,154 297,835,772 337.35
1998 (2,411,149) 179,335,436 17,076,582 80,331,633 716,150 53,550,286 15,381,583 313,217,355 348.49
</TABLE>
[FN]
<F1>
*1) Wal-Mart discount store locations relocated or expanded as Wal-Mart
Supercenters.
<F2>
*2) Total opened net of conversions of Wal-Mart discount stores to Wal-Mart
Supercenters.
<F3>
*3) Includes only stores and clubs that were open at least twelve months as of
January 31 of the previous year.
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<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
SCHEDULE B TO ITEM 1 - INTERNATIONAL STORE COUNT AND NET SQUARE FOOTAGE GROWTH
YEARS ENDED JANUARY 31, 1993 THROUGH 1998
<CAPTION>
STORE COUNT
Fiscal ARGENTINA BRAZIL CANADA CHINA
Year Wal-Mart Sam's Wal-Mart Sam's Wal-Mart Wal-Mart Sam's
Ended Supercenters Clubs Total Supercenters Clubs Total Stores Supercenters Clubs Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 123 0 0 0
1996 1 2 3 2 3 5 131 0 0 0
1997 3 3 6 2 3 5 136 1 1 2
1998 6 3 9 5 3 8 144 2 1 3
Fiscal GERMANY MEXICO PUERTO RICO
Year Wal-Mart Sam's Wal-Mart Sam's
Ended Hypermarkets Supercenters Clubs Other* Total Supercenters Clubs Total
<S> <C> <C> <C> <C> <C> <C> <C>
1993 0 0 3 0 3 2 0 2
1994 0 2 7 0 9 3 2 5
1995 0 11 22 0 33 5 2 7
1996 0 13 28 0 41 7 4 11
1997 0 18 28 0 46 7 4 11
1998 21 27 28 347 402 9 5 14
</TABLE>
<TABLE>
<CAPTION>
NET SQUARE FOOTAGE
Fiscal ARGENTINA BRAZIL CANADA CHINA
Year
Ended Net Additions Total Net Additions Total Net Additions Total Net Additions Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0
1995 0 0 0 0 14,606,880 14,606,880 0 0
1996 444,621 444,621 761,581 761,581 868,518 15,475,398 0 0
1997 625,369 1,069,990 0 761,581 578,508 16,053,906 316,656 316,656
1998 506,884 1,576,874 540,056 1,301,637 914,365 16,968,271 145,558 462,214
Fiscal GERMANY MEXICO PUERTO RICO
Year
Ended Net Additions Total Net Additions Total Net Additions Total
<S> <C> <C> <C> <C> <C> <C>
1993 0 0 143,000 305,535 229,647 229,647
1994 0 0 946,028 1,251,563 339,260 568,907
1995 0 0 3,718,910 4,970,473 266,279 835,186
1996 0 0 1,012,734 5,983,207 470,266 1,305,452
1997 0 0 1,032,603 7,015,810 0 1,305,452
1988 2,449,369 2,449,369 10,766,004* 17,781,814 342,888 1,648,340
</TABLE>
[FN]
* "Other" includes 33 Aurreras (combination stores), 62 Bodegas (discount
stores), 38 Suburbias (specialty department stores), 36 Superamas (traditional
supermarkets), and 178 Vips (restaurants).
</PAGE 12>
<PAGE 13>
ITEM 2. PROPERTIES
The number and location of domestic Wal-Mart discount stores,
Supercenters and Sam's Clubs is incorporated by reference to the table
under the caption "Fiscal 1998 End of Year Store Counts" on Page 15 of the
Annual Report to Shareholders for the year ended January 31, 1998.
The Company owns 1,318 properties on which domestic discount
stores and Supercenters are located and 288 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 domestic locations
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.
Domestically, the Company operated 38 Wal-Mart distribution
facilities and 19 McLane distribution facilities at January 31, 1998.
These distribution facilities are primarily owned by the Company, and
several are subject to mortgage secured 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 owns office facilities in Bentonville, Arkansas that
serve as the home office for the Company and owns an office facility in
Temple, Texas which serves as the home office for McLane.
The number and location of international Wal-Mart discount
stores, Supercenters and Sam's Clubs is incorporated by reference to the
table under the caption "Fiscal 1998 End of Year Store Counts" on Page 15
of the Annual Report to Shareholders for the year ended January 31, 1998.
The Company owns properties on which all operating units in
Argentina and Brazil are located. In Canada, China, Germany, Mexico and
Puerto Rico, the Company has a combination of owned and leased properties
in which the operating units are located. The Company owns three properties
in Canada, one property in China, 18 properties in Germany, 167 properties
in Mexico, and four properties in Puerto Rico in which the operating units
are located, with the remaining units in each country being leased.
The Company utilizes both owned and leased properties for office
facilities in each country in which we conduct business.
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
</PAGE 13>
<PAGE 14>
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, 1998.
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 62
Officer.
S. Robson Walton Chairman of the Board. 1992 53
Donald G. Soderquist Vice Chairman of the Board and 1988 64
Chief Operating Officer.
Paul R. Carter Executive Vice President 1995 57
and President - Wal-Mart Realty
Company. Prior to 1995, he
served as Executive Vice
President and Chief Financial
Officer.
Robert F. Connolly Executive Vice President - 1998 54
Merchandising. Prior to January
1998, he served as Senior Vice
President - General Merchandise
Manager. Prior to October 1996,
he served as Vice President -
Jewelry and Shoes. Prior to
February 1996,he served as
Executive Vice President of
Montgomery Ward. Prior to January
1994, he served as Senior Vice
President - General Merchandise
Manager of Wal-Mart Stores, Inc.
</PAGE 14>
<PAGE 15>
Thomas M. Coughlin Executive Vice President and 1998 49
Chief Operating Officer of
Wal-Mart Stores Division. Prior
to January 1998, he served as
Executive Vice President - Store
Operations. Prior to 1995, he
served as Senior Vice President -
Specialty Divisions.
David Dible Executive Vice President 1995 50
Specialty Divisions. Prior to
1995, he served as Senior Vice
President - Merchandising.
Mark S. Hansen Executive Vice President and 1997 43
President and Chief Executive
Officer of Sam's Club Division.
Prior to June 1997, he served as
President and Chief Executive Officer
of Phoenix-based PETsMART, Inc.
Bob L. Martin Executive Vice President 1993 49
and President and Chief Executive
Officer of Wal-Mart International
Division.
John B. Menzer Executive Vice President and 1995 47
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 1998 49
and President and Chief Executive
Officer of Wal-Mart Stores Division.
Prior to January 1998, he served as
Executive Vice President -
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 53
Food Division.
William G. Rosier President and Chief Executive 1995 49
Officer of McLane Company, Inc.
Prior to 1995, he served as Senior
Vice President - Marketing and
Customer Services for McLane.
</PAGE 15>
<PAGE 16>
James A. Walker, Jr. Senior Vice President and 1995 51
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" under the caption "11-
Year Financial Summary" on Pages 20 and 21, and all the information under
the captions "Market Price of Common Stock", "Listings - Stock Symbol: WMT"
and "Dividends Paid Per Share" on page 39 of the Annual Report to
Shareholders for the year ended January 31, 1998.
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 20 and 21 of the Annual Report to Shareholders for the year ended
January 31, 1998.
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 22 through 25 of the Annual
Report to Shareholders for the year ended January 31, 1998.
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", "Notes to Consolidated Financial Statements" and "Report of
Independent Auditors" on Pages 26 through 38 of the Annual Report to
Shareholders for the year ended January 31, 1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
</PAGE 16>
<PAGE17>
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 and 2 and "Section 16(a) Beneficial Ownership
Reporting Compliance" on Page 7 of the Company's Proxy Statement for its
Annual Meeting of Shareholders to be held on Friday, June 5, 1998 (the
"Proxy Statement"). The information required by this item with respect to
the Company's executive officers is included as Item 4A of Part I found on
pages 14 through 16 of this annual report.
