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, 1999, 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, 1999, was $121,319,774,111. For the
purposes of this disclosure only, the registrant has assumed that its
directors, officers and beneficial owners of 5% or more of the registrant's
common stock are the affiliates of the registrant.
</PAGE 1>
<PAGE 2>
The registrant had 4,449,818,854 shares of Common Stock outstanding as
of March 31, 1999, restated to reflect the two-for-one stock split
announced March 4, 1999. The record date for the stock split was March 19,
1999 and it is payable on April 19, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the
fiscal year ended January 31, 1999, are incorporated by reference into
Parts I and II of this Form 10-K.
Portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held June 4, 1999, 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, Year 2000 issues, unemployment levels, interest
rate fluctuations and other capital market and economic 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.
</PAGE 2>
<PAGE 3>
WAL-MART STORES, INC.
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED JANUARY 31, 1999
PART I
ITEM 1. BUSINESS
Wal-Mart Stores, Inc. (together with its subsidiaries hereinafter
referred to as the "Company") is the world's largest retailer measured by
total revenues. During the fiscal year ended January 31, 1999, the Company
had net sales of $137,634,000,000.
(a) Development of Business
Domestically, at January 31, 1999, the Company operated 1,869
discount stores and 564 Supercenters, and 451 SAM'S Clubs. Tables
summarizing information concerning additions of units and square footage
for domestic discount stores, Supercenters and SAM'S Clubs since January
31, 1994, are included as Schedules A and B to Item 1 found on pages 10 and
11 of this annual report.
In fiscal 1999, the Company took possession of 74 units from the
Interspar hypermarket chain in Germany. The units were acquired from Spar
Handels AG, a German company that owns multiple retail formats and
wholesale operations throughout Germany. The transaction closed on
December 29, 1998, Interspar's fiscal year end. Therefore, the acquired
assets are included in the Company's consolidated balance sheet as of
January 31, 1999, and the results of operations will be included beginning
in fiscal 2000.
In fiscal 1999, the Company extended its presence in Asia with an
investment in Korea. The Company acquired a majority interest in four
existing units as well as six undeveloped sites. The four acquired units
were previously operated by Korea Makro. The results of operations since
the effective date of the acquisition have been included in the Company's
results of operations.
See Note 6 of Notes to Consolidated Financial Statements
incorporated by reference in Item 8 of Part II found on page 17 of this
annual report for additional information regarding our acquisitions.
Internationally, at January 31, 1999, the Company operated units
in Argentina(13), Brazil(14), Canada(154), Germany(95), Mexico(416), and
Puerto Rico(15), and, under joint venture agreements, in China(5) and
Korea(4). A table summarizing information concerning additions of units
and square footage for international units operated since fiscal 1994, is
included as Schedule C to Item 1 found on page 12 of this annual report.
</PAGE 3>
<PAGE 4>
(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.
The Company identifies 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, Korea, 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 17 of this annual report.
(c) Narrative Description of Business
The Company, a Delaware corporation, has its principal offices in
Bentonville, Arkansas. Although the Company was incorporated in October
1969, the businesses conducted by its predecessors began in 1945 when Sam
M. Walton opened a franchise Ben Franklin variety store in Newport,
Arkansas. In 1946, his brother, James L. Walton, opened a similar store in
Versailles, Missouri. Until 1962, the Company's business was devoted
entirely to the operation of variety stores. In that year, the first Wal-
Mart Discount City (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 S.A. de C.V. (Cifra). The Company's international
presence has continued to expand and at January 31, 1999, the Company had
operations in seven 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
$95,395,000,000, $83,820,000,000 and $74,840,000,000 for the three fiscal
years ended January 31, 1999, 1998, and 1997, 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 17 of this annual report for additional
information regarding our segments.
General. The Company operates Wal-Mart discount stores in all 50
states. The average size of a discount store is approximately 94,300
square feet. Wal-Mart Supercenters are located in 29 states and the average
size of a Supercenter is 181,200 square feet. The Supercenter prototypes
range in size from 110,000 square feet to 234,000 square feet.
</PAGE 4>
<PAGE 5>
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", "Puritan", "Better Homes & Gardens", "Popular
Mechanics", "Catalina", "McKids", "Basic Equipment" and "House Beautiful".
During the fiscal year ended January 31, 1999, sales in discount
stores and Supercenters (which are subject to seasonal variance) by product
category were as follows:
PERCENTAGE
CATEGORY OF SALES
Hardgoods........................ 22
Softgoods/domestics.............. 21
Grocery, candy and tobacco....... 16
Pharmaceuticals.................. 9
Electronics...................... 9
Sporting goods and toys.......... 7
Health and beauty aids........... 7
Stationery ...................... 4
Shoes............................ 2
Jewelry.......................... 2
One-hour photo................... 1
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
</PAGE 5>
<PAGE 6>
volume of sales occurs in the fourth fiscal quarter and the lowest volume
occurs during the first fiscal quarter.
Competition. Wal-Mart discount stores compete with other
discount, department, drug, variety and specialty stores, many of which are
national chains. Wal-Mart Supercenters compete with other supercenter-type
stores, discount stores, supermarkets and specialty stores, many of which
are national or regional chains. The Company also competes with others for
new club sites. As of January 31, 1999, 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 "Price Rollbacks" 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 1999 fiscal year, approximately 84% of
the Wal-Mart discount stores' and Supercenters' purchases were shipped from
Wal-Mart's 43 distribution centers, nine of which are grocery distribution
centers, and two of which are import distribution centers. The balance of
merchandise purchased was shipped directly to the stores from suppliers.
The 43 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, Georgia, Indiana,
Mississippi, New York and Pennsylvania; and one in each of Alabama,
Arizona, Colorado, Iowa, Illinois, Kansas, Kentucky, New Hampshire, New
Mexico, North Carolina, Ohio, Oregon, Tennessee, Utah, Virginia and
Wisconsin.
SAM'S CLUB OPERATING SEGMENT
The SAM'S Club segment, which includes the warehouse membership
clubs in the United States, had sales of $22,881,000,000, $20,668,000,000
and $19,785,000,000 for the three fiscal years ended January 31, 1999,
1998, and 1997, 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 17 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 121,200 square feet, and club
sizes generally range between 90,000 and 150,000 square feet of building
area.
Merchandise. SAM'S Clubs offer bulk displays of name brand
hardgood merchandise, some softgoods and institutional size grocery items,
and selected items under the "Member's Mark" store brand. Generally each
</PAGE 6>
<PAGE 7>
SAM'S Club 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. In addition, some
clubs offer one-hour photo, embroidery departments, pharmaceuticals and gas
stations.
During the fiscal year ended January 31, 1999, sales in the clubs
(which are subject to seasonal variance) by product category were as
follows:
PERCENTAGE
CATEGORY OF SALES
Sundries.......................... 31.6
Food ............................. 32.8
Hardlines ........................ 22.1
Softlines ........................ 5.7
Service Businesses................ 7.8
100.0%
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 Clubs 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 1999, business members paid
an annual membership fee of $30 for the primary membership card with a
spouse card available at no additional cost. The annual membership fee for
an individual member is $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
club sites. As of January 31, 1999, based on domestic U.S. net sales, the
SAM'S Club segment ranked first among all warehouse clubs.
Distribution. During fiscal 1999, approximately 61% of the SAM'S
Club purchases were shipped from distribution facilities. The balance was
shipped directly to the clubs from suppliers. Operationally, the principle
</PAGE 7>
<PAGE 8>
focus is on crossdocking product, while maintaining stored inventory is
minimized. A combination of Company owned and operated facilities and
third-party facilities comprise the overall distribution structure.
INTERNATIONAL OPERATING SEGMENT
The Company's International Segment is comprised of wholly owned
operations in Argentina, Canada, Germany and Puerto Rico; through joint
ventures in China and Korea; and through majority-owned subsidiaries in
Brazil and Mexico. Sales for the three fiscal years ended January 31, 1999,
1998, and 1997 were $12,247,000,000, $7,517,000,000 and $5,002,000,000,
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 17 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, China, Korea and Mexico; SAM'S Clubs in Argentina, Brazil, China,
Mexico, and Puerto Rico; Hypermarkets in Germany and Superamas (traditional
supermarket,) Bodegas (discount store,) Aurreras (combination store,)
Suburbias (specialty department store) and Vips (restaurant) 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
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 low prices on quality
merchandise that offers exceptional value. In Supercenters, our ability to
</PAGE 8>
<PAGE 9>
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 Jacksonville, 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 1999, approximately 50% 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 17 of this annual report result from sales
to third parties by McLane Company, Inc. (McLane). McLane is a wholly owned
wholesale distributor that sells its merchandise to a variety of retailers,
primarily to the convenience store industry. McLane also services Wal-Mart
discount stores, Supercenters and SAM'S Clubs. Sales to third parties for
the three fiscal years ended January 31, 1999, 1998, and 1997 were
$7,111,000,000, $5,953,000,000 and $5,232,000,000 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,
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, 1999, the Company employed approximately 910,000
associates worldwide, with approximately 780,000 in the United States and
130,000 internationally. Most associates participate in incentive programs,
which provide the opportunity to receive additional compensation based upon
the Company's productivity or profitability.
</PAGE 9>
<PAGE 10>
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
SCHEDULE A TO ITEM 1 - WAL-MART STORES SEGMENT STORE COUNT AND NET SQUARE
FOOTAGE GROWTH
YEARS ENDED JANUARY 31, 1994 THROUGH 1999
<CAPTION>
STORE COUNT
Fiscal Year Wal-Mart Wal-Mart
Ended discount stores Supercenters Total
Ending
Jan 31, Opened Closed Conversions(1) Total Opened (2) Total Opened(2) Closed Balance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Forward 1,848 34 1,882
1994 141 2 37 1,950 38 72 142 2 2,022
1995 109 5 69 1,985 75 147 115 5 2,132
1996 92 2 80 1,995 92 239 104 2 2,234
1997 59 2 92 1,960 105 344 72 2 2,304
1998 37 1 75 1,921 97 441 59 1 2,362
1999 37 1 88 1,869 123 564 72 1 2,433
</TABLE>
<TABLE>
<CAPTION>
NET SQUARE FOOTAGE
Fiscal Year Wal-Mart Wal-Mart
Ended discount stores Supercenters Total
Jan 31, Net Additions Total Net Additions Total Net Additions Square Footage
<S> <C> <C> <C> <C> <C> <C>
Balance Forward 147,366,428 5,951,739 153,318,167
1994 16,185,442 163,551,870 6,762,080 12,713,819 22,947,522 176,265,689
1995 10,109,978 173,661,848 14,087,725 26,801,544 24,197,703 200,463,392
1996 8,188,223 181,850,071 16,791,559 43,593,103 24,979,782 225,443,174
1997 ( 103,486) 181,746,585 19,661,948 63,255,051 19,558,462 245,001,636
1998 (2,411,149) 179,335,436 17,076,582 80,331,633 14,665,433 259,667,069
1999 (3,062,418) 176,273,018 21,892,838 102,224,471 18,830,420 278,497,489
</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.
</PAGE 10>
<PAGE 11>
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
SCHEDULE B TO ITEM 1 - SAM'S CLUB SEGMENT CLUB COUNT AND NET SQUARE FOOTAGE
GROWTH
YEARS ENDED JANUARY 31, 1994 THROUGH 1999
<CAPTION>
STORE COUNT
Fiscal Year
Ended SAM'S Clubs
Jan 31, Opened Closed Total
<S> <C> <C> <C>
Balance Forward 256
1994 162(1) 1 417
1995 21 12 426
1996 9 2 433
1997 9 6 436
1998 8 1 443
1999 8 0 451
</TABLE>
<TABLE>
<CAPTION>
NET SQUARE FOOTAGE
Fiscal Year
Ended SAM'S Clubs
Jan 31, Net Additions Total
<S> <C> <C>
Balance Forward 30,703,878
1994 19,670,804 50,374,682
1995 1,335,742 51,710,424
1996 825,020 52,535,444
1997 298,692 52,834,136
1998 716,150 53,550,286
1999 1,099,144 54,649,430
</TABLE>
[FN]
<F1>
(1) Includes 147 clubs acquired in PACE acquisition.
</PAGE 11>
<PAGE 12>
<TABLE>
WAL-MART STORES, INC. AND SUBSIDIARIES
SCHEDULE C TO ITEM 1 - INTERNATIONAL SEGMENT UNIT COUNT AND NET SQUARE FOOTAGE
GROWTH
YEARS ENDED JANUARY 31, 1994 THROUGH 1999
<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>
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
1999 10 3 13 9 5 14 154 4 1 5
Fiscal Germany Mexico Korea Puerto Rico
Year Wal-Mart SAM'S Wal-Mart Wal-Mart SAM'S
Ended Hypermarkets Supercenters Clubs Other* Total Supercenters Supercenters Clubs Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 0 2 7 0 9 0 3 2 5
1995 0 11 22 0 33 0 5 2 7
1996 0 13 28 0 41 0 7 4 11
1997 0 18 28 0 46 0 7 4 11
1998 21 27 28 330 385 0 9 5 14
1999 95 27 31 358 416 4 9 6 15
</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>
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
1999 663,986 2,240,860 914,618 2,216,255 981,261 17,949,532 224,827 687,041
Fiscal Germany Mexico Korea Puerto Rico
Year
Ended Net Additions Total Net Additions Total Net Additions Total Net Additions Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 0 0 946,028 1,251,563 0 0 339,260 568,907
1995 0 0 3,718,910 4,970,473 0 0 266,279 835,186
1996 0 0 1,012,734 5,983,207 0 0 470,266 1,305,452
1997 0 0 1,032,603 7,015,810 0 0 0 1,305,452
1998 2,449,369 2,449,369 10,292,640* 17,308,450 0 0 342,888 1,648,340
1999 6,845,491 9,294,860 714,459 18,022,909 553,683 553,683 100,250 1,748,590
</TABLE>
[FN]
<F1>
* In fiscal 1998, includes 33 Aurreras (combination stores), 62 Bodegas
(discount stores), 38 Suburbias (specialty department stores), 36 Superamas
(traditional supermarkets), and 178 Vips (restaurants), the majority of which
were acquired in 1998 in the Cifra acquisition.
<F2>
* In fiscal 1999, includes 33 Aurreras (combination stores), 63 Bodegas
(discount stores), 43 Suburbias (specialty department stores), 36 Superamas
(traditional supermarkets), and 183 Vips (restaurants).
</PAGE 12>
<PAGE 13>
ITEM 2. PROPERTIES
The number and location of domestic and international Wal-Mart
discount stores, Supercenters and SAM'S Clubs is incorporated by reference
to the table under the caption "Fiscal 1999 End of Year Store Counts" on
Page 17 of the Annual Report to Shareholders for the year ended January 31,
1999.
The Company owns 1,488 properties on which domestic discount
stores and Supercenters are located and 214 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 43 Wal-Mart distribution
facilities and 19 McLane distribution facilities at January 31, 1999.
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.
Internationally, the Company has a combination of owned and
leased properties in each country in which the operating units are located.
The Company owns ten properties in Argentina, eight properties in Brazil,
seven properties in Canada, one property in China under joint venture, 21
properties in Germany, four properties in Korea under joint venture, 242
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
pending legal proceeding, other than routine litigation incidental to its
business.