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, 1998", and "Option Exercises and
Fiscal Year End Option Values" on Pages 3 and 4, "Compensation and
Nominating Committee Report on Executive Compensation" on page 5 and 6,
"Compensation Committee Interlocks and Insider Participation" and
"Compensation of Directors" on Page 6 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 "Amount and
Nature of Beneficial Ownership" and "Holdings of Officers and Directors"
and "Amount and Nature of Beneficial Ownership of Wal-Mart Stock" on Pages
7 and 8 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 Pages 6 and 7 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 21 of this annual report, are
incorporated by reference herein or filed as part of this Form 10-K.
</PAGE 17>
<PAGE 18>
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 Bank of New York, Trustee, (formerly Boatmen's
Trust Company and Centerre Trust Company) 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 Bank of New York, Trustee, (formerly Boatmen's
Trust Company and Centerre Trust Company) 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
</PAGE 18>
<PAGE 19>
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
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 second paragraph under the caption
"Compensation of Directors" on Page 6 in the Company's
definitive Proxy Statement to be filed in connection with
the Annual Meeting of the Shareholders to be held on June 5,
1998.
+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 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, 1996.
+10(j) Wal-Mart Stores, Inc. Restricted Stock Plan is incorporated
herein by reference to Exhibit 10(j) from the Annual Report
on Form 10-K of the Company for the year ended January 31,
1997.
</PAGE 19>
<PAGE 20>
*+10(k) 1996 Amendment to the Wal-Mart Stores, Inc. Stock Option
Plan of 1994 is filed herewith as an Exhibit to this Form 10-
K.
*+10(l) 1997 Amendment to the Wal-Mart Stores, Inc. Stock Option
Plan of 1994 is filed herewith as an Exhibit to this Form 10-
K.
*13 All information incorporated by reference in Items 1, 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,
1998.
*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, 1998.
</PAGE 20>
<PAGE 21>
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, 1998 26
Consolidated Balance Sheets at
January 31, 1998 and 1997 27
Consolidated Statements of
Shareholders' Equity for each
of the three years in the
period ended January 31, 1998 28
Consolidated Statements of Cash
Flows for each of the three
years in the period ended
January 31, 1998 29
Notes to Consolidated Financial
Statements, except Note 10 30-37
Not Covered by Report of Independent
Auditors:
Note 10 - Quarterly Financial Data
(Unaudited) 37
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.
</PAGE 21>
<PAGE 22>
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 16, 1998 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 16, 1998 /s/S. Robson Walton
S. Robson Walton
Chairman of the Board
DATE: April 16, 1998 /s/David D. Glass
David D. Glass
President, Chief Executive
Officer and Director
DATE: April 16, 1998 /s/Donald G. Soderquist
Donald G. Soderquist
Vice Chairman of the Board,
Chief Operating Officer
and Director
DATE: April 16, 1998 /s/Paul R. Carter
Paul R. Carter
Executive Vice President,
President - Wal-Mart Realty
Company and Director
DATE: April 16, 1998 /s/John B. Menzer
John B. Menzer
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
DATE: April 16, 1998 /s/James A. Walker, Jr.
James A. Walker, Jr.
Senior Vice President and
Controller
(Principal Accounting Officer)
</PAGE 22>
<PAGE 23>
Date: April 16, 1998 /s/Jeronimo Arango
Jeronimo Arango
Chairman of the Board of Cifra,
S. A. de C.V. and Director
DATE: April 16, 1998 /s/John A. Cooper, Jr.
John A. Cooper, Jr.
Director
DATE: April 16, 1998 /s/Stephen Friedman
Stephen Friedman
Director
DATE: April 16, 1998 /s/Stanley C. Gault
Stanley C. Gault
Director
DATE: April 16, 1998 /s/Frederick S. Humphries
Frederick S. Humphries
Director
DATE: April 16, 1998 /s/E. Stanley Kroenke
E. Stanley Kroenke
Director
DATE: April 16, 1998 /s/Elizabeth A. Sanders
Elizabeth A. Sanders
Director
DATE: April 16, 1998 /s/Jack C. Shewmaker
Jack C. Shewmaker
Director
DATE: April 16, 1998 /s/Paula Stern
Paula Stern
Director
DATE: April 16, 1998 /s/John T. Walton
John T. Walton
Director
</PAGE 23>
1996 Amendment to the Wal-Mart Stores, Inc. Stock Option Plan of 1994
The last Paragraph of Section 2 of the Stock Option Plan of 1994 is
hereby stricken from the Stock Option Plan of 1994.
The following language is hereby inserted as the last Paragraph of
Section 2 of the Stock Option Plan of 1994:
Notwithstanding anything in this Paragraph 2 to the contrary,
this Plan shall be administered, as to those officers and key
employees otherwise eligible pursuant to Paragraph 4 hereof who,
in their relationship to the Company, are described in subsection
16(a) of the Securities Exchange Act of 1934, as amended, and the
rules issued thereunder, and/or who are "covered employees" as
such term is defined at Section 162(m) of the Code, by the
Compensation Committee of the Board (the "Compensation
Committee") consisting of not less than two members of the Board,
all of whom shall be both (1) "non-employee directors" within the
meaning of the applicable rules and regulations promulgated by
the Securities and Exchange Commission and (2) "outside
directors" within the meaning of Section 162(m) of the Code and
the regulations promulgated thereunder. The Compensation
Committee shall be appointed, governed, indemnified and
authorized as is the Committee hereinabove described. However,
such Compensation Committee shall have absolute discretion as to
all matters concerning those officers and key employees described
above, subject to the express provisions of the Plan. The term
"Committee" shall refer herein to the Committee or the
Compensation Committee.
1997 Amendment to the Wal-Mart Stores, Inc. Stock Option Plan of 1994
The language of Section 10 of the Stock Option Plan is hereby stricken
and the following language is hereby inserted:
STOCK OPTION GRANTS: Records maintained by the Stock option
Department and the minutes of the Stock Option Committee and the
minutes of the Compensation and Nominating Committee for Section
16 officers shall be conclusive evidence of the grant of stock
options. Individual written stock option agreements shall not be
necessary.