</PAGE 13>
<PAGE 14>
The Company recently opened a Supercenter in Honesdale,
Pennsylvania. In February of 1999, the Company settled claims made by the
Pennsylvania Department of Environmental Protection that the construction
activities led to excess erosion and sedimentation of a nearby creek. In
the settlement, Wal-Mart agreed to pay a fine of $25,000 and to perform a
$75,000 community environmental project in the Honesdale area. The Company
is negotiating settlement of a claim by the United States Army Corps of
Engineers that the construction resulted in the filling of approximately
0.76 acres in excess of the permitted fill area of waters and wetlands at
the site. The proposed settlement with the Corps will require Wal-Mart to
pay $200,000 to a non-profit corporation for the purchase of local wetlands
conservation areas and easements. Under contracts with third parties,
Wal-Mart has received reimbursement for the $75,000 community environmental
project and the $25,000 fine. Wal-Mart also expects to be reimbursed under
third party contracts for the $200,000 proposed settlement amount.
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, 1999.
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 63
Officer.
S. Robson Walton Chairman of the Board. 1992 54
Donald G. Soderquist Senior Vice Chairman of the Board. 1999 65
Prior to January 1999, he served
as Vice Chairman and Chief
Operating Officer.
H. Lee Scott, Jr. Vice Chairman and Chief Operating 1999 50
Officer. Prior to January 1999,
he served as 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.
</PAGE 14>
<PAGE 15>
Paul R. Carter Executive Vice President 1995 58
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 55
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.
Thomas M. Coughlin Executive Vice President and 1999 50
President and Chief Executive
Officer of Wal-Mart Stores
Division. Prior to January 1999,
he served as Executive Vice
President and 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 51
Specialty Divisions. Prior to
1995, he served as Senior Vice
President - Merchandising.
Thomas R. Grimm Executive Vice President and 1998 54
President and Chief Executive
Officer of SAM'S Club Division.
Prior to October 1998, he was
retired and served as a consultant
to various organizations. Prior
to June 1994, he served as
President and Chief Executive
Officer of Pace Membership
Warehouse, a Division of K-Mart
Corporation.
</PAGE 15>
<PAGE 16>
Bob L. Martin Executive Vice President 1993 50
and President and Chief Executive
Officer of Wal-Mart International
Division.
John B. Menzer Executive Vice President and 1995 48
Chief Financial Officer.
Prior to September 1995, he served
as President and Chief Operating
Officer of Ben Franklin Retail
Stores, Inc.
Nicholas J. White Executive Vice President - 1989 54
Food Division.
William G. Rosier President and Chief Executive 1995 50
Officer of McLane Company, Inc.
Prior to 1995, he served as Senior
Vice President - Marketing and
Customer Services for McLane.
James A. Walker, Jr. Senior Vice President and 1995 52
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 to the information "Number of Shareholders" under the caption "11-
Year Financial Summary" on Pages 18 and 19, 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, 1999.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by
reference to all information under the caption "11-Year Financial Summary"
on Pages 18 and 19 of the Annual Report to Shareholders for the year ended
January 31, 1999.
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 to all information under the caption
</PAGE 16>
<PAGE 17>
"Management's Discussion and Analysis" on Pages 20 through 25 of the Annual
Report to Shareholders for the year ended January 31, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is furnished by
incorporation by reference to 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, 1999.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item with respect to the Company's
directors and compliance by the Company's directors, executive officers and
certain beneficial owners of the Company's Common Stock with Section 16(a)
of the Securities Exchange Act of 1934 is furnished by incorporation by
reference to all information under the captions entitled "Nominees for
Directors" on Pages 2 and 3 and "Section 16(a) Beneficial Ownership
Reporting Compliance" on Page 12 of the Company's definitive Proxy
Statement for its Annual Meeting of Shareholders to be held on Friday, June
4, 1999 (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 to all information under the caption entitled
"Compensation of Directors" on Page 4, "Compensation and Nominating
Committee Report on Executive Compensation" on page 5 through 7, and
"Summary Compensation", "Option Grants In Last Fiscal Year", and "Option
Exercises and Fiscal Year End Option Values" on Pages 8 through 10 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 to all information under the caption entitled
"Stock Ownership", subcaptions "Ownership of Major Shareholders (1)" and
"Holdings of Officers and Directors" on Pages 10 through 12 of the Proxy
Statement.
</PAGE 17>
<PAGE 18>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is furnished by
incorporation by reference to all information under the caption "Related-
Party Transactions with Wal-Mart" on Page 5 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.
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
</PAGE 18>
<PAGE 19>
reference to Exhibit 4(b) to Registration Statement on Form
S-3 (File Number 33-11394).
4(d) Form of Indenture dated as of July 15, 1990, between the
Company and Harris Trust and Savings Bank, Trustee, is
incorporated herein by reference to Exhibit 4(b) to
Registration Statement on Form S-3 (File Number 33-35710).
4(e) Indenture dated as of April 1, 1991, between the Company and
The First National Bank of Chicago, Trustee, is incorporated
herein by reference to Exhibit 4(a) to Registration
Statement on Form S-3 (File Number 33-51344).
4(f) First Supplemental Indenture dated as of September 9, 1992,
to the Indenture dated as of April 1, 1991, between the
Company and The First National Bank of Chicago, Trustee, is
incorporated herein by reference to Exhibit 4(b) to
Registration Statement on Form S-3 (File Number 33-51344).
+10(a) Form of individual deferred compensation agreements is
incorporated herein by reference to Exhibit 10(b)from the
Annual Report on Form 10-K of the Company, as amended, for
the year ended January 31, 1986.
+10(b) Wal-Mart Stores, Inc. Stock Option Plan of 1984 is
incorporated herein by reference to Registration Statement
on Form S-8 (File Number 2-94358).
+10(c) 1986 Amendment to the Wal-Mart Stores, Inc. Stock Option
Plan of 1984 is incorporated herein by reference to Exhibit
10(h) from the Annual Report on Form 10-K of the Company for
the year ended January 31, 1987.
+10(d) 1991 Amendment to the Wal-Mart Stores, Inc. Stock Option
Plan of 1984 is incorporated herein by reference to Exhibit
10(h) from the Annual Report on Form 10-K of the Company for
the year ended January 31, 1992.
+10(e) 1993 Amendment to the Wal-Mart Stores, Inc. Stock Option
Plan of 1984 is incorporated herein by reference to Exhibit
10(i) from the Annual Report on Form 10-K of the Company for
the year ended January 31, 1993.
+10(f) Wal-Mart Stores, Inc. Stock Option Plan of 1994 is
incorporated herein by reference to Exhibit 4(c) to
Registration Statement on Form S-8 (File Number 33-55325).
+10(g) 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).
</PAGE 19>
<PAGE 20>
+10(h) 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(i) 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.
+10(j) 1996 Amendment to the Wal-Mart Stores, Inc. Stock Option
Plan of 1994 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, 1998.
+10(k) 1997 Amendment to the Wal-Mart Stores, Inc. Stock Option
Plan of 1994 is incorporated herein by reference to Exhibit
10(k) from the Annual Report on Form 10-K of the Company for
the year ended January 31, 1998.
*+10(l) Wal-Mart Stores, Inc. Stock Incentive Plan of
1998 is filed herewith as an Exhibit to this Form 10-K.
*+10(m) Wal-Mart Stores, Inc. Management Incentive Plan of 1998 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,
1999.
*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, 1999.
</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, 1999 26
Consolidated Balance Sheets at
January 31, 1999 and 1998 27
Consolidated Statements of
Shareholders' Equity for each of the
three years in the period ended
January 31, 1999 28
Consolidated Statements of Cash
Flows for each of the three
years in the period ended
January 31, 1999 29
Notes to Consolidated Financial
Statements, except Note 10 30-37
Not Covered by Report of Independent
Auditors:
Note 10 - Quarterly Financial Data
(Unaudited) 38
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 15, 1999 /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 15, 1999 ____________________
S. Robson Walton
Chairman of the Board
DATE: April 15, 1999 /s/David D. Glass
David D. Glass
President, Chief Executive
Officer and Director
DATE: April 15, 1999 /s/Donald G. Soderquist
Donald G. Soderquist
Senior Vice Chairman of the
Board and Director
DATE: April 15, 1999 /s/John B. Menzer
John B. Menzer
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
DATE: April 15, 1999 /s/James A. Walker, Jr.
James A. Walker, Jr.
Senior Vice President and
Controller
(Principal Accounting Officer)
Date: April 15, 1999 /s/Jeronimo Arango
Jeronimo Arango
Founder of Cifra S.A. de C.V.
and Director of Wal-Mart
Stores, Inc.
</PAGE 22>
<PAGE 23>
DATE: April 15, 1999 /s/John A. Cooper, Jr.
John A. Cooper, Jr.
Director
DATE: April 15, 1999 ____________________
Stephen Friedman
Director
DATE: April 15, 1999 ____________________
Stanley C. Gault
Director
DATE: April 15, 1999 /s/Roland A. Hernandez
Roland A. Hernandez
Director
DATE: April 15, 1999 ______________________
Frederick S. Humphries
Director
DATE: April 15, 1999 /s/E. Stanley Kroenke
E. Stanley Kroenke
Director
DATE: April 15, 1999 /s/Elizabeth A. Sanders
Elizabeth A. Sanders
Director
DATE: April 15, 1999 /s/Jack C. Shewmaker
Jack C. Shewmaker
Director
DATE: April 15, 1999 ____________________
Paula Stern
Director
DATE: April 15, 1999 /s/Jose H. Villarreal
Jose H. Villarreal
Director
DATE: April 15, 1999 /s/John T. Walton
John T. Walton
Director
</PAGE 23>
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 1
WAL-MART STORES, INC.
STOCK INCENTIVE PLAN OF 1998
1.1 Purpose. Wal-Mart Stores, Inc. ("Wal-Mart") believes it is
important to provide incentives to Wal-Mart's Associates and its Non-
Associate Directors through participation in the ownership of Wal-Mart
and otherwise. This Wal-Mart Stores, Inc. Stock Incentive Plan of
1998 (the "Plan") is established to provide incentives to certain
Associates and the Non-Associate Directors to enhance their job
performance, to motivate them to remain or become associated with Wal-
Mart and its Affiliates, and to increase the success of Wal-Mart. The
Plan is not limited to executive officers or directors of Wal-Mart,
but will be available to provide incentives to any Associate that the
Committee believes has made or may make a significant contribution to
Wal-Mart or an Affiliate of Wal-Mart.
DEFINITIONS
2.1 "Affiliate" means any corporation, company limited by shares,
partnership, limited liability company, business trust, other entity
or other business association that is now or hereafter controlled by
Wal-Mart.
2.2 "Associate" means any person employed by Wal-Mart or any
Affiliate.
2.3 "Board" means the Board of Directors of Wal-Mart.
2.4 "Cause" means, in the context of termination of an Associate's
employment, the Associate's commission of any act deemed inimical to
the best interest of Wal-Mart or any Affiliate or failure to perform
satisfactorily his or her assigned duties, each as determined in the
sole discretion of the Committee.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means (1) as to Associates who are Section 16
Persons, the Compensation and Nominating Committee of the Board and
(2) as to all other Associates, the committee appointed by the Board
to administer the Plan or a particular feature of the Plan.
2.7 "Continuous Status as an Associate" means the absence of any
interruption or termination of the employment relationship between an
Associate and Wal-Mart or an Affiliate. Continuous Status as an
Associate shall not be considered interrupted in the case of: (i)
sick leave; (ii) military leave; or (iii) any other leave of absence
approved by Wal-Mart, provided that leave does not exceed one year,
unless reemployment upon the expiration of that leave is guaranteed by
contract or law or unless provided otherwise by to a policy of Wal-
Mart.
2.8 "Delaware Law" means the Delaware General Corporation Law, as
amended.
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 2
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations adopted thereunder.
2.10 "Fair Market Value" means, as of any date, the closing sales
price for a Share (a) on the NYSE on that date (or if no trading in
Shares occurred on that date, on the last day on which Shares were
traded on the NYSE) or (b) if the Shares are not listed for trading on
the NYSE, the value of a Share as determined in good faith by
Committee.
2.11 "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Code Section 422.
2.12 "Non-Associate Director" means a director of Wal-Mart who is
not an Associate.
2.13 "Nonqualified Option" means an Option not intended to qualify as
an Incentive Stock Option.
2.14 "Notification" means the agreement or other document governing
any grant of Restricted Stock or Stock Appreciation Rights.
2.15 "NYSE" means the New York Stock Exchange or any successor
organization thereto.
2.16 "Option" means a stock option to acquire a certain number of the
Subject Shares granted pursuant to the Plan.
2.17 "Option Notification" means the agreement or other document
governing any Incentive Stock Option or Nonqualified Option granted
under the Plan.
2.18 "Optioned Stock" means the Shares subject to an Option.
2.19 "Optionee" means an Associate or other person who receives an
Option.
2.20 "Parent/Subsidiary Corporation" means a "parent corporation"
(within the meaning of Code Section 424(e)) or a "subsidiary
corporation" (within the meaning of Code Section 424(f)) of Wal-Mart.
2.21 "Performance Based Award" means a Plan Award that the Committee
designates as a "Performance Based Award" and that is granted to a
"covered employee" (as defined in Code Section 162(m)(3)) or to an
Associate that the Committee determines might become a "covered
employee."
2.22 "Plan" means this Wal-Mart Stores, Inc. Stock Incentive Plan of
1998, as amended from time to time.
2.23 "Plan Award" means any Option, Restricted Stock Award or Stock
Appreciation Right.
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 3
2.24 "Recipient" means an Associate or Non-Associate Director who has
received a Plan Award.
2.25 "Restricted Stock" means Shares awarded to a Recipient pursuant
to a Restricted Stock Award that are subject to a Restriction and all
non-cash proceeds of those Shares that are subject to a Restriction.
2.26 "Restricted Stock Award" means the award of Shares subject to
one or more Restrictions under the Restricted Stock feature of the
Plan and the terms and conditions of that award.
2.27 "Restriction" means the contractual condition(s) contained in a
Restricted Stock Award that if not met will result in the forfeiture
to Wal-Mart of some or all of the Shares issued to the Recipient
pursuant to that Restricted Stock Award and the non-cash proceeds of
those Shares.
2.28 "Section 16 Person" means any Associate who is required to file
reports under Section 16 of Exchange.
2.29 "Securities Act" means the Securities Act of 1933, as amended
and the rules and regulations adopted thereunder.
2.30 "Shares" means shares of the Common Stock, $.10 par value per
share, of Wal-Mart.
2.31 "Stock Appreciation Right" means a right granted to a Recipient
pursuant to the Stock Appreciation Rights feature of the Plan.
2.32 "Subject Shares" means the 80,000,000 Shares reserved for
issuance under the Plan.
SHARES SUBJECT TO THE PLAN
3.1 The Subject Shares may be authorized, but unissued, Shares or
treasury Shares held by Wal-Mart or an Affiliate. Shares reserved for
issuance pursuant to an Option that expires, is forfeited or otherwise
is no longer exercisable or that are reacquired by Wal-Mart pursuant
to the terms of the Plan or a Plan Award, may be the subject of a new
Plan Award. No fractional shares may be issued under the Plan. If a
stock split, stock dividend or other combination occurs as to the
Shares, the number of Shares reserved for issuance pursuant to the
Plan shall be proportionally increased or decreased, as the case may
be.
ADMINISTRATION
4.1 The Committee will administer the Plan and will grant all Plan
Awards. The Plan and Plan Awards to Section 16 Persons shall be
administered by the Committee in compliance with Rule 16b-3 adopted
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 4
under the Exchange Act ("Rule 16b-3"). With respect to Performance
Based Awards, the Plan shall be administered by a committee of the
Board comprised solely of two or more outside directors, as defined in
Code Section 162(m)(4)(C).
4.2 The Committee shall have these duties as to the Plan:
(a) to establish rules, procedures, and forms governing the Plan;
(b) to interpret and apply the provisions of the Plan and any Plan
Award;
(c) to recommend amendments of the Plan to the Board;
(d) to determine those Associates who will be Recipients and what
Plan Awards will be made to them;
(e) to set the terms and conditions of any Plan Award;
(f) to determine the Fair Market Value of the Shares; and
(g) to amend the terms of any Plan Award or to waive any conditions
or obligations of a Recipient under or with respect to any
Plan Award.
4.3 Except for the administration of Performance Based Awards and
matters under the Plan affected by Section 16 of the Exchange Act and
the rules adopted thereunder, the Committee may delegate its duties
under the Plan to one or more administrators, who may be Associates of
Wal-Mart.
4.4 If the Committee intends that a Plan Award qualify for the
performance-based compensation exception under Code Section
162(m)(4)(C), the Committee will exercise its discretion to qualify
the Plan Award for that exception. All actions taken or
determinations made by the Committee, in good faith, with respect to
the Plan, a Plan Award or any Notification shall not be subject to
review by anyone, but shall be final, binding and conclusive upon all
person interested in the Plan or any Plan Award.
PARTICIPATION
5.1 All Associates whom the Committee determines have the potential
to contribute significantly to the success of the Company, as well as
Non-Associate Directors, may participate in the Plan, although Non-
Associate Directors may not receive Incentive Stock Options. An
Associate or Non-Associate Director may be granted one or more Plan
Awards, unless prohibited by applicable law and subject to the
limitations under Code Section 422 with respect to Incentive Stock
Options.
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 5
STOCK OPTIONS
6.1 Term of Options. Wal-Mart may grant Options covering the Subject
Shares to Associates or Non-Associate Directors. The term of each
Option shall be the term stated in the Option Notification; provided,
however, that in the case of an Incentive Stock Option, the term shall
be no more than 10 years from the date of grant unless the Incentive
Stock Option is granted to an Optionee who, at the time of the grant,
owns stock representing more than 10% of the voting power of all
classes of stock of Wal-Mart or any Parent/Subsidiary Corporation, in
which case the term may not exceed 5 years from the date of grant.
Each Option shall be a Nonqualified Option unless designated otherwise
in the Option Notification. Notwithstanding the designation of an
Option, if the aggregate Fair Market Value of Shares subject to
Incentive Stock Options are exercisable for the first time by an
Optionee during a calendar year exceeds $100,000 (whether due to
acceleration of exercisability, miscalculation or error), the excess
Options shall be treated as Nonqualified Options.
6.2 Option Exercise Price and Consideration. The per Share exercise
price of an Option shall be determined by the Committee in its
discretion, except that the per Share exercise price for an Incentive
Stock Option shall be 100% of the Fair Market Value of a Share on the
date of grant unless the Associate to whom the Incentive Stock Option
is granted owns stock representing more than 10% of the voting power
of all classes of stock of Wal-Mart or any Parent/Subsidiary
Corporation at the time of the grant in which case the per Share
exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
The type of consideration in which the exercise price of an Option is
to be paid shall be determined by the Committee in its discretion,
and, in the case of an Incentive Stock Option, shall be determined at
the time of grant.
6.3 Exercise of Options. An Option shall be deemed to be exercised
when the person entitled to exercise the Option gives notice of
exercise to Wal-Mart in accordance with the Option's terms and Wal-
Mart receives full payment for the Shares as to which the Option is
exercised.
6.4 Termination of Employment. If an Optionee's Continuous Status as
an Associate is terminated, the Optionee may, subject to Wal-Mart's
right to terminate the Associate for Cause, exercise Options vested as
of the termination date to the extent set out in Optionee's Option
Notification. Incentive Stock Options may be exercised only within 60
days (or other period of time determined by the Committee at the time
of grant of the Option and not exceeding 3 months) after the date of
the termination (but in no event later than the expiration date of the
term of that Option as set forth in the Option Notification), and only
to the extent that Optionee was entitled to exercise the Incentive
Stock Option at the date of that termination. To the extent the
Optionee is not entitled to or does not exercise an Option at the date
of that termination or within the time specified herein or in the
Option Notification, the Option shall terminate. During a period for
which the Optionee is subject to administrative suspension from
employment, the Optionee's right to exercise Options will be
suspended.
6.5 Disability of Optionee. Notwithstanding the provisions of the
immediately preceding paragraph, in the case of an Optionee's
Incentive Stock Option, if the Optionee's Continuous Status as an
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 6
Associate is terminated as a result of his or her total and permanent
disability (as defined in Code Section 22(e)(3)), Optionee may, but
only within 12 months from the date of that termination (but in no
event later than the expiration date of the term of that Option as set
forth in the Option Notification), exercise an Incentive Stock Option
to the extent otherwise entitled to exercise it at the date of that
termination. To the extent the Optionee is not entitled to exercise
an Incentive Stock Option at the date of termination, or if Optionee
does not exercise that Incentive Stock Option to the extent so
entitled within the time specified herein, the Incentive Stock Option
shall terminate.
6.6 Reload Options. If an Optionee exercises an Option (the
"Original Option") while the Optionee is an Associate or a Non-
Associate Director by paying all or a portion of the exercise price of
the Shares subject to the Original Option by tendering to Wal-Mart
Shares owned by that person, an Option to purchase the number of
Shares used for this purpose by the Associate or the Non-Associate
Director, as the case may be (the "Reload Option") may, at the
Committee's discretion, be granted to the Associate, as a part of the
Original Option, as evidenced in the Optionee's Option Notification.
The Reload Option may be exercised at any time during the term of the
Original Option, under the terms and conditions, and subject to any
limitations as may be placed on that exercisability in the
Notification.
6.7 Non-transferability of Options. An Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any
manner except by testamentary devise or by the laws of descent or
distribution or in those circumstances expressly permitted by the
Committee.
RESTRICTED STOCK
7.1 Grant of Restricted Stock Awards. Wal-Mart may make Restricted
Stock Awards to those Associates or Non-Associate Directors as the
Committee may determine in its sole discretion. Restricted Stock
Awards may be made with respect to up to an aggregate of 16,000,000
Subject Shares. Each Restricted Stock Award shall have those terms
and conditions that are expressly set forth in, or are required by,
the Plan and any other terms and conditions as the Committee making
the Restricted Stock Award may determine in its discretion.
7.2 Dividend Receipt; Voting. While any Restriction applies to any
Recipient's Restricted Stock, (i) the Recipient shall receive the
dividends paid on the Restricted Stock and shall not be required to
return those dividends to Wal-Mart in the event of the forfeiture of
the Restricted Stock, (ii) the Recipient shall receive the proceeds of
the Restricted Stock in any stock split, reverse stock split,
recapitalization, or other change in the capital structure of Wal-
Mart, which proceeds shall automatically and without need for any
other action become Restricted Stock and be subject to all
Restrictions then existing as to the Recipient's Restricted Stock and
(iii) the Recipient shall be entitled to vote the Restricted Stock
during the Restriction period.
7.3 Issuance of Restricted Stock. The Restricted Stock will be
issued to each Recipient subject to the understanding that while any
Restriction applies to the Restricted Stock, the Recipient shall not
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 7
have the right to sell, transfer, assign, convey, pledge, hypothecate,
grant any security interest in or mortgage on, or otherwise dispose of
or encumber any shares of Restricted Stock or any interest therein.
As a result of the retention of rights in the Restricted Stock by Wal-
Mart, except as required by any law, neither any shares of the
Restricted Stock nor any interest therein shall be subject in any
manner to any forced or involuntary sale, transfer, conveyance,
pledge, hypothecation, encumbrance, or other disposition or to any
charge, liability, debt, or obligation of the Recipient, whether as
the direct or indirect result of any action of the Recipient or any
action taken in any proceeding, including any proceeding under any
bankruptcy or other creditors' rights law. Any action attempting to
effect any transaction of that type shall be void.
7.4 Forfeiture. Unless expressly provided for in the Restricted
Stock Award made to a Recipient, any Restricted Stock held by the
Recipient at the time the Recipient ceases to be an Associate for any
reason whatsoever shall be forfeited by the Recipient to Wal-Mart and
automatically re-conveyed to Wal-Mart.
7.5 Withholding. The Committee may withhold any amounts or Shares
necessary to collect any withholding taxes with respect to any
Restricted Stock Award or upon the fulfillment of the Restriction in
that Restricted Stock Award.
7.6 Compliance with Law. The making of Restricted Stock Awards and
issuance of any Restricted Stock is subject to compliance by Wal-Mart
with all applicable laws. Wal-Mart need not issue or transfer
Restricted Stock pursuant to the Plan unless Wal-Mart's legal counsel
has approved all legal matters in connection with the issuance and
delivery of the Restricted Stock.
7.7 Evidence of Share Ownership. The Restricted Stock will be book-
entry shares only unless the Committee decides to issue certificates
to evidence shares of the Restricted Stock. Any stock certificate(s)
representing the Restricted Stock issued to a Recipient that is so
issued shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO THE WAL-MART STORES, INC. STOCK INCENTIVE PLAN OF
1998 (THE "PLAN") AND ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS
ON THEIR TRANSFER AND TO FORFEITURE TO WAL-MART STORES, INC.
IF CERTAIN CONDITIONS ARE NOT MET. THOSE RESTRICTIONS AND
CONDITIONS ARE SET FORTH IN THE PLAN AND IN THE RESTRICTED
STOCK AWARD PURSUANT TO WHICH THOSE SHARES WERE ISSUED TO THE
REGISTERED HOLDER THERE-OF.
Wal-Mart will place stop-transfer instructions with respect to all
Restricted Stock on its stock transfer records.
7.8 Deferral of Restricted Stock. In the discretion of the
Committee, any Recipient of Restricted Stock who is eligible to
participate in the Wal-Mart Officer Deferred Compensation Plan may
defer his or her Restricted Stock by electing to: (1) assign some or
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 8
all of the Restricted Stock to Wal-Mart and to have an amount equal to
the Fair Market Value of the Restricted Stock assigned on the date of
the assignment credited to the benefit of the Recipient and deferred
pursuant to and in accordance with the terms of the Wal-mart Officer
Deferred Compensation Plan, provided that any amounts deferred under
this provision and that plan shall not be considered in determining
any incentive payments to be made to the Recipient under Section 4.2
of the Wal-Mart Officer Deferred Compensation Plan; or (2) transfer
some or all of the Restricted Stock to Wal-Mart in trust for the
benefit of the Recipient under terms that will permit the deferral of
recognition of gain or income by the Recipient for federal income tax
purposes in connection with the receipt of the Restricted Stock. A
Recipient must make the election by no later than April 1 of the year
prior to the year in which the conditions in each of the Restrictions
relating to the release of that Restricted Stock from those
Restrictions would be met. Each election must be made by the
Recipient filing an election form with Wal-Mart. Once an election is
made, the Recipient may not revoke or change that election.
If the Shares are the subject of a stock dividend, stock split, or a
reverse stock split, the products of such action with respect to the
Restricted Stock held for a Recipient in escrow shall be held in
escrow on the same terms as the Restricted Stock. Wal-Mart will
credit to the Recipient's account on the date any dividend is paid on
Shares the amount of the dividend paid on the Restricted Stock held in
escrow on that date. The dividends credited to the account shall bear
interest at a rate per annum equal to the rate of interest paid on the
amounts of compensation deferred under the Wal-Mart Officer Deferred
Compensation Plan.
Shares of Restricted Stock held by Wal-Mart pursuant to the terms of
this deferral provision, along with the cash amount credited to the
account of the Recipient in respect of dividends, shall be paid out
to: (1) the Recipient only upon the termination of the Recipient's
Continuous Status as an Associate or, in the case of a Non-Associate
Director, the Recipient ceasing to be a director of Wal-Mart or upon
any demonstration that the Recipient is the subject of any hardship
pursuant to rules the Committee may establish employment; or (2) the
Recipients' named beneficiaries upon the death of the Recipient.
8.1 Stock Value Equivalent Awards. Wal-Mart may grant Stock
Appreciation Rights on any terms and conditions as the Committee deems
desirable. Any Recipient granted a Stock Appreciation Right will be
entitled to receive an amount in cash equal to (i) the excess of the
Fair Market Value of a Share on the date of exercise of the Stock
Appreciation Right over the Fair Market Value of a Share on the date
of grant of the Stock Appreciation Right or (ii) a predetermined
amount that is less than that excess or (iii) any other price as may
be set by the Committee, multiplied by the number of Shares with
respect to which the Stock Appreciation Right shall have been
exercised. The Committee shall give the Recipient of the Stock
Appreciation Right Notification of the grant of the Stock Appreciation
Right. The notice will state the terms and conditions of that Stock
Appreciation Right.
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 9
8.2 Award Vesting. The Committee shall establish the conditions
pursuant to and the period over which the rights of the Recipient in
the Stock Appreciation Right will fully or partially vest with respect
to the Recipient.
8.3 Election To Receive Payments. A Recipient may elect to receive a
payment to which the Recipient is entitled under the Plan Award by
giving notice of such election to the Committee in accordance with the
rules established by the Committee.
Exercise. If the Stock Appreciation Right has vested in whole or part,
a Recipient may exercise a Stock Appreciation Right to the extent
vested by giving the Committee notice of the exercise on the form and
in compliance with the procedures established by the Committee. The
date of exercise shall be the date Wal-Mart receives the notice of the
exercise.
8.4 Payment to Recipients. Subject to the terms and conditions of
the Plan Award granting the Stock Appreciation Right, payment upon a
Recipient's exercise of a Stock Appreciation Right may be made (i) in
cash or by check, (ii) in Shares having an aggregate Fair Market Value
on the date of exercise of the Stock Appreciation Right equal to the
payment to be made under the Stock Appreciation Right or (iii) any
combination of cash and Shares, as the Committee shall determine in
its discretion. The Committee may elect to make this determination
either at the time the Stock Appreciation Right is granted, or with
respect to payments contemplated in clauses (i) and (ii) above, at the
time of the exercise.
MISCELLANEOUS
9.1 Issuance of Stock Certificates; Book-Entry. If a Recipient has
the right to the issuance of any Shares pursuant to any Plan Award,
Wal-Mart shall issue or cause to be issued a stock certificate or a
book-entry crediting shares to the Recipient's account promptly upon
the exercise of the Plan Award or the right arising under the Plan
Award.