The following {bracketed} language is hereby inserted in the first
Paragraph of Section 8:
EXERCISE OF OPTION RIGHTS UPON TERMINATION OF {OR ADMINISTRATIVE
SUSPENSION FROM} EMPLOYMENT OR CESSATION AS A FULL-TIME OFFICER
OR ELIGIBLE KEY EMPLOYEE: If an Optionee (i) whose employment
with the Company and/or one of its Subsidiaries is terminated for
any reason other that death, or (ii) ceases for any reason to be
a full-time officer or eligible key employee as determined by
Committee in its discretion, then such Optionee may exercise his
or her option, to the extent exercisable as of the date the
Optionee's employment is terminated or such Optionee ceases to be
a full-time officer or an eligible key employee, whichever is
earlier, at any time within three months after the earlier of
such dates, but in no event may an option be exercised after the
expiration of the term of the option; provided, however, that if
the Optionee's employment shall be terminated for cause, said
option shall terminate immediately. As used herein, "cause" shall
mean the commission of any act deemed inimical to the best
interest of the Company as determined at the sole discretion of
the Committee. {During a period of administrative suspension, the
Optionee's right to exercise options is suspended and will
terminate if the Optionee is terminated for cause.}
Wal-Mart Stores, Inc. Annual Report - Page 15
<TABLE>
Fiscal 1998 End of Year Store Counts
<CAPTION>
Discount Sam's
Stores Supercenters Club
<S> <C> <C> <C>
Alabama 50 27 8
Alaska 3 0 3
Arizona 34 0 7
Arkansas 50 27 4
California 100 0 24
Colorado 31 5 10
Connecticut 14 0 3
Delaware 2 1 1
Florida 102 33 31
Georgia 62 25 16
Hawaii 5 0 1
Idaho 9 0 1
Illinois 95 11 24
Indiana 60 15 14
Iowa 43 2 7
Kansas 40 8 5
Kentucky 45 23 5
Louisiana 56 19 9
Maine 19 0 3
Maryland 22 1 10
Massachusetts 27 0 3
Michigan 45 0 21
Minnesota 34 0 9
Mississippi 42 14 4
Missouri 79 30 12
Montana 9 0 1
Nebraska 13 5 3
Nevada 13 0 2
New Hampshire 17 0 4
New Jersey 16 0 6
New Mexico 16 3 3
New York 51 5 18
North Carolina 78 8 14
North Dakota 8 0 2
Ohio 77 4 23
Oklahoma 57 21 6
Oregon 23 0 0
Pennsylvania 49 12 18
Rhode Island 6 0 1
South Carolina 41 12 9
South Dakota 8 0 2
Tennessee 57 30 11
Texas 169 72 52
Utah 14 0 5
Vermont 3 0 0
Virginia 31 21 10
Washington 20 0 2
West Virginia 12 6 3
Wisconsin 55 1 11
Wyoming 9 0 2
U.S. TOTAL 1,921 441 443
Alberta 16 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 52 0 0
Quebec 28 0 0
Saskatchewan 8 0 0
CANADA TOTAL 144 0 0
Argentina 0 6 3
Brazil 0 5 3
Mexico 347* 27 28
Puerto Rico 9 0 5
China 0 2 1
Germany 0 21 0
INT'L. TOTAL 500 61 40
GRAND TOTAL 2,421 502 483
</TABLE>
[FN]
*Includes 36 Superamas, 62 Bodegas, 33 Aurreras, 178 Vips and 38 Suburbias
Wal-Mart Stores, Inc. Annual Report - Pages 20 and 21
<TABLE>
11-YEAR FINANCIAL SUMMARY
(Dollar amounts in millions except per share data)
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $117,958 $104,859 $ 93,627 $ 82,494 $ 67,344
Net sales increase 12% 12% 13% 22% 21%
Comparative store
sales increase 6% 5% 4% 7% 6%
Other income-net 1,341 1,319 1,146 914 645
Cost of sales 93,438 83,510 74,505 65,586 53,444
Operating, selling
and general and
administrative
expenses 19,358 16,946 15,021 12,858 10,333
Interest costs:
Debt 555 629 692 520 331
Capital leases 229 216 196 186 186
Provision for income
taxes 2,115 1,794 1,606 1,581 1,358
Minority interest
and equity in
unconsolidated
subsidiaries (78) (27) (13) 4 (4)
Net income 3,526 3,056 2,740 2,681 2,333
Per share of common stock:
Net income - Basic
and Dilutive $1.56 1.33 1.19 1.17 1.02
Dividends 0.27 0.21 .20 .17 .13
Financial Position
Current assets $ 19,352 $ 17,993 $ 17,331 $ 15,338 $ 12,114
Inventories at
replacement cost 16,845 16,193 16,300 14,415 11,483
Less LIFO reserve 348 296 311 351 469
Inventories at
LIFO cost 16,497 15,897 15,989 14,064 11,014
Net property, plant
and equipment and
capital leases 23,606 20,324 18,894 15,874 13,176
Total assets 45,384 39,604 37,541 32,819 26,441
Current liabilities 14,460 10,957 11,454 9,973 7,406
Long-term debt 7,191 7,709 8,508 7,871 6,156
Long-term obligations
under capital leases 2,483 2,307 2,092 1,838 1,804
Shareholders' equity 18,503 17,143 14,756 12,726 10,753
Financial Ratios
Current ratio 1.3 1.6 1.5 1.5 1.6
Inventories/working
capital 3.4 2.3 2.7 2.6 2.3
Return on assets* 8.5% 7.9% 7.8% 9.0% 9.9%
Return on shareholders'
equity** 19.8% 19.2% 19.9% 22.8% 23.9%
Other Year-End Data
Number of domestic
Wal-Mart stores 1,921 1,960 1,995 1,985 1,950
Number of domestic
Supercenters 441 344 239 147 72
Number of domestic
SAM'S Club units 443 436 433 426 417
International units 601 314 276 226 24
Number of associates 825,000 728,000 675,000 622,000 528,000
Number of
shareholders 245,884 257,215 244,483 259,286 257,946
</TABLE>
[FN]
<F1>
* Net income before minority interest and equity in unconsolidated
subsidiaries/average assets
<F2>
** Net income/average shareholders' equity
<TABLE>
11-YEAR FINANCIAL SUMMARY
(Dollar amounts in millions except per share data)
<CAPTION>
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C. <C>
Net sales $ 55,484 $ 43,887 $ 32,602 $ 25,811 $ 20,649 $ 15,959
Net sales increase 26% 35% 26% 25% 29% 34%
Comparative store
sales increase 11% 10% 10% 11% 12% 11%
Other income-net 497 404 262 175 137 105
Cost of sales 44,175 34,786 25,500 20,070 16,057 12,282
Operating, selling
and general and
administrative
expenses 8,321 6,684 5,152 4,070 3,268 2,599
Interest costs:
Debt 143 113 43 20 36 25
Capital leases 180 153 126 118 99 89
Provision for income
taxes 1,171 945 752 632 488 441
Minority interest
and equity in
unconsolidated
subsidiaries 4 (1)
Net income 1,995 1,609 1,291 1,076 838 628
Per share of common stock:
Net income - Basic
and Dilutive .87 .70 .57 .48 .37 .28
Dividends .11 .09 .07 .06 .04 .03
Financial Position
Current assets $ 10,198 $ 8,575 $ 6,415 $ 4,713 $ 3,631 $ 2,905
Inventories at
replacement cost 9,780 7,857 6,207 4,751 3,642 2,855
Less LIFO reserve 512 473 399 323 291 203
Inventories at
LIFO cost 9,268 7,384 5,808 4,428 3,351 2,652
Net property, plant
and equipment and
capital leases 9,793 6,434 4,712 3,430 2,662 2,145
Total assets 20,565 15,443 11,389 8,198 6,360 5,132
Current liabilities 6,754 5,004 3,990 2,845 2,066 1,744
Long-term debt 3,073 1,722 740 185 184 186
Long-term obligations
under capital leases 1,772 1,556 1,159 1,087 1,009 867
Shareholders' equity 8,759 6,990 5,366 3,966 3,008 2,257
Financial Ratios
Current ratio 1.5 1.7 1.6 1.7 1.8 1.7
Inventories/working
capital 2.7 2.1 2.4 2.4 2.1 2.3
Return on assets* 11.1% 12.0% 13.2% 14.8% 14.6% 13.7%
Return on shareholders'
equity** 25.3% 26.0% 27.7% 30.9% 31.8% 31.8%
Other Year-End Data
Number of domestic
Wal-Mart stores 1,848 1,714 1,568 1,399 1,259 1,114
Number of domestic
Supercenters 34 10 9 6 3 2
Number of domestic
SAM'S Club units 256 208 148 123 105 84
International units 10
Number of associates 434,000 371,000 328,000 271,000 223,000 183,000
Number of
shareholders 180,584 150,242 122,414 79,929 80,270 79,777
</TABLE>
[FN]
<F1>
* Net income before minority interest and equity in unconsolidated
subsidiaries/average assets
<F2>
** Net income/average shareholders' equity
Wal-Mart Stores, Inc. Annual Report - Page 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
Net Sales
Sales (in millions) by operating segment for the three fiscal years ended
January 31, are as follows:
<CAPTION>
Total
Fiscal Wal-Mart SAM'S Other Total Company
Year Stores Club International (McLane) Company Increase
<S> <C> <C> <C> <C> <C> <C>
1998 $83,820 $20,668 $7,517 $5,953 $117,958 12%
1997 74,840 19,785 5,002 5,232 104,859 12%
1996 66,271 19,068 3,712 4,576 93,627 13%
</TABLE>
The Company sales growth of 12% in fiscal 1998, when compared to fiscal
1997, was attributable to our expansion program and comparative store sales
increases of 6%. Expansion for fiscal 1998 included the opening of 37 Wal-Mart
stores, 97 Supercenters (including the conversion of 75 Wal-Mart stores), eight
SAM'S Club units and the opening or acquisition of 289 international units.
International sales accounted for approximately 6.4% of total sales in fiscal
1998 compared with 4.8% in fiscal 1997. The growth in International is partially
due to the acquisition of controlling interest in Cifra, S.A de C.V. during the
third quarter. See Note 6 of Notes to Consolidated Financial Statements for
additional information on our acquisitions. SAM'S Club sales, as a percentage of
total sales, decreased from 18.9% in fiscal 1997 to 17.5% in fiscal 1998.