9.2 Section 162(m) Matters. The Compensation and Nominating
Committee of the Board may grant Plan Awards that provide for the
rights thereunder to accrue based on performance-based criteria and
that is intended to qualify for the performance-based exception under
Code Section 162(m)(4)(C). In granting any Performance Based Award,
the Compensation Committee shall comply fully with the regulations
promulgated with respect to Code Section 162(m). provided, however,
that no Recipient who is a "covered employee" as defined in Code
Section 162(m)(3) shall receive grants of Plan Awards with respect to
more than 1,600,000 Shares and Share equivalents in any one fiscal
year of Wal-Mart, subject to adjustment as provided in the paragraph
captioned "Adjustments upon Changes in Capitalization or Mergers"
below. Nothing in the Plan shall be construed to prevent the issuance
of Plan Award to any "covered employees" that are not Performance
Based Awards if the Committee so elects.
9.3 Termination of Employment. Except as otherwise expressly set
forth in the Plan, the Committee shall determine the effect of the
termination of a Recipient's employment, a Recipient's disability or
death or a Non-Associate Director's ceasing to be a director of Wal-
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 10
Mart during any applicable vesting period contained in a Plan Award
made to the Recipient. During a period for which the Recipient is
subject to administrative suspension, a Recipient's right to exercise
any rights under any Plan Award or the vesting of any rights under any
Plan Award shall be suspended.
9.4 Termination for Cause. Notwithstanding anything to the contrary
contained in the Plan, any Recipient whose Continuous Status as an
Associate is terminated by Wal-Mart for Cause shall forfeit all Plan
Awards and Restricted Stock granted under the Plan, whether or not
vested or otherwise exercisable.
9.5 Death of Recipient. If a Recipient dies, the Recipient's Award
may be exercised, in accordance with its terms or as allowed by law,
by the Recipient's estate or by a person who acquired the right to
exercise the Award by bequest or inheritance, but only to the extent
the Recipient was otherwise entitled to exercise the Award at the date
of the Recipient's death and only if exercised within 12 months after
the Recipient's death. To the extent the Award as unvested at the
date of death, the Award shall terminate.
9.6 Limitations on Liability and Award Obligations. Receiving a Plan
Award or being the owner of any Option, Restricted Stock Award or
Stock Appreciation Right shall not:
(a) give a Recipient any rights except as expressly set forth in
the Plan or in the Plan Award and except as a stockholder of Wal-
Mart as set forth herein as to the Restricted Stock only;
(b) as to Shares issuable on the exercise of Options or Stock
Appreciation Rights payable in Shares, until the issuance (as
evidenced by the appropriate entry on the books of Wal-Mart of a
duly authorized transfer agent of Wal-Mart) of the Shares issued
upon exercise of an Option or Stock Appreciation Right, give the
Recipient the right to vote, or receive dividends on, the Shares
to be issued upon exercise or any other rights as a stockholder
with respect to the Optioned Stock or those Shares,
notwithstanding the exercise of the Option or Stock Appreciation
Right;
(c) be considered a contract of employment or give the Recipient
any right to continued employment, or to hold any position, with
Wal-Mart or any Affiliate;
(d) create any fiduciary or other obligation of Wal-Mart or any
Affiliate to take any action or provide to the Recipient any
assistance or dedicate or permit the use of any assets of Wal-
Mart or any Affiliate that would permit the Recipient to be able
to attain any performance criteria stated in the Recipient's Plan
Award;
(e) create any trust, fiduciary or other duty or obligation of
Wal-Mart or any Affiliate to engage in any particular business,
continue to engage in any particular business, engage in any
particular business practices or sell any particular product or
products; or
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 11
(f) create any obligation of Wal-Mart or any Affiliate that
shall be greater than the obligations of Wal-Mart or that
Affiliate to any general unsecured creditor of Wal-Mart or the
Affiliate.
If Wal-Mart or an Affiliate terminates a Recipient's employment with
Wal-Mart or the Affiliate, the potential value of any Plan Award or
Restricted Stock that must be returned to Wal-Mart will not be an
element of any damages that the Recipient may have for any termination
of employment or other relationship in violation of any contractual or
other rights the Recipient may have.
9.7 No Liability of Committee Members. Wal-Mart shall indemnify and
hold harmless each member of the Committee and each other officer,
director and Associate of Wal-Mart or any Affiliate that has any duty
or power relating to the administration of the Plan against any
liability, obligation, cost or expense incurred by that person arising
out of any act or omission to act in connection with the Plan or any
Plan Award if he or she acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interest of Wal-Mart.
9.8 Adjustments upon Changes in Capitalization or Merger. Subject to
any required action by the Wal-Mart stockholders, the number of Shares
covered by each Plan Award, and the number of Shares which have been
authorized for issuance under the Plan but as to which no Plan Awards
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of a Plan Award, as well as the price per
Share covered by any outstanding Plan Award that includes in its terms
a price per Share, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of the Common Stock of Wal-
Mart resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock of Wal-
Mart, or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by Wal-Mart. That
adjustment shall be made by the Committee, whose determination shall
be final, binding and conclusive. Except as expressly provided
herein, no issuance by Wal-Mart of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of Shares subject to a Plan Award.
9.9 Notification. Options, Restricted Stock Awards and Stock
Appreciation Rights shall be evidenced by Notifications or other award
documents in the form approved by the Committee.
9.10 Amendment and Termination of the Plan. The Board may amend or
terminate the Plan at any time without the approval of the Recipients
or any other person, except to the extent any action of that type is
required to be approved by the stockholders of Wal-Mart in connection
with any outstanding Performance Based Awards.
9.11 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Arkansas, except that any
matters relating to the internal governance of Wal-Mart shall be
governed by the Delaware Law.
Wal-Mart Stores, Inc. Exhibit 10(l) - Page 12
9.12 Superseding Existing Plans. Effective Date and Transition. The
Plan supersedes the Wal-Mart Stores, Inc. Stock Option Plan of 1994,
as amended, and the Wal-Mart Stores, Inc. 1997 Restricted Stock Plan.
This Plan was approved by the Board on, and shall be effective as of,
March 5, 1998, subject only to the approval of the Plan by the holders
of a majority of the outstanding Shares at Wal-Mart's 1998 annual
stockholders' meeting.
Wal-Mart Stores, Inc. Exhibit 10(m) - Page 1
WAL-MART STORES, INC.
MANAGEMENT INCENTIVE PLAN OF 1998
GENERAL
1.1. Purpose. The purpose of the Wal-Mart Stores, Inc.
Management Incentive Plan of 1998 ("MIP") is to advance the
interests of the shareholders of Wal-Mart Stores, Inc. by
providing performance-based incentives to eligible management
associates.
1.2. Effective Date. The MIP shall be effective for the
Fiscal Year beginning February 1, 1998, subject to the approval
of the Company's shareholders, and shall remain effective for
each subsequent Fiscal Year until terminated by the Board.
1.3. Nature of MIP. With respect to individuals who are
Covered Employees, the MIP is intended to provide "qualified
performance-based compensation," as such term is defined in
Treas. Reg. 1.162-27(e), to the extent deemed appropriate by the
Committee at the time Performance Goals are established for a
Fiscal Year. Nothing herein shall be construed as preventing the
MIP to provide both "qualified performance-based compensation"
and nonqualified compensation for the same Fiscal Year in the
manner permitted under Code Section 162(m). The MIP shall be
administered and construed in a manner consistent with Code
Section 162(m) and regulations thereunder for any Fiscal Year in
which the MIP is intended to provide "qualified performance-based
compensation."
1.4. MIP Not Funded. Incentive Plan Awards shall be made
solely from the general assets of Wal-Mart Stores, Inc. or a
Related Affiliate, to the extent such payments or benefits are
attributable to services with a Related Affiliate participating
in the MIP. To the extent any person acquires a right to receive
payments from Wal-Mart Stores, Inc. or a Related Affiliate under
the MIP, the right is no greater than the right of any other
unsecured general creditor.
DEFINITIONS
2.1. "Board" means the Board of Directors of Wal-Mart
Stores, Inc.
2.2. "Committee" means the Compensation and Nominating
Committee of the Board, or such other committee designated by the
Board as the "Committee" under the MIP. The Board may appoint
different Committees with respect to Covered Employees and non-
Covered Employees. With respect to Covered Employees, any such
Committee must consist of two or more persons each of whom are
"outside directors" within the meaning of Code Section 162(m).
2.3. "Company" means Wal-Mart Stores, Inc. and each Related
Affiliate designated by the Committee as a participating employer
in the MIP.
2.4. "Covered Employee" has the meaning of such term under
Code Section 162(m)(3).
Wal-Mart Stores, Inc. Exhibit 10(m) - Page 2
2.5. "Incentive Percentage" means the pre-established award
formula established by the Committee for each Fiscal Year which
specifies a percentage of a Participant's rate of salary in
effect for the last full payroll period of the Fiscal Year to be
paid as an Incentive Plan Award. The Committee may establish
different Incentive Percentages for individual Participants or
different classes of Participants, and/or the achievement levels
of the Performance Goals. Solely with respect to Covered
Employees, for any Fiscal Year for which the MIP is intended to
provide "qualified performance-based compensation," the Incentive
Percentages applicable to the Covered Employees must be
established by the Committee no later than 90 days after the
beginning of the Fiscal Year for which the Incentive Plan Award
pertains.
2.6. "Incentive Plan Award" means the annual incentive
compensation award granted under the MIP which is contingent and
based upon the attainment of the Performance Goals with respect
to a Fiscal Year.
2.7. "Participant" means an associate of the Company
participating in the Plan as provided in the "Participation"
section of the MIP.
2.8. "Performance Goals" means the pre-established objective
performance goals established by the Committee for each Fiscal
Year. Solely with respect to Covered Employees, for any Fiscal
Year for which the MIP is intended to provide "qualified
performance-based compensation," Performance Goals applicable to
the Covered Employees must be established by the Committee no
later than 90 days after the beginning of the Fiscal Year to
which the Performance Goals pertain. The Performance Goals may
be based upon the performance of the Company or any Related
Company, or division thereof, using one or more of the following
operating performance measures selected by the Committee: (a)
earnings; (b) revenue; (c) operating or net cash flows; (d)
financial return ratios; (e) total shareholder return; (f) market
share; or (g) pre-tax profits. Separate Performance Goals may be
established by the Committee for the Company or a Related
Affiliate, or division thereof. The Performance Goals shall
include a threshold Performance Goal under which no Incentive
Plan Awards shall be paid if the threshold goal is not achieved.
With respect to Participants who are not Covered Employees, the
Committee may establish such other subjective or objective goals,
including individual Performance Goals, which it deems
appropriate. The preceding sentence shall also apply to Covered
Employees with respect to any Incentive Plan Award not intended
at time of grant to be "qualified performance-based
compensation." Performance Goals may be set at a specific level,
or may be expressed as a relative percentage to the comparable
measure at comparison companies or a defined index.
2.9. "Fiscal Year" means the 12-month period beginning on
each February 1 and ending on the following January 31.
2.10. "Related Affiliate" means a business or entity
that is, directly or indirectly, controlled by Wal-Mart Stores,
Inc.
Wal-Mart Stores, Inc. Exhibit 10(m) - Page 3
PARTICIPATION
3.1. Eligibility. Associates eligible to participate in the
MIP shall consist of officers and other key management associates
of the Company whom the Committee determines have the potential
to contribute significantly to the success of the Company and its
Related Affiliates. For each Fiscal Year the Committee shall
determine which of such officers and other key management
associates shall participate in the MIP. For any Fiscal Year for
which "qualified performance-based compensation" is to be
provided, the Committee shall designate the individual or classes
of Covered Employees for such compensation no later than the 90th
day of such Fiscal Year.
Unless determined otherwise by the Committee, Company
associates shall not be eligible to participate in the MIP for
any period they are participating in any other incentive program
maintained by the Company or any other Related Affiliate. At any
time, including during a Fiscal Year, the Committee may add
additional classes or delete classes of associates for
participation in the Plan as it deems appropriate, except that no
such change may be made to the extent it would result in a loss
of deductibility under Code Section 162(m) for any "qualified
performance-based compensation."
INCENTIVE PLAN AWARDS
4.1. Determination of Incentive Plan Awards.
(a) The Committee shall, promptly after the date on which
the necessary financial, individual or other information for a
particular Fiscal Year becomes available, certify: (i) the
degree to which each of the Performance Goals have been attained;
and (ii) with respect to each qualifying Participant who is a
Covered Employee, the amount of the Incentive Plan Award, if any,
payable to such Participant. The Committee or its designee shall
likewise certify the amount of the Incentive Plan Award, if any,
payable with respect to a qualifying Participant who is not a
Covered Employee. Any such determination by the Committee or its
designee shall be final and conclusive on all parties, but shall
be based on such objective information or financial data as is
relevant to the Performance Goal. Performance Goals shall, to
the extent applicable, be based upon generally accepted
accounting principles. The Committee may rely conclusively on
any such information provided by the Company's certified public
accountant.
(b) Unless the Committee provides otherwise when
establishing the Performance Goal, if the Company fails to
achieve its threshold Performance Goal, no Incentive Plan Award
shall be paid even if any applicable threshold division
Performance Goal has been achieved. Similarly, unless provided
otherwise by the Committee when establishing the Performance
Goal, if the Company fails to achieve its threshold Performance
Goal, no Incentive Plan Award shall be paid even if any
individual Performance Goal has been satisfied. Participants
whose Incentive Plan Award is based the attainment of Company
Performance Goals and division/individual Performance Goals shall
earn the Company portion of the Incentive Plan Award if the
Company attains its Performance Goals, even if the
division/individual Performance Goals are not achieved.
Wal-Mart Stores, Inc. Exhibit 10(m) - Page 4
4.2. Eligibility and Amount of Incentive Plan Award.
(a) To be eligible for payment of any Incentive Plan Award,
the Participant must: (i) be employed by the Company on the last
day of the Fiscal Year to which the award pertains, unless
termination is due to the Participant's death; (ii) have
performed the Participant's duties to the satisfaction of the
Committee; (iii) have not engaged in any act deemed by the
Committee to be inimical to the best interest of the Company or a
Related Affiliate; and (iv) otherwise complied with Company
policies at all times prior to the date the Incentive Plan Award
is actually paid. No Incentive Plan Award shall be paid to any
Participant who does not satisfy each of the above.
(b) The Incentive Plan Award shall be determined by
multiplying the Incentive Percentage applicable to the
Participant by the Participant's rate of base salary in effect
for the last full payroll period of the Fiscal Year to which the
Incentive Plan Award pertains. In no event, however, will an
Incentive Plan Award for a Covered Employee exceed two-tenths of
one percent (0.20%) of the Company's net income for the Fiscal
Year. In the event of a Participant's death, the Incentive Plan
Award shall be prorated based upon the number of full payroll
periods worked in a MIP position for such Fiscal Year. The
Committee shall have the discretion and authority to make
adjustments to any Incentive Plan Award in circumstances where:
(i) a Participant leaves the Company and is rehired as a
Participant; (ii) a Participant is hired, promoted or transferred
into a position eligible for MIP participation; (iii) a
Participant transfers between eligible MIP positions with
different Incentive Percentages or Performance Goals; (iv) a
Participant transfers to a position not eligible to participate
in the MIP; (v) a Participant becomes eligible for an incentive
from another incentive plan maintained by the Company or Related
Affiliate; (vi) a Participant is on a leave of absence; and (vii)
such similar circumstances deemed appropriate by the Committee,
consistent with the purpose and terms of the MIP.
4.3. Payment of Award. Incentive Plan Awards will be paid
in cash by April 15 following the applicable Fiscal Year to which
the award pertains. If, however, the Participant is on
administrative suspension at the time payment would otherwise be
made, payment shall be delayed until the matter is resolved by
the Company. No payment in that event shall be made if the
Committee determines the qualification requirements of Section
4.2.(a) have not been satisfied by the Participant.
ADMINISTRATION
5.1. Administration. The MIP shall be administered by the
Committee. Subject to the provisions of the MIP, the Committee
shall have full discretionary authority to administer and
interpret the MIP, to exercise all powers either specifically
granted to it under the MIP or as are necessary or advisable in
the administration of the MIP, to prescribe, amend and rescind
rules and regulations relating to the MIP, and to make all other
determinations necessary or advisable for the administration of
the MIP, all of which shall be binding on all persons, including
the Company, the Participants (or any person claiming any rights
under the MIP from or through any Participant), and any
stockholder of the Company. A majority of the Committee shall
constitute a quorum, and the Committee shall act pursuant to a
Wal-Mart Stores, Inc. Exhibit 10(m) - Page 5
majority vote or by unanimous written consent. No member of the
Board or the Committee shall be liable for any action taken or
determination made in good faith with respect to the MIP or any
Incentive Plan Award paid hereunder.
5.2. Delegation. The Committee may delegate its
responsibilities for administering the MIP to one or more persons
as the Committee deems necessary. However, the Committee may not
delegate its responsibilities under the Plan relating to any
Covered Employee where such delegation is prohibited under Code
Section 162(m) pertaining to "qualified performance-based
compensation."
MISCELLANEOUS
6.1. Amendment and Termination. The Board reserves the
right to alter, amend, suspend or terminate the MIP in whole or
in part at any time. With respect to Covered Employees, any such
amendment shall comply with Code Section 162(m).
6.2. No Guarantee. While a discretionary Incentive Plan
Award may have been paid in the past, whether such payments will
be made in the future will depend upon various factors, such as
the Company's financial condition and performance. There is no
guarantee that the Company will pay any such incentive. The
Committee may, in its sole discretion, reduce, eliminate or
increase, any Incentive Plan Award, except that the amount of any
Incentive Plan Award intended to be "qualified performance-based
compensation" may not be increased above the amount established
for the Performance Goal and Incentive Percentage. The Company
may withhold an Incentive Plan Award, or portions thereof, for
any reason including gross misconduct (e.g., theft,
dishonesty/compromised integrity, fraud, harassment, etc.) or any
actions deemed to be inimical to the best interests of the
Company by the Committee.
6.3. Tax Withholding. The Company shall have the right to
deduct from all payments made under the MIP any federal, state or
local taxes required by law to be withheld with respect to such
payments.
6.4. Governing Law. The Plan and all rights to an Incentive
Plan Award hereunder shall be construed in accordance with and
governed by the laws of the State of Arkansas, except that any
matters relating to the internal governance of Wal-Mart shall be
governed by the general corporate laws of the State of Delaware.
6.5. Assignment or Pledge. No rights under the MIP,
contingent or otherwise, shall be assignable or subject to any
encumbrance, pledge or charge of any nature.
6.6. Employment. Neither the adoption of the MIP nor its
operation shall in any way affect the rights and power of the
Company or any Related Affiliate to dismiss or discharge any
Participants.
6.7. Death. In the event of a Participant's death prior to
the payment of any Incentive Plan Award to which the Participant
is otherwise entitled, payment shall be made to the Participant's
Wal-Mart Stores, Inc. Exhibit 10(m) - Page 6
then-effective beneficiary or beneficiaries under the Company-
paid group term life arrangement.
6.8. Rights to Payments. No absolute right to any Incentive
Plan Award shall be considered as having accrued to any
Participant prior to the close of the Fiscal Year with respect to
which the award is made. No Participant shall have any
enforceable right to receive any Incentive Plan Award made with
respect to a Fiscal Year or to retain any payment made with
respect thereto if for any reason the requirements of Section
4.2.(a) are not satisfied.
6.9. Prior Plans. The MIP supercedes and replaces the Wal-
Mart Stores, Inc. Home Office Management Incentive Plans
effective February 1, 1998.
Wal-Mart Stores, Inc. Annual Report - Page 17
<TABLE>
Fiscal 1999 End of Year Store Counts
<CAPTION>
Discount SAM'S
Stores Supercenters Club
<S> <C> <C> <C>
Alabama 48 30 8
Alaska 3 0 3
Arizona 34 0 7
Arkansas 49 27 4
California 106 0 24
Colorado 28 10 11
Connecticut 14 0 3
Delaware 2 1 1
Florida 93 44 35
Georgia 62 28 16
Hawaii 5 0 1
Idaho 9 0 1
Illinois 89 17 24
Indiana 58 17 14
Iowa 42 3 7
Kansas 38 10 5
Kentucky 44 27 5
Louisiana 52 23 9
Maine 20 0 3
Maryland 23 1 10
Massachusetts 31 0 3
Michigan 52 0 21
Minnesota 35 0 9
Mississippi 38 18 4
Missouri 72 38 12
Montana 9 0 1
Nebraska 13 5 3
Nevada 13 0 2
New Hampshire 18 2 4
New Jersey 18 0 6
New Mexico 10 11 3
New York 52 7 18
North Carolina 75 12 16
North Dakota 8 0 2
Ohio 74 9 23
Oklahoma 54 24 6
Oregon 23 0 0
Pennsylvania 50 19 18
Rhode Island 6 0 1
South Carolina 35 20 9
South Dakota 8 0 2
Tennessee 52 35 12
Texas 163 82 52
Utah 14 0 5
Vermont 4 0 0
Virginia 27 30 10
Washington 22 0 2
West Virginia 10 11 3
Wisconsin 55 3 11
Wyoming 9 0 2
U.S. TOTAL 1,869 564 451
Alberta 19 0 0
British Columbia 13 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 57 0 0
Quebec 28 0 0
Saskatchewan 8 0 0
CANADA TOTAL 153 0 0
Argentina 0 10 3
Brazil 0 9 5
Korea 0 4 0
Mexico 358* 27 31
Puerto Rico 9 0 6
China 0 4 1
Germany 0 95 0
INT'L. TOTAL 520 149 46
GRAND TOTAL 2,389 713 497
</TABLE>
[FN]
<F1>
*Includes 36 Superamas, 63 Bodegas, 33 Aurreras, 183 Vips and 43 Suburbias
Wal-Mart Stores, Inc. Annual Report - Pages 18 and 19
<TABLE>
11-YEAR FINANCIAL SUMMARY
(Dollar amounts in millions except per share data)
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales $137,634 $117,958 $104,859 $93,627 $82,494
Net sales increase 17% 12% 12% 13% 22%
Comparative store
sales increase 9% 6% 5% 4% 7%
Other income-net 1,574 1,341 1,319 1,146 914
Cost of sales 108,725 93,438 83,510 74,505 65,586
Operating, selling
and general and
administrative
expenses 22,363 19,358 16,946 15,021 12,858
Interest costs:
Debt 529 555 629 692 520
Capital leases 268 229 216 196 186
Provision for income
taxes 2,740 2,115 1,794 1,606 1,581
Minority interest
and equity in
unconsolidated
subsidiaries (153) (78) (27) (13) 4
Net income 4,430 3,526 3,056 2,740 2,681
Per share of common stock*:
Net income - Basic
and Dilutive 0.99 0.78 0.67 0.60 0.59
Dividends 0.16 0.14 0.11 0.10 0.09
Financial Position
Current assets $21,132 $19,352 $ 17,993 $17,331 $15,338
Inventories at
replacement cost 17,549 16,845 16,193 16,300 14,415
Less LIFO reserve 473 348 296 311 351
Inventories at
LIFO cost 17,076 16,497 15,897 15,989 14,064
Net property, plant
and equipment and
capital leases 25,973 23,606 20,324 18,894 15,874
Total assets 49,996 45,384 39,604 37,541 32,819
Current liabilities 16,762 14,460 10,957 11,454 9,973
Long-term debt 6,908 7,191 7,709 8,508 7,871
Long-term obligations
under capital leases 2,699 2,483 2,307 2,092 1,838
Shareholders' equity 21,112 18,503 17,143 14,756 12,726
Financial Ratios
Current ratio 1.3 1.3 1.6 1.5 1.5
Inventories/working
capital 3.9 3.4 2.3 2.7 2.6
Return on assets** 9.6% 8.5% 7.9% 7.8% 9.0%
Return on shareholders'
equity*** 22.4% 19.8% 19.2% 19.9% 22.8%
Other Year-End Data
Number of domestic
Wal-Mart stores 1,869 1,921 1,960 1,995 1,985
Number of domestic
Supercenters 564 441 344 239 147
Number of domestic
SAM'S Club units 451 443 436 433 426
International units 715 601 314 276 226
Number of Associates 910,000 825,000 728,000 675,000 622,000
Number of
Shareholders 261,170 245,884 257,215 244,483 259,286
</TABLE>
[FN]
<F1>
* Restated to reflect the two-for-one stock split announced March 4, 1999,
with date of record of March 19, 1999. The stock split is payable on
April 19, 1999.
<F2>
** Net income before minority interest and equity in unconsolidated
subsidiaries/average assets
<F3>
*** Net income/average shareholders' equity
Wal-Mart Stores, Inc. Annual Report - Pages 18 and 19
<TABLE>
11-YEAR FINANCIAL SUMMARY
(Dollar amounts in millions except per share data)
<CAPTION>
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net sales $67,344 $55,484 $43,887 $32,602 $25,811 $20,649
Net sales increase 21% 26% 35% 26% 25% 29%
Comparative store
sales increase 6% 11% 10% 10% 11% 12%
Other income-net 645 497 404 262 175 137
Cost of sales 53,444 44,175 34,786 25,500 20,070 16,057
Operating, selling
and general and
administrative
expenses 10,333 8,321 6,684 5,152 4,070 3,268
Interest costs:
Debt 331 143 113 43 20 36
Capital leases 186 180 153 126 118 99
Provision for income
taxes 1,358 1,171 945 752 632 488
Minority interest
and equity in
unconsolidated
subsidiaries (4) 4 (1) - - -
Net income 2,333 1,995 1,609 1,291 1,076 838
Per share of common stock*:
Net income - Basic
and Dilutive 0.51 0.44 0.35 0.28 0.24 0.19
Dividends 0.07 0.05 0.04 0.04 0.03 0.02
Financial Position
Current assets $12,114 $10,198 $8,575 $6,415 $4,713 $3,631
Inventories at
replacement cost 11,483 9,780 7,857 6,207 4,751 3,642
Less LIFO reserve 469 512 473 399 323 291
Inventories at
LIFO cost 11,014 9,268 7,384 5,808 4,428 3,351
Net property, plant
and equipment and
capital leases 13,176 9,793 6,434 4,712 3,430 2,662
Total assets 26,441 20,565 15,443 11,389 8,198 6,360
Current liabilities 7,406 6,754 5,004 3,990 2,845 2,066
Long-term debt 6,156 3,073 1,722 740 185 184
Long-term obligations
under capital leases 1,804 1,772 1,556 1,159 1,087 1,009
Shareholders' equity 10,753 8,759 6,990 5,366 3,966 3,008
Financial Ratios
Current ratio 1.6 1.5 1.7 1.6 1.7 1.8
Inventories/working
capital 2.3 2.7 2.1 2.4 2.4 2.1
Return on assets** 9.9% 11.1% 12.0% 13.2% 14.8% 14.6%
Return on shareholders'
equity*** 23.9% 25.3% 26.0% 27.7% 30.9% 31.8%
Other Year-End Data
Number of domestic
Wal-Mart stores 1,950 1,848 1,714 1,568 1,399 1,259
Number of domestic
Supercenters 72 34 10 9 6 3
Number of domestic
SAM'S Club units 417 256 208 148 123 105
International units 24 10 - - - -
Number of Associates 528,000 434,000 371,000 328,000 271,000 223,000
Number of
Shareholders 257,946 180,584 150,242 122,414 79,929 80,270
</TABLE>
[FN]
<F1>
* Restated to reflect the two-for-one stock split announced March 4, 1999,
with date of record of March 19, 1999. The stock split is payable on
April 19, 1999.
<F2>
** Net income before minority interest and equity in unconsolidated
subsidiaries/average assets
<F3>
*** Net income/average shareholders' equity
Wal-Mart Stores, Inc. Annual Report - Page 20
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>
1999 $95,395 $22,881 $12,247 $7,111 $137,634 17%
1998 83,820 20,668 7,517 5,953 117,958 12%
1997 74,840 19,785 5,002 5,232 104,859 12%
</TABLE>
The Company's sales growth of 17% in fiscal 1999, when compared to fiscal 1998,
was attributable to our expansion program and a domestic comparative store sales
increase of 9%. Expansion for fiscal 1999 included the opening of 37 Wal-Mart
stores, 123 Supercenters (including the conversion of 88 existing Wal-Mart
stores), eight SAM'S Club units, and the opening or acquisition of 114
international units. International sales accounted for approximately 8.9% of
total Company sales in fiscal 1999 compared with 6.4% in fiscal 1998. The growth
in International is partially due to acquisitions during 1999 and 1998. In the
third quarter of fiscal 1998, the Company acquired a controlling interest of
Cifra, S.A de C.V. (Cifra) which at acquisition date included 250 units in
varying formats including Aurreras, Bodegas, Suburbias, Superamas, and Vips. In
the fourth quarter of fiscal 1998, the Company acquired the 21 units of the
Wertkauf hypermarket chain in Germany. In fiscal 1999, the Company acquired four
units in South Korea which were previously operated by Korea Makro. See Note 6
of Notes to Consolidated Financial Statements for additional information on
acquisitions. SAM'S Club sales, as a percentage of total Company sales,
decreased from 17.5% in fiscal 1998 to 16.6% in fiscal 1999.
The sales increase 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 existing Wal-Mart stores), eight
SAM'S Clubs, and the opening or acquisition of 289 international units,
including the various Cifra formats. International sales accounted for
approximately 6.4% of total Company sales in fiscal 1998 compared with 4.8% in
fiscal 1997. The growth in International is partially due to the acquisition of
controlling interest of Cifra during the third quarter. SAM'S Club sales, as a
percentage of total Company sales, decreased from 18.9% in fiscal 1997 to 17.5%
in fiscal 1998.
Costs and Expenses
Cost of sales, as a percentage of sales, decreased, resulting in increases in
gross margin of .2% and .4% in fiscal 1999 and fiscal 1998, respectively. These
improvements in gross margin occurred even with continued price rollbacks and
our continuing commitment to always providing low prices. Lower inventory levels
resulted in reduced markdowns and decreased shrink and generated a sustainable
improvement in profitability without raising prices. The improvement in gross
margin also occurred despite higher food department and International sales,
which generally have lower gross margins than domestic general merchandise. This
effect is partially offset by the slower growth of SAM'S Club, which is our
lowest gross margin retail operation.