The sales increase in fiscal 1997 when compared to fiscal 1996 was
attributable to our 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), nine SAM'S Club
units 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.
Costs and Expenses
Cost of sales, as a percentage of sales, decreased .4% in fiscal 1998 when
compared to fiscal 1997 and increased .1% in fiscal 1997, when compared with
fiscal 1996. The decrease in fiscal 1998 resulted from improvements in the mix
of merchandise sold and from better inventory management. Operating efficiencies
and the strong emphasis placed on inventory management has reduced markdowns and
shrinkage. Approximately .1% of the decrease in cost of sales was a result of
the sales contribution of SAM'S Club. As its sales became a smaller percentage
of total Company sales, the cost of sales is positively impacted since their
gross margin contribution is lower than the stores. The increase in fiscal 1997
when compared to fiscal 1996 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 our 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 Wal-Mart stores.
Operating, selling, general and administrative expenses increased .3%, as a
percentage of sales, in fiscal 1998 when compared with fiscal 1997, and were
flat in fiscal 1997 when compared to fiscal 1996. Approximately .2% of the
increase in fiscal 1998 was due to increases in payroll and related benefit
costs. Additionally, a contributing factor in the increase for the year is a
charge of $50 million for closing the majority of the Bud's Discount City stores
during the second quarter of fiscal 1998. This charge was reflected in operating
income due to its immateriality to our results of operations and because we
continue to operate eight Bud's Discount City stores. In fiscal 1997, operating,
selling, general and administrative expenses increased approximately .1% due to
a lower expense to sales percentage at SAM'S Club compared to Wal-Mart Stores.
This increase was offset through expense control in all of the operating
formats.
Historically, computer software has been programmed to make assumptions
about the century when given a date that only uses two digits to represent the
year. Although these assumptions have been perfectly acceptable the past few
decades, they are potential cause for concern for software used in the year 2000
and beyond. Specifically,this abbreviated date format makes it difficult for an
application or computer user to distinguish between dates starting with 19xx and
20xx. The Company has initiated a project to address the year 2000 compliance
issue for technology hardware, software and equipment. The assessment phase of
our project is substantially complete. The majority of the compliance is
expected to be performed by Company associates. Approximately 67% of the
required conversions have occurred. We anticipate completing all remaining
conversions during fiscal 1999. The total estimated cost of the conversion is
$12 million, which is being expensed as incurred. The cost of the conversions
and the completion dates are based on management's best estimates and may be u
pdated as additional information becomes available. In addition, communications
are ongoing with other companies with which our systems interface or rely on to
determine the extent to which those companies are addressing their year 2000
compliance.
Interest Costs
Interest costs decreased in fiscal 1998 compared to fiscal 1997 due
primarily to lower short-term borrowings. Enhanced operating cash flows and
lower capital spending enabled the Company to meet cash requirements without
short-term borrowings throughout most of fiscal 1998. Interest costs decreased
in fiscal 1997 compared to fiscal 1996 due to lower average daily short-term
borrowings and through retirement of maturing debt. See Note 2 of Notes to
Consolidated Financial Statements for additional information on interest and
debt.
Wal-Mart Stores, Inc. Annual Report - Page 23
Market Risk
Market risks relating to the Company's operations result primarily from
changes in interest rates and changes in foreign exchange rates. We enter into
interest rate swaps to minimize the risk and costs associated with our financial
activities. The swap agreements are contracts to exchange fixed or variable
rates for floating interest rate payments periodically over the life of the
instruments.
The following table provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates. For debt obligations, the table presents principal cash flows
and related weighted-aver
age interest rates by expected maturity dates. For interest rate swaps, the
table presents notional amounts and average interest rates by contractual
maturity dates. For variable rate instruments, we have indicated the applicable
floating rate index.
<TABLE>
Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
<CAPTION>
Fair
value
(Amounts in millions) 1999 2000 2001 2002 2003 Thereafter Total 1/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Long-term debt Including
current portion
Fixed rate debt $1,039 $815 $2,018 $52 $559 $3,747 $8,230 $8,639
Average interest rate 7.1% 7.2% 7.2% 7.1% 6.9% 7.2% 7.2%
Long-term obligation related
to real estate investment trust
Fixed rate obligation 36 39 43 46 50 382 596 560
Average interest rate 8.4% 8.4% 8.4% 8.4% 8.4% 8.4% 8.4%
Interest Rate Derivative Financial
Instruments Related to Debt
Interest rate swaps
Pay variable/receive fixed - 500 - - - - 500 -
Average pay rate - 30-day
commercial paper non-financial
plus .134%
Average receive rate - 5.7% - - - - 5.7% -
Interest Rate Derivative Financial
Instruments Related to Real Estate
Investment Trust Obligation
Interest rate swaps
Pay variable/receive fixed 35 37 41 45 49 378 585 17
Average pay rate - 30-day
commercial paper non-financial
Average receive rate 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
Interest Rate Derivative Financial
Instrument on Currency Swap
German Deutschmarks
Pay variable/receive variable - - - - 1,101 - 1,101 (1)
Average Pay Rate - 3-month Deutschmark
LIBOR minus .0676%
Average receive rate - 30-day commercial
paper non-financial
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 24
The Company routinely enters into forward currency exchange contracts in the
regular course of business to manage its exposure against foreign currency
fluctuations on inventory purchases denominated in foreign currencies. These
contracts are for short durations, generally less than six months. In addition,
we have entered into a foreign currency swap to hedge our investment in Germany.
Under the agreement, the Company will pay 1,960 million in German Deutschmarks
in 2003 and will receive $1,101 million in United States Dollars.
The following table provides information about the Company's derivative
financial instruments, including foreign currency forward exchange agreements
and currency swap agreements by functional currency and presents the information
in U.S. dollar equivalents. For foreign currency forward exchange agreements,
the table presents the notional amounts and average exchange rates by
contractual maturity dates.
<TABLE>
Foreign Currency Exchange Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
<CAPTION>
Fair
value
(Amounts in millions) 1999 2000 2001 2002 2003 Thereafter Total 1/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Forward Contracts to Sell Foreign Currencies for US $
Canadian Dollars
Notional amount 24 - - - - - 24 -
Average contract rate 1.4 - - - - - 1.4 -
German Deutschmarks
Notional amount 2 - - - - - 2 -
Average contract rate 1.8 - - - - - 1.8 -
Forward Contracts to Sell Foreign Currencies for Hong Kong $
German Deutschmarks (DEM)
Notional amount 1 - - - - - 1 -
Average contract rate 0.2 - - - - - 0.2 -
Average currency exchange rate
(DEM to US$) 1.8 - - - - - 1.8 -
Currency Swap Agreements
Payment of German Deutschmarks
Notional amount - - - - 1,101 - 1,101 30
Average contract rate - - - - 1.8 - 1.8 -
</TABLE>
International Operations
A portion of our operations consists of sales activities in foreign
jurisdictions. We operate wholly owned operations in Argentina, Canada, Germany
and Puerto Rico, through joint ventures in China and through majority-owned
subsidiaries in Brazil and Mexico. As a result, our financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in the foreign markets in which we do business. We minimize
the exposure to the risk of devaluation of foreign currencies by operating in
local currencies and through buying forward contracts, where feasible, on known
transactions.
All foreign operations are measured in their local currencies with the
exception of Brazil and Mexico, which operate in highly-inflationary economies
and report operations using U.S. Dollars. Beginning in fiscal 1999, Brazil will
no longer be considered a highly-inflationary economy and will begin reporting
its operations in its local currency. In fiscal 1998, the foreign currency
translation adjustment increased by $73 million to $473 million primarily due to
the exchange rate in Canada. 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 adjustment
of $412 million in fiscal 1996 was due primarily to operations in Mexico.
Wal-Mart Stores, Inc. Annual Report - Page 25
Liquidity and Capital Resources
Cash Flows Information
Cash flows from operating activities were $7,123 million in fiscal 1998, up
from $5,930 million in fiscal 1997. In fiscal 1998, the Company invested $2,636
million in capital assets and paid dividends of $611 million and had a net cash
outlay of $1,865 million for acquisitions. Acquisitions include the Wertkauf
hypermarket chain in Germany, a controlling interest in Cifra, S.A. de C. V.
(Cifra) and the minority interest in our Brazilian joint venture from Lojas
Americanas. See Note 6 of Notes to Consolidated Financial Statements for
additional information on our acquisitions.
Company Stock Purchase and Common Stock Dividends
In fiscal 1998, the Company repurchased over 47 million shares of its
common stock for $1.6 billion. Subsequent to January 31, 1998, the Company
announced plans to repurchase up to $2 billion of its common stock over the next
12 to 18 months. Additionally, the Company increased the dividend 15% to $.31
per share for fiscal 1999.
Borrowing Information
The Company had committed lines of credit with 77 banks, aggregating $1,873
million and informal lines of credit with various other banks, totaling an
additional $1,950 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.
We anticipate generating sufficient operating cash flow to fund all capital
expenditures and our Company stock repurchase program. Accordingly, we do not
plan to finance future capital expenditures with debt. However, we do plan to
refinance existing long-term debt as it matures and may desire to obtain
additional long-term financing for other uses of cash or for strategic reasons.
We anticipate no difficulty in obtaining long-term financing in view of our
excellent credit rating and favorable experiences in the debt market in the
recent past. In addition to the available credit lines mentioned above, we may
sell up to $251 million of public debt under shelf registration statements on
file with the Securities and Exchange Commission.
Expansion
Domestically, we plan to open approximately 50 new Wal-Mart stores and
between 120 and 125 new Supercenters. Approximately 90 of the Supercenters will
come from relocations or expansions of existing Wal-Mart stores. Also planned
for next fiscal year are ten new SAM'S Club units and three distribution
centers. Internationally, plans are to develop 50 to 60 new retail units. These
stores are planned in Argentina, Brazil, Canada, China, Germany, Mexico and
Puerto Rico. Total planned growth represents approximately 26 million square
feet of additional retail space.
Total planned capital expenditures for fiscal 1999 approximate $4 billion.
We plan to finance our expansion primarily with operating cash flows.
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 our filings with the Securities and Exchange Commission. Actual
results may materially differ from anticipated results described in these
statements.
Wal-Marat Stores, Inc. Annual Report - Page 26
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions except per share data)
<CAPTION>
Fiscal years ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Revenues:
Net sales $117,958 $104,859 $93,627
Other income-net 1,341 1,319 1,146
119,299 106,178 94,773
Costs and Expenses:
Cost of sales 93,438 83,510 74,505
Operating, selling and general
and administrative expenses 19,358 16,946 15,021
Interest Costs:
Debt 555 629 692
Capital leases 229 216 196
113,580 101,301 90,414
Income Before Income Taxes,
Minority Interest and Equity
in Unconsolidated Subsidiaries 5,719 4,877 4,359
Provision for Income Taxes
Current 2,095 1,974 1,530
Deferred 20 (180) 76
2,115 1,794 1,606
Income Before Minority Interest
and Equity in Unconsolidated
Subsidiaries 3,604 3,083 2,753
Minority Interest and Equity in
Unconsolidated Subsidiaries (78) (27) (13)
Net Income $ 3,526 $ 3,056 $ 2,740
Net Income Per Share - Basic
and Dilutive $1.56 $1.33 $1.19
See accompanying notes.
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 27
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
<CAPTION>
January 31, 1998 1997
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,447 $ 883
Receivables 976 845
Inventories
At replacement cost 16,845 16,193
Less LIFO reserve 348 296
Inventories at LIFO cost 16,497 15,897
Prepaid expenses and other 432 368
Total Current Assets 19,352 17,993
Property, Plant and Equipment, at Cost:
Land 4,691 3,689
Building and improvements 14,646 12,724
Fixtures and equipment 7,636 6,390
Transportation equipment 403 379
27,376 23,182
Less accumulated depreciation 5,907 4,849
Net property, plant and equipment 21,469 18,333
Property Under Capital Lease:
Property under capital lease 3,040 2,782
Less accumulated amortization 903 791
Net property under capital leases 2,137 1,991
Other Assets and Deferred Charges 2,426 1,287
Total Assets $45,384 $39,604
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 9,126 $ 7,628
Accrued liabilities 3,628 2,413
Accrued income taxes 565 298
Long-term debt due within one year 1,039 523
Obligations under capital leases due
within one year 102 95
Total Current Liabilities 14,460 10,957
Long-Term Debt 7,191 7,709
Long-Term Obligations Under Capital Leases 2,483 2,307
Deferred Income Taxes and Other 809 463
Minority Interest 1,938 1,025
Shareholders' Equity
Preferred stock ($.10 par value; 100 shares
authorized, none issued)
Common stock ($.10 par value; 5,500 shares
authorized, 2,241 and 2,285 issued and
outstanding in 1998 and 1997, respectively) 224 228
Capital in excess of par value 585 547
Retained earnings 18,167 16,768
Foreign currency translation adjustment (473) (400)
Total Shareholders' Equity 18,503 17,143
Total Liabilities and Shareholders' Equity $45,384 $39,604
See accompanying notes.
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 28
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Foreign
Capital in currency
(Amounts in millions Number Common excess of Retained translation
except per share data) of shares stock par value earnings adjustment Total
<S> <C> <C> <C> <C> <C> <C>
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)
Stock options exercised and 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 ($.21 per share) (481) (481)
Purchase of Company stock (8) (7) (201) (208)
Foreign currency translation adjustment 12 12
Stock options exercised and other (1) 9 8
Balance - January 31, 1997 2,285 228 547 16,768 (400) 17,143
Net income 3,526 3,526
Cash dividends ($.27 per share) (611) (611)
Purchase of Company stock (47) (5) (48) (1,516) (1,569)
Foreign currency translation adjustment (73) (73)
Stock options exercised and other 3 1 86 87
Balance - January 31, 1998 2,241 $224 $585 $18,167 ($ 473) $18,503
See accompanying notes.
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 29
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
<CAPTION>
Fiscal years ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities
Net Income $ 3,526 $ 3,056 $ 2,740
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,634 1,463 1,304
Increase in accounts receivable (78) (58) (61)
(Increase)/decrease in inventories (365) 99 (1,850)
Increase in accounts payable 1,048 1,208 448
Increase in accrued liabilities 1,329 430 29
Deferred income taxes 20 (180) 76
Other 9 (88) (303)
Net cash provided by operating activities 7,123 5,930 2,383
Cash flows from investing activities
Payments for property, plant and equipment (2,636) (2,643) (3,566)
Proceeds from sale of photo finishing plants 464
Acquisitions (1,865)
Other investing activities 80 111 234
Net cash used in investing activities (4,421) (2,068) (3,332)
Cash flows from financing activities
(Decrease)/increase in commercial paper (2,458) 660
Proceeds from issuance of long-term debt 547 1,004
Net proceeds from formation of Real Estate
Investment Trust (REIT) 632
Purchase of Company stock (1,569) (208) (105)
Dividends paid (611) (481) (458)
Payment of long-term debt (554) (541) (126)
Payment of capital lease obligations (94) (74) (81)
Other financing activities 143 68 93
Net cash (used in)/provided by financing
activities (2,138) (3,062) 987
Net increase in cash and cash equivalents 564 800 38
Cash and cash equivalents at beginning of year 883 83 45
Cash and cash equivalents at end of year $ 1,447 $ 883 $ 83
Supplemental disclosure of cash flow information
Income tax paid $ 1,971 $ 1,791 $ 1,785
Interest paid 796 851 866
Capital lease obligations incurred 309 326 365
Investment in unconsolidated subsidiary
exchanged in acquisition 226
See accompanying notes.
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 30
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.
Cash and cash equivalents
The Company considers investments with a maturity of three months or less
when purchased to be cash equivalents.
Inventories
The Company uses the retail last-in, first-out (LIFO) method for domestic
Wal-Mart discount stores and Supercenters and cost LIFO for SAM'S Clubs.
International inventories are on other cost methods. Inventories are not in
excess of market value.
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. If the Company had expensed these costs as incurred, net income
would have been reduced by $2 million, $9 million and $2 million in fiscal 1998,
1997 and 1996, respectively.
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
$33 million, $44 million and $50 million in 1998, 1997 and 1996, respectively.