Operating, selling, general and administrative expenses decreased .2% as a
percentage of sales in fiscal 1999 when compared with fiscal 1998. The strong
sales increase along with lower inventory levels combined to reduce expenses as
a percentage of sales. The expense leverage was mitigated in the consolidated
results due to the percentage of the total volume decreasing in the SAM'S Club
segment, which has lower expenses as a percentage of sales, while the percentage
of total volume increased in the International segment, which has higher
expenses as a percentage of sales than the other operating segments. Every
operating segment was flat or down in expenses as a percent of sales in fiscal
1999 when compared with fiscal 1998.
Operating, selling, general and administrative expenses increased .3% as a
percentage of sales in fiscal 1998 when compared with fiscal 1997. 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
was the one-time pre-tax charge of $50 million for closing the majority of the
Bud's Discount City stores during the second quarter of fiscal 1998.
Interest Costs
Interest costs decreased .1% as a percentage of sales in fiscal 1999 when
compared with fiscal 1998. This marks the third consecutive year that interest
costs relating to debt have declined. The Company was able to meet cash
requirements without short-term borrowings throughout most of fiscal 1999 due to
enhanced operating cash flows. The interest on the Company's capital leases
increased over fiscal 1998 due to continuing expansion. 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. See Note 3 of Notes to Consolidated Financial Statements for
additional information on interest and debt.
Market Risk
Market risks relating to the Company's operations result primarily from changes
in interest rates and changes in foreign exchange rates.
The Company enters into interest rate swaps to minimize the risk and costs
associated with financing activities. The swap agreements are contracts to
exchange fixed or variable rates for variable or fixed interest rate payments
periodically over the life of the instruments. The following tables provide
information about the Company's 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-
average interest rates by expected maturity dates. For interest rate swaps, the
table presents notional amounts and interest rates by contractual maturity
dates. The applicable floating rate index is included for variable rate
instruments. All amounts are stated in United States dollar equivalents.
Wal-Mart Stores, Inc. Annual Report - Page 21
<TABLE>
Interest Rate Sensitivity
As of January 31, 1999
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
<CAPTION>
Fair
value
(Amounts in millions) 2000 2001 2002 2003 2004 Thereafter Total 1/31/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Long-term debt including
current portion
Fixed rate debt $ 900 $1,284 $801 $558 $285 $3,980 $7,808 $8,323
Average interest rate
- U.S.$ rate 7.1% 7.2% 7.1% 6.9% 7.0% 7.2% 7.2%
Long-term obligation related to
real estate investment trust
Fixed rate obligation 39 43 46 50 55 327 560 641
Fixed interest rate
- U.S.$ 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 swap
Pay variable/receive fixed - 500 - - - - 500 10
Average rate paid - 30-day
U.S. commercial paper
non-financial plus .134%
Fixed rate received
- U.S.$ rate - 5.7% - - - - 5.7%
Interest rate swap
Pay variable/receive fixed - 500 - - - - 500 5
Average rate paid - 30-day
U.S. commercial paper
non-financial plus .245%
Fixed rate received
- U.S.$ rate - 5.9% - - - - 5.9%
Interest Rate Derivative Financial
Instruments Related to Real Estate
Investment Trust Obligation
Interest rate swap
Pay variable/receive fixed 38 41 45 49 54 324 551 44
Average rate paid - 30-day
U.S. commercial paper
non-financial
Fixed rate received
- U.S.$ rate 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
Interest rate swap
Pay variable/receive fixed - - - - - 230 230 30
Average rate paid - 6-month
U.S. LIBOR
Fixed rate received
- U.S.$ rate - - - - - 7.0% 7.0%
Interest Rate Derivative Financial
Instrument Related to Currency Swaps
Currency swap - German Deutschemarks
Pay variable/receive variable - - - 1,101 - - 1,101 (43)
Average rate paid - 3-month
German Deutschemark LIBOR
minus .0676%
Average rate received - 30-day
U.S. commercial paper
non-financial
Interest rate swap
- - German Deutschemarks
Pay fixed/receive variable - - - 1,101 - - 1,101 (58)
Fixed rate paid - German
Deutschemark rate - - - 4.5% - - 4.5%
Average rate received - 3-month
German Deutschemark LIBOR
minus .0676%
Interest rate swap - U.S. Dollars
Pay variable/receive fixed - - - 1,101 - - 1,101 28
Average rate paid - 30-day
U.S. commercial paper
non-financial
Fixed rate received
- U.S.$ rate - - - 5.8% - - 5.8%
Currency swap
- - German Deutschemarks
Pay variable/receive variable - - - - 809 - 809 18
Average rate paid - 3-month
German Deutschemark LIBOR
minus .055%
Average rate received - 30-day
U.S. commercial paper
non-financial
Interest rate swap
- - German Deutschemarks
Pay fixed/receive variable - - - - 809 - 809 3
Fixed rate paid -
German Deutschemark rate - - - - 3.4% - 3.4%
Average rate received - 3-month
German Deutschemark LIBOR
minus .055%
Interest rate swap - U.S. Dollars
Pay variable/receive fixed - - - - 809 - 809 1
Average rate paid - 30-day
U.S. commercial paper
non-financial
Fixed rate received - U.S.$ rate - - - - 5.2% - 5.2%
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 22
<TABLE>
Interest Rate Sensitivity
As of January 31, 1998
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 $1,268 $802 $559 $3,747 $8,230 $8,639
Average interest rate
- U.S.$ 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 50 382 596 660
Fixed interest rate
- U.S.$ 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 swap
Pay variable/receive fixed - - 500 - - - 500 -
Average rate paid - 30-day
U.S. commercial paper
non-financial plus .134%
Fixed rate received
- U.S.$ rate - - 5.7% - - - 5.7%
Interest Rate Derivative Financial
Instruments Related to Real Estate
Investment Trust Obligation
Interest rate swap
Pay variable/receive fixed 34 38 41 45 49 378 585 17
Average pay rate - 30-day
U.S. commercial paper
non-financial
Fixed rate received
- U.S.$ rate 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
Interest rate swap
Pay variable/receive fixed - - - - - 230 230 20
Average rate paid - 6-month
U.S. LIBOR
Fixed rate received
- U.S.$ rate - - - - - 7.0% 7.0%
Interest Rate Derivative Financial
Instrument Related to Currency Swap
German Deutschemarks
Pay variable/receive variable - - - 1,101 - - 1,101 (1)
Average rate paid - 3-month
German Deutschemark LIBOR
minus .0676%
Average rate received - 30-day
U.S. commercial paper
non-financial
</TABLE>
The Company routinely enters into forward currency exchange contracts in the
regular course of business to manage its exposure against foreign currency
fluctuations on cross-border purchases of inventory. These contracts are
generally for durations of six months or less. In addition, the Company entered
into two foreign currency swaps to hedge the net investment in Germany.
The following tables provide 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 United States dollar equivalents. For foreign currency forward exchange
agreements, the table presents the notional amounts and average exchange rates
by contractual maturity dates.
Wal-Mart Stores, Inc. Annual Report - Page 23
<TABLE>
Foreign Currency Exchange Rate Sensitivity
As of January 31, 1999
Principal (Notional) Amount by Expected Maturity
<CAPTION>
Fair
value
(Amounts in millions) 2000 2001 2002 2003 2004 Thereafter Total 1/31/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Forward Contracts to Sell Foreign
Currencies for U.S.$
Canadian Dollars
Notional amount 45 - - - - - 45 (1)
Average contract rate 1.5 - - - - - 1.5
German Deutschemarks
Notional amount 1 - - - - - 1 -
Average contract rate 1.8 - - - - - 1.8
Forward Contracts to Sell Foreign
Currencies for Hong Kong $
German Deutschemarks
Notional amount 1 - - - - - 1 -
Average contract rate 0.2 - - - - - 0.2
Average currency exchange rate 1.8 - - - - - 1.8
Currency Swap Agreements
Payment of German Deutschemarks
Notional amount - - - 1,101 - - 1,101 (43)
Average contract rate - - - 1.8 - - 1.8
Payment of German Deutschemarks
Notional amount - - - - 809 - 809 18
Average contract rate - - - - 1.7 - 1.7
</TABLE>
<TABLE>
Foreign Currency Exchange Rate Sensitivity
As of January 31, 1998
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 U.S.$
Canadian Dollars
Notional amount 24 - - - - - 24 -
Average contract rate 1.4 - - - - - 1.4
German Deutschemarks
Notional amount 2 - - - - - 2 -
Average contract rate 1.8 - - - - - 1.8
Forward Contracts to Sell Foreign
Currencies for Hong Kong $
German Deutschemarks
Notional amount 1 - - - - - 1 -
Average contract rate 0.2 - - - - - 0.2
Average currency exchange rate 1.8 - - - - - 1.8
Currency Swap Agreements
Payment of German Deutschemarks
Notional amount - - - - 1,101 - 1,101 (1)
Average contract rate - - - - 1.8 - 1.8
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 24
International Operations
The Company's foreign operations are comprised of wholly-owned operations
in Argentina, Canada, Germany and Puerto Rico; joint ventures in China
and Korea; and majority-owned subsidiaries in Brazil and Mexico. As a
result, the Company's 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 the Company does business. The Company
minimizes exposure to the risk of devaluation of foreign currencies by
operating in local currencies and through buying forward contracts, where
feasible, for known transactions.
All foreign operations are measured in their local currencies with the
exception of Mexico, which operates in a highly-inflationary economy and
reports operations using United States dollars. Beginning in fiscal 2000,
Mexico will no longer be considered a highly-inflationary economy and
will begin reporting its operations in its local currency. The Company
does not anticipate there will be a material impact on the consolidated
or International segment's results of operations or financial position as
a result of the change. In fiscal 1999, the foreign currency translation
adjustment increased by $36 million to $509 million primarily due to the
exchange rates in Brazil and Canada, and in fiscal 1998, the foreign
currency translation adjustment increased by $73 million to $473 million
primarily due to the exchange rate in Canada.
The International segment's operating profit increased from $262 million
in fiscal 1998 to $551 million in fiscal 1999. As noted above, the
results for fiscal 1999 include the operating profit of Cifra and
Wertkauf. Because the acquisitions occurred during the last half of
fiscal 1998, the additional operating profit resulting from these
acquisitions accounts for a part of the increase in the International
segment's operating profit.
Liquidity and Capital Resources
Cash Flows Information
Cash flows from operating activities were $7,580 million in fiscal 1999,
up from $7,123 million in fiscal 1998. In fiscal 1999, the Company
invested $3,734 million in capital assets, paid dividends of $693
million, and had a net cash outlay of $855 million for acquisitions.
Acquisitions include the purchase of six undeveloped sites and four units
in Korea which had been operated by Korea Makro, and 74 Interspar
hypermarkets in Germany from Spar Handels AG. See Note 6 of Notes to
Consolidated Financial Statements for additional information on
acquisitions.
Company Stock Purchase and Common Stock Dividends
In fiscal 1999, the Company repurchased over 21 million shares of its
common stock for $1,202 million. In March of 1999 the Company announced
plans to increase the existing common stock repurchase program by $1.2
billion, resulting in a total outstanding authorization of $2 billion.
Additionally, the Company increased the dividend 29% to $.20 per share
(after the two-for-one common stock split, which was also announced in
March of 1999) for fiscal 2000. This marks the 27th consecutive yearly
increase in dividends.
Borrowing Information
The Company had committed lines of credit with 78 banks, aggregating
$1,872 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 were sufficient to finance the seasonal
buildups in merchandise inventories and other cash requirements.
The Company anticipates generating sufficient operating cash flow to pay
the increased dividend and to fund all capital expenditures. Accordingly,
management does not plan to finance future capital expenditures with
debt. However, the Company plans 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. The Company anticipates no
difficulty in obtaining long-term financing in view of an excellent
credit rating and favorable experiences in the debt market in the recent
past. In addition to the available credit lines mentioned above, the
Company may sell up to $501 million of public debt under shelf
registration statements previously filed with the United States
Securities and Exchange Commission.
Expansion
Domestically, the Company plans to open approximately 40 new Wal-Mart
stores and approximately 150 new Supercenters. Relocations or expansions
of existing discount stores will account for 90 of the Supercenters,
while approximately 60 will be new locations. Due to the positive
customer feedback on the Neighborhood Market concept, which is being
tested in four locations, the Company plans to expand the test to
additional areas. Also planned for fiscal 2000 are ten to fifteen new
SAM'S Clubs, including six relocations. In addition, the Company will
remodel approximately 140 of the existing SAM'S Clubs and expand one
unit. In order to serve these and future developments, the Company will
begin shipping from three new distribution centers in the next fiscal
year. Internationally, plans are to develop 75 to 80 new retail units.
These stores are planned in Argentina, Brazil, Canada, China, Korea,
Mexico, and Puerto Rico. Total planned growth represents approximately 34
million square feet of net additional retail space.
Total planned capital expenditures for fiscal 2000 approximate $4.9
billion. We plan to finance our expansion primarily with operating cash
flows.
Year 2000 Issue State of Readiness
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 a 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 been evaluating and adjusting all of its known date-sensitive
systems and equipment for Year 2000 compliance, including those systems
and equipment which support the Company's International segment. The
assessment phase of the Year 2000 project is substantially complete and
Wal-Mart Stores, Inc. Annual Report - Page 25
included both information technology, such as point-of-sale computer
systems, as well as non-information technology equipment, such as
warehouse conveyor systems. All internal coding conversions are complete.
Some third-party applications representing less than 1% of the total
application inventory remain to be converted, these applications are
dependent on vendor upgrade availability and will be completed by October
1999. Virtually all the conversions were performed or are expected to be
performed by Company associates.
The next phase of the Company's Year 2000 project, complete system
testing, began during the second quarter of fiscal 1999. The first phase
of testing has been completed on critical systems. Thus far, no
significant issues have been detected in the testing. A second, more
comprehensive phase of testing, is scheduled for the March 1999 to July
1999 timeframe. A final test cycle is planned for October 1999 to ensure
all version levels, upgrades, new releases and enhancements are Year 2000
compliant.
The total incremental estimated cost directly related to the Year 2000
remedy is $27 million. Approximately $17.5 million of the cost is related
to reprogramming, replacement, extensive testing and validation of
software, which is being expensed as incurred, while approximately $9.5
million is related to acquisition of hardware. Approximately $8 million
of the $27 million cost of conversion has been incurred as of the end of
the fourth quarter of fiscal 1999. The majority of the remaining costs
include future testing of the systems and the purchase of additional
equipment. All of these costs are being funded through operating cash
flows. These costs are not a significant component of the Company's
overall information technology budget. The Company's Information Systems
Division did not defer any information technology projects last year to
address the Year 2000 issue. During fiscal 2000 the Company still plans
to complete and implement over half of the normal project load in
priority sequence.