Financial instruments
The Company uses derivative financial instruments for purposes other than
trading to reduce its exposure to fluctuations in foreign currencies and to
minimize the risk and cost associated with financial and global operating
activities. Settlements of interest rate swaps are 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. Contracts that effectively meet risk reduction and correlation
criteria are recorded using hedge accounting. Hedges of firm commitments or
anticipated transactions are deferred and recognized when the hedged transaction
occurs.
Advertising costs
Advertising costs are expensed as incurred and were $292 million, $249
million and $219 million in 1998, 1997 and 1996, respectively.
Operating, selling and general and administrative expenses
Buying, warehousing and occupancy costs are included in operating, selling
and general and administrative expenses.
Depreciation and amortization
Depreciation and amortization for financial statement purposes are 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.
Estimated useful lives are as follows:
Building and improvements 5-33 years
Fixtures and equipment 5-12 years
Transportation equipment 2-5 years
Goodwill 20-40 years
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.
Comprehensive income
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 130, "Reporting Comprehensive Income," which is effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for reporting and display of comprehensive income and its components.
The Company anticipates adopting this Statement in fiscal 1999. Since this
Statement requires only additional disclosure, there will be no effect on the
Company's results of operations or financial position.
Net income per share
In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, Earnings Per Share. Statement 128 replaces primary and fully
dilutive earnings per share with basic and dilutive earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effect of options. Basic earnings per share for all periods presented are the
same as previously reported. Basic net income per share is based on the weighted
average outstanding common shares. Dilutive net income per share is based on the
weighted average outstanding shares reduced by the effect of stock options.
The shares used in the computations for basic and dilutive net income per
share are as follows (in millions):
1998 1997 1996
Basic 2,258 2,292 2,296
Dilutive 2,267 2,296 2,299
Wal-Mart Stores, Inc. Annual Report - Page 31
Foreign currency translation
The assets and liabilities of most foreign subsidiaries are translated at
current exchange rates and any related translation adjustments are recorded in
Consolidated Shareholders' Equity. Operations in Brazil and Mexico operate in
highly inflationary economies and certain assets are translated at historical
exchange rates and all translation adjustments are reflected in the Consolidated
Income Statements.
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.
Reclassifications
Certain reclassifications have been made to prior periods to conform to
current presentation.
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, 1998 1997 1996
<S> <C> <C> <C>
Maximum amount outstanding at month-end $ 1,530 $ 2,209 $ 3,686
Average daily short-term borrowings 212 1,091 2,106
Weighted average interest rate 5.6% 5.3% 5.9%
</TABLE>
At January 31, 1998 and 1997, there were no short-term borrowings
outstanding. At January 31, 1998, the Company had committed lines of credit of
$1,873 million with 77 banks and informal lines of credit with various banks
totaling an additional $1,950 million, which were used to support short-term
borrowings and commercial paper. Short-term borrowings under these lines of
credit bear interest at or below the prime rate.
Long-term debt at January 31, consists of (amounts in millions):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
8.625% Notes due April 2001 $ 750 $ 750
5.875% Notes due October 2005 597 597
5.614% Notes due February 2010 with
biannual put options 500 -
7.500% Notes due May 2004 500 500
9.100% Notes due July 2000 500 500
6.125% Notes due October 1999 500 500
7.800% - 8.250% Obligations from sale/leaseback
transactions due 2014 458 466
6.500% Notes due June 2003 454 454
7.250% Notes due June 2013 445 445
7.000% - 8.000% Obligations from sale/leaseback
transactions due 2013 306 314
6.750% Notes due May 2002 300 300
8.500% Notes due September 2024 250 250
6.750% Notes due October 2023 250 250
8.000% Notes due September 2006 250 250
6.125% Eurobond due November 2000 250 250
6.875% Eurobond due June 1999 250 250
6.375% Notes due March 2003 228 228
6.750% Eurobond due May 2002 200 200
5.500% Notes due March 1998 - 500
5.125% Eurobond due October 1998 - 250
7.000% Eurobond due April 1998 - 250
Other 203 205
$7,191 $7,709
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 32
In fiscal 1998, the Company borrowed $500 million due in 2010 with put
options imbedded. Beginning in 2000, and every second year, thereafter until
2010, the holders of the debt may require the Company to repurchase the debt at
face value.
Long-term debt is unsecured except for $202 million, which is collateralized
by property with an aggregate carrying value of approximately $349 million.
Annual maturities of long-term debt during the next five years are (in
millions):
<TABLE>
<CAPTION>
Fiscal year ending Annual
January 31, maturity
<S> <C>
1999 $ 1,039
2000 815
2001 2,018
2002 52
2003 559
Thereafter 3,747
</TABLE>
The Company has agreed to observe certain covenants under the terms of its
note 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 undering 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, 1998, are
(in millions):
<TABLE>
<CAPTION>
Fiscal years ending Minimum
January 31, rentals
<S> <C>
1999 $ 76
2000 104
2001 100
2002 94
2003 98
Thereafter 817
</TABLE>
At January 31, 1998 and 1997, the Company had letters of credit outstanding
totaling $673 million and $811 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 $251
million.
3 Financial Instruments:
Interest rate instruments
The Company enters into interest rate swaps to minimize the risks and costs
associated with its financial activities. The swap agreements are contracts to
exchange fixed or variable rates for floating interest rate payments
periodically over the life of the instruments. The notional amounts are used to
measure interest to be paid or received and do not represent the exposure to
credit loss. The rates paid on these swaps range from 3-month Deutschmark LIBOR
minus .0676% to 30-day Commercial Paper Non-Financial plus .134%. These
instruments are not recorded on the balance sheet, and as of January 31, 1998
and 1997, are as follows:
<TABLE>
<CAPTION>
January 31, 1998
Notional amount Maturity Rate Fair
(in millions) received value
<S> <C> <C> <C>
$ 585 2006 6.97% $17
$ 500 2000 5.65% -
$1,101 2003 30-day commercial ($1)
paper non-financial
</TABLE>
<TABLE>
<CAPTION>
January 31, 1997
Notional amount Maturity Rate
(in millions) received
<S> <C> >C>
$630 2006 6.97%
</TABLE>
Foreign exchange instruments
The Company has entered into a foreign currency swap to hedge its investment
in Germany. Under the agreement, the Company will pay $1,960 million in German
Deutschmarks in 2003 and will receive $1,101 million in United States Dollars.
At January 31, 1998, the fair value of this swap was $30 million.
The Company enters routinely into forward currency exchange contracts in the
regular course of business to manage its exposure against foreign currency
fluctuations on inventory purchases denominated in foreign currencies. These
contracts are for short durations (six months or less) and are insignificant to
the Company's operations or financial position. (There were approximately $27
million outstanding at January 31, 1998.)
Fair value of financial instruments
Cash and cash equivalents: The carrying amount approximates fair value due
to the short maturity of these instruments.
Long-term debt: The fair value of the Company's long-term debt, including
current maturities, approximates $8,639 million at January 31, 1998 and is based
on the Company's current incremental borrowing rate for similar types of
borrowing arrangements.
Interest rate instruments: The fair values are estimated amounts the Company
would receive or pay to terminate the agreements as of the reporting dates.
Foreign currency contracts: The fair value of foreign currency contracts are
estimated by obtaining quotes from brokers.
Wal-Mart Stores, Inc. Annual Report - Page 33
4 Defined Contribution Plans
The Company maintains profit sharing plans under which most full-time, and
many part-time associates become participants following one year of employment.
In fiscal 1998, the Company add
ed 401(k) plans in which the same associates may elect to contribute up to 10%
of their earnings.
The Company will make annual contributions to these plans on behalf of all
eligible associates, including those who have not elected to contribute to the
401(k) plan.
Annual Company contributions are made at the sole discretion of the Company,
and were $321 million, $247 million and $204 million in 1998, 1997 and 1996,
respectively.
5 Income Taxes
The income tax provision consists of the following (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current
Federal $1,891 $1,769 $1,342
State and local 186 201 188
International 18 4
Total current tax provision 2,095 1,974 1,530
Deferred
Federal (5) (97) 119
State and local (2) (9) 15
International 27 (74) (58)
Total deferred tax provision 20 (180) 76
Total provision for income taxes $2,115 $1,794 $1,606
</TABLE>
Items that give rise to significant portions of the deferred tax accounts at
January 31, are as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ 797 $ 721 $ 617
Inventory 275 145 135
International, principally asset
basis differences 387 83 62
Other 33 45 19
Total deferred tax liabilities 1,492 994 833
Deferred tax assets:
Amounts accrued for financial reporting
purposes not yet deductible for tax
purposes 441 295 204
International, asset basis and loss
carryforwards 258 314 163
Capital leases 190 169 147
Deferred revenue 89 113
Other 108 68 49
Total deferred tax assets 1,086 959 563
Net deferred tax liabilities $ 406 $ 35 $ 270
</TABLE>
A reconciliation of the significant differences between the effective income
tax rate and the federal statutory rate on pretax income follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit 2.1% 2.2% 3.1%
International (0.3%) (1.5%) (1.0%)
Other 0.2% 1.1% (0.3%)
37.0% 36.8% 36.8%
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 34
6 Acquisitions
A merger of the Mexican joint venture companies owned by Wal-Mart Stores,
Inc. and Cifra, S.A. de C.V. (Cifra) with, and into Cifra, was consummated with
an effective merger date of September 1, 1997. The Company received voting
shares of Cifra equaling approximately 33.5% of the outstanding voting shares
of Cifra in exchange for the Company's joint venture interests having a net book
value of approximately $644 million. No gain or loss was recognized on the
exchange of the joint venture interest. The Company then acquired 593,100,000
shares of the Series "A" Common Shares and Series "B" Common Shares of Cifra, in
a cash tender offer. The transaction has been accounted for as a purchase. The
net assets and liabilities acquired are recorded at fair value. Resulting
goodwill is being amortized over 40 years. As a result of the merger and tender
offer, Wal-Mart holds approximately 51% of the outstanding voting shares of
Cifra. The results of operations for Cifra, since the effective merger date,
have been included in the Company's results.
In December 1997, the Company acquired the Wertkauf hypermarket chain in
Germany, as well as certain real estate. The 21 hypermarkets are one-stop
shopping centers that offer a broad assortment of high-quality general
merchandise and food and are similar to the Wal-Mart Supercenter format in the
United States. The transaction has been accounted for as a purchase. Net assets
and liabilities of Wertkauf and the real estate are recorded at fair value. The
goodwill is being amortized over 40 years. The transaction closed on December
30, 1997; therefore, the assets are included in the January 31, 1998
consolidated balance sheet and the results of operations will be included
beginning in fiscal 1999.
In December 1997, the Company acquired the 40% minority interest in its
Brazilian joint venture from Lojas Americanas, and then sold a 5% share to an
individual. The purchase price of the minority interest approximated book value.
Because the transaction closed on December 30, 1997, the results of operations
for fiscal 1998 include the Company's original ownership percentage of the joint
venture.
Pro forma results of operations are not presented due to the insignificant
differences from historical results, both individually and in the aggregate.
The fair value of the assets and liabilities recorded as a result of these
transactions is as follows (in millions):
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 500
Receivables 97
Inventories 266
Net property, plant and equipment 2,105
Goodwill 1,213
Accounts payable (431)
Accrued liabilities (132)
Deferred income taxes (353)
Minority interest (705)
Other 31
2,591
Investment in unconsolidated Mexican
subsidiary exchanged (226)
Total cash purchase price $ 2,365
</TABLE>
7 Stock Option Plans
At January 31, 1998, 70 million shares of common stock were reserved for
issuance under stock option plans. The options granted under the stock option
plans expire ten 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.
Pro forma information, regarding net income and income per share, is
required by Statement 123 and has been determined as if the Company had
accounted for its associate stock option plans under the fair value method of
that statement. The fair value of these options was estimated at the date of the
grant using the Black-Scholes option pricing model with the following assumption
ranges: risk-free interest rates between 7.2% and 5.6%, dividend yields between
0.7% and 1.0%, volatility factors between .23 and .27, and an expected life of
the option of 7.4 years for the options issued prior to November 17, 1995 and
5.8 years for options issued thereafter.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferrable. In addition, option valuation methods require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's associate stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimates, in
management's opinion, the existing models do not necessarily provide a reliable
Wal-Mart Stores, Inc. Annual Report - Page 35
single measure of the fair value of its associate stock options. Using the
Black-Scholes option valuation model, the weighted average grant date value of
options granted during the year ended January 31, 1998, was $13 per option.
The effect of applying the fair value method of Statement 123 to the
Company's option plan does not result in net income and net income per share
that are materially different from the amounts reported in the Company's
consolidated financial statements as demonstrated below: (Amounts in millions
except per share data)
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Pro forma net income $3,504 $3,042 $2,737
Pro forma earnings
per share - basic $ 1.55 $ 1.33 $ 1.19
Pro forma earnings
per share - dilutive $ 1.55 $ 1.32 $ 1.19
</TABLE>
Further information concerning the options is as follows:
<TABLE>
<CAPTION>
Weighted
Option price average
Shares per share per share Total
<S> <C> <C> <C> <C>
January 31, 1995 17,969,000 $ 2.78-30.62 $20.20 $362,981,000
Options granted 7,114,000 23.50-24.75 23.61 167,959,000
Options canceled (1,953,000) 3.75-30.82 22.46 (43,873,000)
Options exercised (1,101,000) 2.78-25.38 8.79 (9,678,000)
January 31, 1996 22,029,000 4.94-30.82 21.67 477,389,000
(5,011,000 shares
exerciseable)
Options granted 11,466,000 22.25-25.25 23.19 265,931,000
Options canceled (2,110,000) 5.78-30.82 23.27 (49,109,000)
Options exercised (999,000) 4.94-25.75 10.34 (10,327,000)
January 31, 1997 30,386,000 6.50-30.82 22.51 683,884,000
(6,448,000 shares
exerciseable)
Options granted 5,263,000 24.88-39.94 37.87 199,309,000
Options canceled (1,802,000) 6.50-35.06 23.45 (42,251,000)
Options exercised (3,519,000) 6.50-30.82 19.25 (67,729,000)
January 31, 1998 30,328,000 $ 7.19-39.94 $25.50 $773,213,000
(6,731,000 shares
exerciseable)
The weighted average remaining life of options outstanding as of January 31,
1998 was 7.5 years.
Shares available for option grants:
January 31, 1997 43,590,000
January 31, 1998 40,129,000
</TABLE>
The following table summarizes information about stock options outstanding as of
January 31, 1998.
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Range of Number of Average Remaining Average Options Average
Exercise Prices Options Life (Years) Exercise Price Exerciseable Exercise Price
<S> <C> <C> <C> <C> <C>
$ 7.19 to 10.66 1,593,000 1.8 $10.23 1,233,000 $10.13
13.25 to 17.69 898,000 2.9 14.44 550,000 14.46
20.00 to 24.88 17,998,000 8.0 23.29 3,000,000 23.32
25.00 to 29.75 4,513,000 5.4 27.25 1,887,000 27.62
30.82 to 39.94 5,326,000 9.8 37.89 61,000 30.82
30,328,000 6,731,000
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 36
8 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 $596 million, $561
million and $531 million in 1998, 1997 and 1996, respectively. Aggregate
minimum annual rentals at January 31, 1998, under non-cancelable leases
are as follows (in millions):
<TABLE>
<CAPTION>
Fiscal Operating Capital
year leases leases
<S> <C> <C>
1999 $ 404 $ 347
2000 384 345
2001 347 344
2002 332 343
2002 315 340
Thereafter 2,642 3,404
Total minimum rentals $ 4,424 5,123
Less estimated executory costs 73
Net minimum lease payments 5,050
Less imputed interest at rates ranging from 6.1% to 14.0% 2,465
Present value of minimum lease payments $ 2,585
</TABLE>
Certain of the leases provide for contingent additional rentals based
on percentage of sales. Such additional rentals amounted to $46 million,
$51 million and $41 million in 1998, 1997 and 1996, 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 38 future locations. These lease commitments with real estate
developers provide for minimum rentals for 20 to 25 years, excluding
renewal options, which if consummated based on current cost estimates, will
approximate $38 million annually over the lease terms.