In addition to internal Year 2000 implementation activities, the Company
is communicating with other companies with which our systems interface or
on which it relies to determine the extent to which those companies are
addressing their Year 2000 compliance. Testing began during the third
quarter of fiscal year 1999 and will be substantially complete by October
31, 1999. Thus far, no significant issues have been detected in the
testing process. There can be no assurance that there will not be an
adverse effect on the Company if third parties, such as utility companies
or merchandise suppliers, do not convert their systems in a timely manner
and in a way that is compatible with the Company's systems. However,
management believes that ongoing communication with and assessment of
these third parties should minimize these risks.
The Company anticipates minimal business disruption will occur as a
result of Year 2000 issues; however, possible consequences include, but
are not limited to, loss of communications links with certain store
locations, loss of electric power, inability to process transactions,
send purchase orders, or engage in similar normal business activities. In
addition, since there is no uniform definition of Year 2000 compliance
and not all customer situations can be anticipated, the Company may
experience an increase in sales returns of merchandise that may contain
hardware or software components. If returns of merchandise increase, such
returns are not expected to be material to the Company's financial
condition.
Although the Company has not finalized its contingency plans for possible
Year 2000 issues, initial analysis and planning is underway. Where
needed, the Company will establish contingency plans based on its actual
testing experience with its supplier base and assessment of outside
risks. The Company anticipates the majority of its contingency plans to
be in place by October 31, 1999.
The cost of the conversions and the completion dates are based on
management's best estimates and may be updated as additional information
becomes available. Readers are referred to the next section of this
report, which addresses forward-looking statements made by the Company.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements made by or on behalf of the
Company. Certain statements contained in Management's Discussion and
Analysis and in other Company filings are forward-looking statements.
These statements discuss, among other things, expected growth, future
revenues, future cash flows and future performance. The forward-looking
statements are subject to risks and uncertainties including but not
limited to the cost of goods, competitive pressures, inflation, consumer
debt levels, currency exchange fluctuations, trade restrictions, changes
in tariff and freight rates, Year 2000 issues, interest rate fluctuations
and other capital market conditions, and other risks indicated in the
Company's filings with the United States Securities and Exchange
Commission. Actual results may materially differ from anticipated results
described in these statements.
Wal-Mart Stores, Inc. Annual Report - Page 26
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions except per share data)
<CAPTION>
Fiscal years ended January 31, 1999 1998 1997
<S> <C> <C> <C>
Revenues:
Net sales $137,634 $117,958 $104,859
Other income-net 1,574 1,341 1,319
139,208 119,299 106,178
Costs and Expenses:
Cost of sales 108,725 93,438 83,510
Operating, selling and general
and administrative expenses 22,363 19,358 16,946
Interest Costs:
Debt 529 555 629
Capital leases 268 229 216
131,885 113,580 101,301
Income Before Income Taxes,
Minority Interest and Equity
in Unconsolidated Subsidiaries 7,323 5,719 4,877
Provision for Income Taxes
Current 3,380 2,095 1,974
Deferred (640) 20 (180)
2,740 2,115 1,794
Income Before Minority Interest
and Equity in Unconsolidated
Subsidiaries 4,583 3,604 3,083
Minority Interest and Equity
in Unconsolidated Subsidiaries (153) (78) (27)
Net Income $ 4,430 $ 3,526 $ 3,056
Net Income Per Share - Basic
and Dilutive $0.99 $0.78 $0.67
Average Number of Common Shares:
Basic 4,464 4,516 4,585
Dilutive 4,485 4,533 4,592
See accompanying notes.
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 27
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
<CAPTION>
January 31, 1999 1998
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,879 $1,447
Receivables 1,118 976
Inventories
At replacement cost 17,549 16,845
Less LIFO reserve 473 348
Inventories at LIFO cost 17,076 16,497
Prepaid expenses and other 1,059 432
Total Current Assets 21,132 19,352
Property, Plant and Equipment, at Cost:
Land 5,219 4,691
Building and improvements 16,061 14,646
Fixtures and equipment 9,296 7,636
Transportation equipment 553 403
31,129 27,376
Less accumulated depreciation 7,455 5,907
Net property, plant and equipment 23,674 21,469
Property Under Capital Lease:
Property under capital lease 3,335 3,040
Less accumulated amortization 1,036 903
Net property under capital leases 2,299 2,137
Other Assets and Deferred Charges 2,891 2,426
Total Assets $49,996 $45,384
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 10,257 $ 9,126
Accrued liabilities 4,998 3,628
Accrued income taxes 501 565
Long-term debt due within one year 900 1,039
Obligations under capital leases
due within one year 106 102
Total Current Liabilities 16,762 14,460
Long-Term Debt 6,908 7,191
Long-Term Obligations Under Capital Leases 2,699 2,483
Deferred Income Taxes and Other 716 809
Minority Interest 1,799 1,938
Shareholders' Equity
Preferred stock ($.10 par value; 100
shares authorized, none issued)
Common stock ($.10 par value; 5,500
shares authorized, 4,448 and 2,241
issued and outstanding in 1999 and
1998, respectively) 445 224
Capital in excess of par value 435 585
Retained earnings 20,741 18,167
Other accumulated comprehensive income (509) (473)
Total Shareholders' Equity 21,112 18,503
Total Liabilities and Shareholders' Equity $49,996 $45,384
See accompanying notes.
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 28
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Other
Capital in accumulated
(Amounts in millions Number Common excess of Retained comprehensive
except per share data) of shares stock par value earnings income Total
<S> <C> <C> <C> <C> <C> <C>
Balance - January 31, 1996 2,293 $ 229 $ 545 $ 14,394 ($ 412) $ 14,756
Comprehensive Income
Net income 3,056 3,056
Other accumulated comprehensive income
Foreign currency translation adjustment 12 12
Total Comprehensive income $ 3,068
Cash dividends ($.11 per share) (481) (481)
Purchase of Company stock (8) (7) (201) (208)
Stock options exercised and other (1) 9 8
Balance - January 31, 1997 2,285 228 547 16,768 (400) 17,143
Comprehensive Income
Net income 3,526 3,526
Other accumulated comprehensive income
Foreign currency translation adjustment (73) (73)
Total Comprehensive income $ 3,453
Cash dividends ($.14 per share) (611) (611)
Purchase of Company stock (47) (5) (48) (1,516) (1,569)
Stock options exercised and other 3 1 86 87
Balance - January 31, 1998 2,241 224 585 18,167 (473) 18,503
Comprehensive Income
Net income 4,430 4,430
Other accumulated comprehensive income
Foreign currency translation adjustment (36) (36)
Total Comprehensive income $ 4,394
Cash dividends ($.16 per share) (693) (693)
Purchase of Company stock (21) (2) (37) (1,163) (1,202)
Two-for-one stock split
(announced March 4, 1999) 2,224 223 (223)
Stock options exercised and other 4 110 110
Balance - January 31, 1999 4,448 $445 $435 $20,741 ($ 509) $ 21,112
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, 1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities
Net Income $4,430 $3,526 $3,056
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,872 1,634 1,463
Increase in accounts receivable (148) (78) (58)
(Increase)/decrease in inventories (379) (365) 99
Increase in accounts payable 1,108 1,048 1,208
Increase in accrued liabilities 1,259 1,329 430
Deferred income taxes (640) 20 (180)
Other 78 9 (88)
Net cash provided by operating activities 7,580 7,123 5,930
Cash flows from investing activities
Payments for property, plant
and equipment (3,734) (2,636) (2,643)
Proceeds from sale of photo
finishing plants - - 464
Acquisitions (855) (1,865) -
Other investing activities 171 80 111
Net cash used in investing activities (4,418) (4,421) (2,068)
Cash flows from financing activities
Decrease in commercial paper - - (2,458)
Proceeds from issuance of long-term debt 536 547 -
Net proceeds from formation of Real Estate
Investment Trust - - 632
Purchase of Company stock (1,202) (1,569) (208)
Dividends paid (693) (611) (481)
Payment of long-term debt (1,075) (554) (541)
Payment of capital lease obligations (101) (94) (74)
Other financing activities (195) 143 68
Net cash used in financing activities (2,730) (2,138) (3,062)
Net increase in cash and cash equivalents 432 564 800
Cash and cash equivalents at
beginning of year 1,447 883 83
Cash and cash equivalents at end of year $1,879 $1,447 $883
Supplemental disclosure of cash
flow information
Income tax paid $3,458 $1,971 $1,791
Interest paid 805 796 851
Capital lease obligations incurred 347 309 326
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
During fiscal 1999, the Company adopted Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities." The SOP requires that
the costs of start-up activities, including organization costs, be
expensed as incurred. The impact of the adoption of SOP 98-5 was $8
million net of taxes. Due to the immateriality to the Company's results
of operations, the initial application was not reported as a cumulative
effect of a change in an accounting principle. The impact of the change
did not have a material effect on any of the years presented.
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 $41 million, $33 million and $44 million in 1999, 1998
and 1997, 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 financing and global
operating activities. Contracts that effectively meet risk reduction and
correlation criteria are recorded using hedge accounting. Unrealized
gains and losses resulting from market movements are not recognized.
Hedges of firm commitments are deferred and recognized when the hedged
transaction occurs.
Goodwill and other acquired intangible assets
Goodwill and other acquired intangible assets are amortized on a straight-
line basis over the periods that expected economic benefits will be
provided. Management estimates such periods of economic benefits using
factors such as entry barriers in certain countries, operating rights and
estimated lives of other operating assets acquired. The realizability of
goodwill and other intangibles is evaluated periodically when events or
circumstances indicate a possible inability to recover the carrying
amount. Such evaluation is based on cash flow and profitability
projections that incorporate the impact of existing Company businesses.
The analyses necessarily involve significant management judgment to
evaluate the capacity of an acquired business to perform within
projections. Historically, the Company has generated sufficient returns
from acquired businesses to recover the cost of the goodwill and other
intangible assets. Goodwill and other acquired intangible assets, net of
accumulated amortization, included in the consolidated balance sheets is
$2,538 million and $1,887 million in 1999 and 1998, respectively.
Long-lived assets
The Company periodically reviews long-lived assets and certain intangible
assets when indicators of impairments exist and if the value of the
assets is impaired, an impairment loss would be recognized.
Comprehensive income
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income
and its components. The Company has reclassified all years presented to
reflect comprehensive income and its components in the consolidated
statements of shareholders' equity.
Stock split
On March 4, 1999, the Company announced a two-for-one stock split issued
in the form of a 100% stock dividend. The date of record is March 19,
1999, and it will be distributed April 19, 1999. Consequently, the stock
option data and per share data have been restated to reflect the stock
split.
Advertising costs
Advertising costs are expensed as incurred and were $405 million, $292
million and $249 million in 1999, 1998 and 1997, 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 is
provided on the straight-line method over the estimated useful lives of
the various assets. For income tax purposes, accelerated methods are used
with recognition of deferred income taxes for the resulting temporary
differences. Estimated useful lives are as follows:
Building and improvements 5-33 years
Fixtures and equipment 5-12 years
Transportation equipment 2-5 years
Goodwill and other acquired intangible assets 20-40 years
Costs of computer software
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting For the Costs of Computer
Software Developed For or Obtained For Internal Use." The SOP will be
effective for the Company beginning February 1, 1999. The SOP will
require the capitalization of certain costs incurred in connection with
developing or obtaining software for internal use. Currently, costs
related to developing internal-use software are expensed as incurred. The
Company does not anticipate there will be a material impact on the
results of operations or financial position after SOP 98-1 is adopted.
Wal-Mart Stores, Inc. Annual Report - Page 31
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The Statement will be effective for the Company beginning February 1,
2000. The new Statement requires all derivatives to be recorded on the
balance sheet at fair value and establishes accounting treatment for
three types of hedges: hedges of changes in the fair value of assets,
liabilities, or firm commitments; hedges of the variable cash flows of
forecasted transactions; and hedges of foreign currency exposures of net
investments in foreign operations. The Company is analyzing the
implementation requirements and currently does not anticipate there will
be a material impact on the results of operations or financial position
after the adoption of Statement No. 133.
Net income per share
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 dilutive effect of stock
options.
Foreign currency translation
The assets and liabilities of most foreign subsidiaries are translated at
current exchange rates and any related translation adjustments are
recorded as a component of accumulated comprehensive income. Operations
in Mexico operate in highly inflationary economies and certain assets are
translated at historical exchange rates and all translation adjustments
are reflected in the Consolidated Statements of Income. Beginning in
fiscal 2000, Mexico will no longer be considered highly inflationary and
will begin reporting operations in local currency.
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 presentations.
2 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 and a 401(k) plan 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 $388 million, $321 million and $247 million in 1999,
1998 and 1997, respectively.
3 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, 1999 1998 1997
<S> <C> <C> <C>
Maximum amount outstanding at month-end $1,976 $1,530 $2,209
Average daily short-term borrowings 256 212 1,091
Weighted average interest rate 5.1% 5.6% 5.3%
</TABLE>
At January 31, 1999 and 1998, there were no short-term borrowings
outstanding. At January 31, 1999, the Company had committed lines of
credit of $1,872 million with 78 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):
Wal-Mart Stores, Inc. Annual Report - Page 32
<TABLE>
<CAPTION>
Fiscal years ended January 31, 1999 1998
<S> <C> <C> <C>
8.625% Notes due April 2001 $750 $750
5.875% Notes due October 2005 597 597
5.850% Notes due June 2018 with
biannual put options 500 -
5.650% Notes due February 2010
with biannual put options 500 500
7.500% Notes due May 2004 500 500
9.100% Notes due July 2000 500 500
6.500% Notes due June 2003 454 454
7.250% Notes due June 2013 445 445
7.800% - 8.250% Obligations from sale/leaseback
transactions due 2014 427 458
6.750% Notes due May 2002 300 300
7.000% - 8.000% Obligations from sale/leaseback
transactions due 2013 292 306
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
6.375% Notes due March 2003 228 228
6.750% Eurobond due May 2002 200 200
6.875% Eurobond due June 1999 - 250
6.125% Notes due October 1999 - 500
Other 215 203
$6,908 $7,191
</TABLE>
The Company has $1 billion of outstanding debt with imbedded put options.
Beginning in fiscal 2001, and every second year thereafter the holders of
the debt may require the Company to repurchase the debt at face value.
Long-term debt is unsecured except for $182 million which is
collateralized by property with an aggregate carrying value of
approximately $347 million. Annual maturities of long-term debt during
the next five years are (in millions):
<TABLE>
<CAPTION>
Fiscal years ended Annual
January 31, maturity
<S> <C>
2000 $ 900
2001 1,284
2002 801
2003 558
2004 285
Thereafter 3,980
</TABLE>
The Company has agreed to observe certain covenants under the terms of
its note agreements, the most restrictive of which relate to amounts of
additional secured debt and long-term leases.
The Company has entered into sale/leaseback transactions involving
buildings while retaining title to the underlying land.
These transactions were accounted for as financings and are included in
long-term debt and the annual maturities schedules above. The resulting
obligations are amortized over the lease terms. Future minimum lease
payments for each of the five succeeding years as of January 31, 1999,
are (in millions):
<TABLE>
<CAPTION>
Fiscal years ended Minimum
January 31, rentals
<S> <C>
2000 $104
2001 100
2002 94
2003 98
2004 93
Thereafter 724
</TABLE>
At January 31, 1999 and 1998, the Company had letters of credit
outstanding totaling $767 million and $673 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 $501 million.