9 Segments
The Company and its subsidiaries are principally engaged in the
operation of mass merchandising stores located in all 50 states, Argentina,
Brazil, Canada, Germany, Mexico and Puerto Rico, and through joint ventures
in China.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which the Company has adopted in the current year.
The Company identifies such segments based on management
responsibility within the United States and geographically for all
international units. The Wal-Mart Stores segment includes the Company's
discount stores and Supercenters in the United States. The SAM'S Club
segment includes the warehouse membership clubs in the United States. The
Company's operations in Argentina, Brazil, Germany, Mexico and China are
consolidated using a December fiscal year end, generally due to statutory
reporting requirements. There were no significant intervening events which
materially affected the financial statements. The Company measures segment
profit as operating profit, which is defined as income before interest
expense, income taxes and minority interest. Information on segments and a
reconciliation to income, before income taxes and minority interest, are as
follows (in millions):
<TABLE>
<CAPTION>
Fiscal year ended January 31,1998
Wal-Mart
Stores SAM'S Club International Other Consolidated
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 83,820 $ 20,668 $ 7,517 $ 5,953 $ 117,958
Intercompany real estate
charge (income) 1,375 349 (1,724)
Depreciation and
amortization 674 104 118 738 1,634
Operating income 5,833 616 262 (208) 6,503
Interest expense 784
Income before income taxes
and minority interest 5,719
Total assets $ 22,002 $ 3,864 $ 7,390 $ 12,128 $ 45,384
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 37
<TABLE>
<CAPTION>
Fiscal year ended January 31,1997
Wal-Mart
Stores SAM'S Club International Other Consolidated
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 74,840 $ 19,785 $ 5,002 $ 5,232 $ 104,859
Intercompany real estate
charge (income) 1,250 346 (1,596)
Depreciation and
amortization 628 99 70 666 1,463
Operating income 5,033 557 24 108 5,722
Interest expense 845
Income before income taxes
and minority interest 4,877
Total assets $ 20,905 $ 3,927 $ 2,887 $ 11,885 $ 39,604
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended January 31,1996
Wal-Mart
Stores SAM'S Club International Other Consolidated
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 66,271 $ 19,068 $ 3,712 $ 4,576 $ 93,627
Intercompany real estate
charge (income) 1,075 339 (1,414)
Depreciation and
amortization 561 95 52 596 1,304
Operating income 4,562 480 (16) 221 5,247
Interest expense 888
Income before income taxes
and minority interest 4,359
Total assets $ 19,292 $ 3,875 $ 2,305 $ 12,069 $ 37,541
</TABLE>
International long-lived assets excluding goodwill are $3,537 million,
$1,199 million and $952 million in 1998, 1997 and 1996, respectively.
Additions to international long-lived assets are $2,401 million, $317
million and $747 million in 1998, 1997 and 1996, respectively. The
international segment includes all international real estate. All of the
real estate in the United States is included in the "Other" category and is
leased to Wal-Mart Stores and SAM'S Club. The revenues in the "other"
category result from sales to third parties by McLane Company, Inc., a
wholesale distributor.
McLane offers a wide variety of grocery and non-grocery products, which
it sells to a variety of retailers including the Company's Wal-Mart Stores
and SAM'S Club. McLane is not a significant segment and, therefore, results
are not presented separately.
10 Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
Quarters ended
Amounts in millions (except
per share information) April 30, July 31, October 31, January 31,
<S> <C> <C> <C> <C>
1998
Net sales $25,409 $28,386 $28,777 $35,386
Cost of sales 20,127 22,478 22,680 28,153
Net income 652 795 792 1,287
Net income per share,
basic and dilutive $.29 $.35 $.35 $.57
1997
Net sales $22,772 $25,587 $25,644 $30,856
Cost of sales 18,032 20,336 20,416 24,726
Net income 571 706 684 1,095
Net income per share,
basic and dilutive $.25 $.31 $.30 $.48
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 38
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders,
Wal-Mart Stores, Inc.
We have audited the accompanying consolidated balance sheets of Wal-Mart
Stores, Inc. and Subsidiaries as of January 31, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended January 31, 1998.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wal-
Mart Stores, Inc. and Subsidiaries at January 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended January 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Tulsa, Oklahoma
March 24, 1998
Wal-Mart Stores, Inc. Annual Report - Page 39
Listings- Stock Symbol: WMT
New York Stock Exchange
Pacific Stock Exchange
<TABLE>
<CAPTION>
Market Price of Common Stock
Fiscal years ended January 31,
1998 1997
Quarter Ended Hi Low Hi Low
<S> <C> <C> <C> <C>
April 30 $29.88 $23.13 $24.50 $20.88
July 31 $38.56 $28.25 $26.25 $22.88
October 31 $38.75 $32.19 $28.13 $24.50
January 31 $41.75 $36.06 $27.00 $22.13
</TABLE>
<TABLE>
<CAPTION>
Dividends Paid Per Share
Fiscal years ended January 31,
Quarterly
1998 1997
<S> <C> <C> <C>
April 9 $0.0675 April 8 $0.0525
July 14 $0.0675 July 8 $0.0525
October 14 $0.0675 October 7 $0.0525
January 12 $0.0675 January 17 $0.0525
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF WAL-MART STORES, INC.
NAME UNDER
PERCENT OF WHICH DOING
EQUITY BUSINESS
ORGANIZED OR SECURITIES OTHER THAN
SUBSIDIARY INCORPORATED OWNED SUBSIDIARY'S
Wal-Mart Stores East, Inc. Delaware, U. S. 100% Wal-Mart
Sam's West, Inc. Delaware, U. S. 100% Sam's Club
Sam's East, Inc. Delaware, U. S. 100% Sam's Club
Wal-Mart Property Company Delaware, U. S. 100% NA
Sam's Property Company Delaware, U. S. 100% NA
McLane Company, Inc., Texas, U. S. 100% Wal-Mart
and its subsidiaries
Cifra, S.A. de C.V. Mexico 51%
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 24, 1998,
included in the 1998 Annual Report to Shareholders of Wal-Mart Stores, Inc.
We also consent to the incorporation by reference of our report dated
March 24, 1998, 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, 1998, in the following registration
statements and related prospectuses.
Associate Stock Purchase Plan Form S-8 File No. 2-64662
of Wal-Mart Stores, Inc.
Stock Option Plan of 1984 of Form S-8 File No. 2-94358
Wal-Mart Stores, Inc., as and 33-43315
amended
Stock Option Plan of 1994 of Form S-8 File No. 33-55325
Wal-Mart Stores, Inc., as
amended
Debt Securities and Pass-Through Form S-3 File No. 33-55725
Certificates of
Wal-Mart Stores, Inc.
Director Compensation Plan Form S-8 File No. 333-24259
of Wal-Mart Stores, Inc.
Debt Securities of Wal-Mart Form S-3 File No. 33-53125
Stores, Inc.
Dividend Reinvestment and Form S-3 File No. 333-2089
Stock Purchase Plan of
Wal-Mart Stores, Inc.
401(k) Retirement Savings Form S-8 File No. 333-29847
Plan of Wal-Mart Stores, Inc.
401(k) Retirement Savings Form S-8 File No. 33-44659
Plan of Wal-Mart Puerto Rico, Inc.
/s/ Ernst & Young LLP
Ernst & Young LLP
Tulsa, Oklahoma
April 21, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 1,447
<SECURITIES> 0
<RECEIVABLES> 976
<ALLOWANCES> 0
<INVENTORY> 16,497
<CURRENT-ASSETS> 19,352
<PP&E> 27,376
<DEPRECIATION> 5,907
<TOTAL-ASSETS> 45,384
<CURRENT-LIABILITIES> 14,460
<BONDS> 0
0
0
<COMMON> 224
<OTHER-SE> 18,279
<TOTAL-LIABILITY-AND-EQUITY> 45,384
<SALES> 117,958
<TOTAL-REVENUES> 119,299
<CGS> 93,438
<TOTAL-COSTS> 113,580
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 784
<INCOME-PRETAX> 5,719
<INCOME-TAX> 2,115
<INCOME-CONTINUING> 3,526
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,526
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
</TABLE>