4 Financial Instruments
Interest rate instruments
The Company enters into interest rate swaps to minimize the risks and
costs associated with its financing activities. The swap agreements are
contracts to exchange fixed or variable rate interest for fixed or
variable 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 due to credit loss.
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. These instruments are not recorded on the balance sheet,
and as of January 31, 1999 and 1998, are as follows:
Wal-Mart Stores, Inc. Annual Report - Page 33
<TABLE>
<CAPTION>
Notional amount Maturity Rate Rate Fair
(in millions) date received paid value
January 31, 1999
<S> <C> <C> <C> <C>
$ 551 2007 7.0% 30-day U.S. commercial $44
paper non-financial
500 2001 5.9% 30-day U.S. commercial 5
paper non-financial
plus .245%
500 2001 5.7% 30-day U.S. commercial 10
paper non-financial
plus .134%
1,101 2003 5.8% 30-day U.S. commercial 28
paper non-financial
1,101 2003 30-day U.S. commercial 3-month German DEM (43)
paper non-financial LIBOR minus .0676%
1,101 2003 3-month German DEM 4.5% - DEM rate (58)
LIBOR minus .0676%
809 2004 5.2% 30-day U.S. commercial 1
paper non-financial
809 2004 30-day U.S. commercial 3-month German DEM 18
paper non-financial LIBOR minus .055%
809 2004 3-month German DEM 3.4% - DEM rate 3
LIBOR minus .055%
230 2027 7.0% 6-month U.S. LIBOR 30
January 31, 1998
$ 585 2007 7.0% 30-day U.S. commercial $17
paper non-financial
500 2001 5.7% 30-day U.S. commercial -
paper non-financial
plus .134%
1,101 2003 30-day U.S. commercial 3-month German DEM (1)
paper non-financial LIBOR minus .0676%
230 2027 7.0% 6-month U.S. LIBOR 20
</TABLE>
Foreign exchange instruments
The Company has entered into two foreign currency swap agreements to hedge its
net investment in Germany. In fiscal 1998, the Company entered into a foreign
currency swap where it will pay 1,960 million in German Deutschemarks in 2003
and will receive $1,101 million in United States Dollars. In fiscal 1999, the
Company entered into a foreign currency swap where it will pay 1,360 million in
German Deutschemarks in 2004 and will receive $809 million in United States
Dollars.
The Company routinely enters into forward currency exchange contracts in the
regular course of business to manage its exposure against foreign currency
fluctuations on cross-border purchases of inventory. These contracts are
generally for short durations of six months or less and are insignificant to the
Company's operations or financial position. There were approximately $46 million
notional outstanding at January 31, 1999.
Fair value of financial instruments
Cash and cash equivalents: The carry 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 $8,323 million at January 31, 1999 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 external sources.
5 Income Taxes
The income tax provision consists of the following (in millions):
<TABLE>
<CAPTION>
Fiscal years ended January 31, 1999 1998 1997
<S> <C> <C> <C>
Current
Federal $ 3,043 $ 1,891 $ 1,769
State and local 254 186 201
International 83 18 4
Total current tax provision 3,380 2,095 1,974
Deferred
Federal (655) (5) (97)
State and local (28) (2) (9)
International 43 27 (74)
Total deferred tax provision (640) 20 (180)
Total provision for income taxes $ 2,740 $ 2,115 $ 1,794
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 34
Items that give rise to significant portions of the deferred tax accounts
at January 31, are as follows (in millions):
<TABLE>
<CAPTION>
Fiscal years ended January 31, 1999 1998 1997
<S> <C> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ 695 $ 797 $ 721
Inventory 286 275 145
International, principally asset
basis differences 272 387 83
Other 36 33 45
Total deferred tax liabilities 1,289 1,492 994
Deferred tax assets:
Amounts accrued for financial
reporting purposes not yet
deductible for tax purposes 985 441 295
Capital leases 188 190 169
International, asset basis and
loss carryforwards 143 258 314
Deferred revenue 66 89 113
Other 184 108 68
Total deferred tax assets 1,566 1,086 959
Net deferred tax (assets)
liabilities $ (277) $ 406 $ 35
</TABLE>
A reconciliation of the significant differences between the effective
income tax rate and the federal statutory rate on pretax income follows:
<TABLE>
<CAPTION>
Fiscal years ended January 31, 1999 1998 1997
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal income tax benefit 2.0% 2.1% 2.2%
International (0.5%) (0.3%) (1.5%)
Other 0.9% 0.2% 1.1%
37.4% 37.0% 36.8%
</TABLE>
6 Acquisitions
On January 1, 1999, the Company took possession of 74 units from the
Interspar hypermarket chain in Germany. The units were acquired from Spar
Handels AG, a German company that owns multiple retail formats and
wholesale operations throughout Germany. The transaction closed on
December 29, 1998; therefore, the assets are included in the Company's
consolidated balance sheet and the results of operations will be included
beginning in fiscal 2000. The transaction has been recorded as a
purchase. The net assets and liabilities acquired are recorded at fair
value. Resulting goodwill is being amortized over 40 years.
In July 1998, the Company extended its presence in Asia with an
investment in Korea. The Company acquired a majority interest in four
units as well as six undeveloped sites. The four units were previously
operated by Korea Makro. The transaction has been accounted for as a
purchase. The new assets and liabilities acquired are recorded at fair
value. The goodwill is being amortized over 40 years. The results of
operations since the effective date of the acquisition have been included
in the Company's results.
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.
The Company then acquired 593,100,000 shares of the Series "A" Common
Shares and Series "B" Common Shares of Cifra, for approximately $1.2
billion. 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 a majority interest 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 are included in fiscal 1999.
Wal-Mart Stores, Inc. Annual Report - Page 35
In December 1997, the Company acquired the minority interest in its
Brazilian joint venture from Lojas Americanas, and then sold a lesser
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>
1999 1998
<S> <C> <C>
Cash and cash equivalents $137 $ 500
Receivables - 97
Inventories 200 266
Net property, plant and equipment 219 2,105
Goodwill and other acquired
intangible assets 576 1,213
Accounts payable (112) (431)
Accrued liabilities (60) (132)
Deferred income taxes 32 (353)
Minority interest (22) (705)
Other 22 31
992 2,591
Investment in unconsolidated
Mexican subsidiary exchanged - (226)
Total cash purchase price $992 $ 2,365
</TABLE>
7 Stock Option Plans
At January 31, 1999, 131 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.
Generally, 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," (FAS No. 123) 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 FAS No.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 4.4%, dividend yields between 0.4% and 1.2%, volatility factors
between .23 and .29, 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 single measure of
the fair value of its associate stock options. Using the Black-Scholes
option evaluation model, the weighted average value of options granted
during the years ending January 31, 1999, 1998 and 1997, were $14, $7 and
$4 per option, respectively.
The effect of applying the fair value method of FAS No. 123 to the stock
option grants subsequent to February 1, 1995, 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>
1999 1998 1997
<S> <C> <C> <C>
Pro forma net income $ 4,397 $ 3,504 $ 3,042
Pro forma earnings
per share - basic $ 0.98 $ 0.78 $ 0.66
- dilutive $ 0.98 $ 0.77 $ 0.66
</TABLE>
The following table summarizes information about stock options outstanding as of
January 31, 1999.
<TABLE>
<CAPTION>
Weighted Weighted Weighted
average average average
Range of Number of remaining exercise price Number of exercise price
exercise outstanding life of outstanding options of exercisable
prices options (Years) options exercisable options
<S> <C> <C> <C> <C> <C>
$ 4.39 to 5.33 1,544,000 1.0 $ 5.30 1,538,000 $ 5.30
6.63 to 8.84 1,155,000 1.9 7.25 831,000 7.25
10.00 to 14.88 35,277,000 6.5 12.03 8,869,000 12.37
15.41 to 19.97 11,726,000 9.0 19.30 1,113,000 19.13
20.88 to 34.53 716,000 9.5 28.79 6,000 20.88
39.88 to 43.00 5,740,000 10.0 39.90 - -
$ 4.39 to 43.00 56,158,000 7.2 $16.32 12,357,000 $12.78
</TABLE>
Wal-Mart Stores, Inc. Annual Report - Page 36
Further information concerning the options is as follows:
<TABLE>
<CAPTION>
Option price Weighted average
Shares per share price per share Total
<S> <C> <C> <C> <C>
January 31, 1996 44,058,000 $2.47-15.41 $ 10.84 $ 477,389,000
(10,022,000 shares exercisable)
Options granted 22,932,000 11.13-12.63 11.60 265,931,000
Options canceled (4,220,000) 2.89-15.41 11.64 (49,109,000)
Options exercised (1,998,000) 2.47-12.88 5.17 (10,327,000)
January 31, 1997 60,772,000 3.25-15.41 11.26 683,884,000
(12,896,000 shares exercisable)
Options granted 10,526,000 12.44-19.97 18.93 199,309,000
Options canceled (3,604,000) 3.25-17.53 11.72 (42,251,000)
Options exercised (7,038,000) 3.25-15.41 9.62 (67,729,000)
January 31, 1998 60,656,000 3.60-19.97 12.75 773,213,000
(13,462,000 shares exercisable)
Options granted 9,256,000 12.63-43.00 33.02 305,646,000
Options canceled (4,254,000) 4.39-39.88 13.74 (58,436,000)
Options exercised (9,500,000) 3.59-19.09 10.92 (103,748,000)
January 31, 1999 56,158,000 $4.39-43.00 $ 16.32 $916,675,000
(12,357,000 shares exercisable)
Shares available for option:
January 31, 1998 80,258,000
January 31, 1999 75,256,000
</TABLE>
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 $654 million, $596
million and $561 million in 1999, 1998 and 1997, respectively. Aggregate
minimum annual rentals at January 31, 1999, under non-cancelable leases
are as follows (in millions):
<TABLE>
<CAPTION>
Fiscal Operating Capital
year leases leases
<S> <C> <C>
1999 $ 394 $ 349
2000 371 370
2001 358 370
2002 337 366
2003 324 365
Thereafter 2,745 3,504
Total minimum rentals $ 4,529 5,324
Less estimated executory costs 69
Net minimum lease payments 5,255
Less imputed interest at rates ranging
from 6.1% to 14.0% 2,450
Present value of minimum lease payments $ 2,805
</TABLE>
Certain of the leases provide for contingent additional rentals based on
percentage of sales. Such additional rentals amounted to $49 million, $46
million and $51 million in 1999, 1998 and 1997, 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
47 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 $49 million annually over the lease terms.
Wal-Mart Stores, Inc. Annual Report - Page 37
9 Segments
The Company and its subsidiaries are principally engaged in the operation
of mass merchandising stores located in all 50 states, Argentina, Canada,
Germany, and Puerto Rico, and through joint ventures in China and Korea,
and through majority-owned subsidiaries in Brazil and Mexico.
The Company identifies 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, China and Korea are consolidated
using a December 31 fiscal year end, generally due to statutory reporting
requirements. The Company's operations in Canada and Puerto Rico are
consolidated using a January 31 fiscal year end. 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 31,1999
Wal-Mart
Stores SAM'S Club International Other Consolidated
<S> <C> <C> <C> <C> <C>
Revenues from
external customers $ 95,395 $ 22,881 $ 12,247 $ 7,111 $ 137,634
Intercompany real estate
charge (income) 1,502 355 (1,857)
Depreciation and
amortization 716 111 252 793 1,872
Operating income 7,075 707 551 (213) 8,120
Interest expense 797
Income before income taxes
and minority interest 7,323
Total assets $ 16,950 $ 2,834 $ 9,537 $20,675 $ 49,996
</TABLE>
<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 $ 16,229 $ 2,933 $ 7,390 $18,832 $ 45,384
</TABLE>
<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 $ 15,387 $ 3,115 $ 2,887 $18,215 $ 39,604
</TABLE>
International long-lived assets excluding goodwill are $4,044 million,
$3,537 million and $1,199 million in 1999, 1998 and 1997, respectively.
Additions to international long-lived assets are $732 million, $2,401
million and $317 million in 1999, 1998 and 1997, 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 segments. McLane is not a significant segment and
therefore, results are not presented separately.
Wal-Mart Stores, Inc. Annual Report - Page 38
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>
1999
Net sales $29,819 $33,521 $33,509 $40,785
Cost of sales 23,526 26,422 26,380 32,397
Net income 828 1,034 1,009 1,559
Net income per share,
basic and dilutive $.18 $.23 $.23 $.35
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 $.14 $.18 $.17 $.29
</TABLE>
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. as of January 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended January 31, 1999. 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, 1999 and 1998, and
the consolidated results of their operations and their cash flows for
each of the three years in the period ended January 31, 1999, in
conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Ernst & Young LLP
Tulsa, Oklahoma
March 24, 1999
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,
1999 1998
Quarter Ended Hi Low Hi Low
<S> <C> <C> <C> <C>
April 30 $26.94 $20.41 $14.94 $11.56
July 31 $34.50 $24.97 $19.28 $14.13
October 31 $34.53 $26.56 $19.38 $16.09
January 31 $43.00 $33.44 $20.88 $18.03
</TABLE>
<TABLE>
<CAPTION>
Dividends Paid Per Share **
Fiscal years ended January 31,
Quarterly
1999 1998
<S> <C> <C> <C>
April 6 $0.0388 April 9 $0.0338
July 13 $0.0388 July 14 $0.0338
October 12 $0.0388 October 14 $0.0338
January 11 $0.0388 January 12 $0.0338
</TABLE>
[FN]
<F1>
** Restated to reflect the two-for-one stock split announced March 4,
1999, with date of record of March 19, 1999. The stock split is
payable on April 19, 1999.
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 53%
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, 1999,
included in the 1999 Annual Report to Shareholders of Wal-Mart Stores, Inc.
We also consent to the incorporation by reference of our report dated
March 24, 1999, 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, 1999, in the following registration
statements and related prospectuses.
Stock Option Plan of 1984 of Form S-8 File No. 2-94358
Wal-Mart Stores, Inc., as amended and 33-43315
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.
Form S-3 Registration Statement Form S-3 File No. 333-56993
Covering 14,710,000 Shares
Associate Stock Purchase Plan of Form S-8 File No. 333-62965
Wal-Mart Stores, Inc.
Stock Incentive Plan of Wal-Mart Form S-8 File No. 333-60329
Stores, Inc.
/s/ Ernst & Young LLP
Ernst & Young LLP
Tulsa, Oklahoma
April 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 1,879
<SECURITIES> 0
<RECEIVABLES> 1,118
<ALLOWANCES> 0
<INVENTORY> 17,076
<CURRENT-ASSETS> 21,132
<PP&E> 31,129
<DEPRECIATION> 7,455
<TOTAL-ASSETS> 49,996
<CURRENT-LIABILITIES> 16,762
<BONDS> 0
0
0
<COMMON> 445
<OTHER-SE> 20,667
<TOTAL-LIABILITY-AND-EQUITY> 49,996
<SALES> 137,634
<TOTAL-REVENUES> 139,208
<CGS> 108,725
<TOTAL-COSTS> 131,885
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 797
<INCOME-PRETAX> 7,323
<INCOME-TAX> 2,740
<INCOME-CONTINUING> 4,430
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,430
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.99
</TABLE>
