Wal-Mart Stores, Inc. Annual Report - Page 6
Fiscal 2000 End-of-Year Store Count
State Discount Stores Supercenters SAMS Clubs Alabama 43 38 8 Alaska 4 0 3 Arizona 31 5 9 Arkansas 44 33 4 California 113 0 25 Colorado 23 16 12 Connecticut 14 0 3 Delaware 3 1 1 Florida 89 50 35 Georgia 59 35 16 Hawaii 5 0 1 Idaho 9 0 1 Illinois 85 22 26 Indiana 56 24 14 Iowa 36 11 7 Kansas 37 11 5 Kentucky 39 33 5 Louisiana 48 29 10 Maine 17 3 3 Maryland 25 1 11 Massachusetts 32 1 3 Michigan 52 1 21 Minnesota 35 1 9 Mississippi 34 25 4 Missouri 69 43 12 Montana 9 0 1 Nebraska 13 6 3 Nevada 13 0 2 New Hampshire 18 3 4 New Jersey 22 0 6 New Mexico 9 13 3 New York 52 9 18 North Carolina 66 26 16 North Dakota 8 0 2 Ohio 75 11 24 Oklahoma 52 27 6 Oregon 24 0 0 Pennsylvania 49 27 18 Rhode Island 7 0 1 South Carolina 32 25 9 South Dakota 8 0 2 Tennessee 49 38 14 Texas 154 94 53 Utah 14 0 5 Vermont 4 0 0 Virginia 26 37 10 Washington 24 0 2 West Virginia 8 18 3 Wisconsin 54 4 11 Wyoming 9 0 2 US Total 1801 721 463
Country Discount Stores Supercenters SAMS Clubs Argentina 0 10 3 Brazil 0 9 5 Canada 166 0 0 China 0 5 1 Germany 0 95 0 Korea 0 5 0 Mexico 397* 27 34 Puerto Rico 9 0 6 United Kingdom 0 232 0 INTL Total 572 383 49 Worldwide
Grand Total2373 1104 512 * Includes: 36 Aurreras, 68 Bodegas, 51 Suburbias, 38 Superamas, and 204 Vips.
Wal-Mart Stores, Inc. Annual Report - Pages 18 and 19
11-Year Financial Summary
(Dollar amounts in millions except per share data) 2000 1999 1998 1997 1996 Net sales $ 165,013 $ 137,634 $ 117,958 $ 104,859 $ 93,627 Net sales increase 20% 17% 12% 12% 13% Comparative store sales increase 8% 9% 6% 5% 4% Other income-net 1,796 1,574 1,341 1,319 1,146 Cost of sales 129,664 108,725 93,438 83,510 74,505 Operating, selling and general and administrative expenses 27,040 22,363 19,358 16,946 15,021 Interest costs: Debt 756 529 555 629 692 Capital leases 266 268 229 216 196 Provision for income taxes 3,338 2,740 2,115 1,794 1,606 Minority interest and equity in unconsolidated subsidiaries (170) (153) (78) (27) (13) Cumulative effect of accounting change, net of tax (198) - - - - Net income 5,377 4,430 3,526 3,056 2,740 Per share of common stock: Basic net income 1.21 0.99 0.78 0.67 0.60 Diluted net income 1.20 0.99 0.78 0.67 0.60 Dividends 0.20 0.16 0.14 0.11 0.10 Financial Position Current assets $ 24,356 $ 21,132 $ 19,352 $ 17,993 $ 17,331 Inventories at replacement cost 20,171 17,549 16,845 16,193 16,300 Less LIFO reserve 378 473 348 296 311 Inventories at LIFO cost 19,793 17,076 16,497 15,897 15,989 Net property, plant and equipment and capital leases 35,969 25,973 23,606 20,324 18,894 Total assets 70,349 49,996 45,384 39,604 37,541 Current liabilities 25,803 16,762 14,460 10,957 11,454 Long-term debt 13,672 6,908 7,191 7,709 8,508 Long-term obligations under capital leases 3,002 2,699 2,483 2,307 2,092 Shareholders equity 25,834 21,112 18,503 17,143 14,756 Financial Ratios Current ratio .9 1.3 1.3 1.6 1.5 Inventories/working capital (13.7) 3.9 3.4 2.3 2.7 Return on assets* 9.8%*** 9.6% 8.5% 7.9% 7.8% Return on shareholders equity** 22.9% 22.4% 19.8% 19.2% 19.9% Other Year-End Data Number of domestic Wal-Mart stores 1,801 1,869 1,921 1,960 1,995 Number of domestic Supercenters 721 564 441 344 239 Number of domestic SAMS Club units 463 451 443 436 433 International units 1,004 715 601 314 276 Number of Associates 1,140,000 910,000 825,000 728,000 675,000 Number of Shareholders 341,000 261,000 246,000 257,000 244,000
(Dollar amounts in millions except per share data) 1995 1994 1993 1992 1991 1990 Net sales $ 82,494 $ 67,344 $ 55,484 $ 43,887 $ 32,602 $ 25,811 Net sales increase 22% 21% 26% 35% 26% 25% Comparative store sales increase 7% 6% 11% 10% 10% 11% Other income-net 914 645 497 404 262 175 Cost of sales 65,586 53,444 44,175 34,786 25,500 20,070 Operating, selling and general and administrative expenses 12,858 10,333 8,321 6,684 5,152 4,070 Interest costs: Debt 520 331 143 113 43 20 Capital leases 186 186 180 153 126 118 Provision for income taxes 1,581 1,358 1,171 945 752 632 Minority interest and equity in unconsolidated subsidiaries 4 (4) 4 (1) - - Cumulative effect of accounting change, net of tax - - - - -
- Net income 2,681 2,333 1,995 1,609 1,291 1,076 Per share of common stock: Basic net income 0.59 0.51 0.44 0.35 0.28 0.24 Diluted net income 0.59 0.51 0.44 0.35 0.28 0.24 Dividends 0.09 0.07 0.05 0.04 0.04 0.03 Financial Position Current assets $ 15,338 $ 12,114 $ 10,198 $ 8,575 $ 6,415 $ 4,713 Inventories at replacement cost 14,415 11,483 9,780 7,857 6,207 4,751 Less LIFO reserve 351 469 512 473 399
323 Inventories at LIFO cost 14,064 11,014 9,268 7,384 5,808 4,428 Net property, plant and equipment and capital leases 15,874 13,176 9,793 6,434 4,712 3,430 Total assets 32,819 26,441 20,565 15,443 11,389 8,198 Current liabilities 9,973 7,406 6,754 5,004 3,990 2,845 Long-term debt 7,871 6,156 3,073 1,722 740 185 Long-term obligations under capital leases 1,838 1,804 1,772 1,556 1,159 1,087 Shareholders equity 12,726 10,753 8,759 6,990 5,366 3,966 Financial Ratios Current ratio 1.5 1.6 1.5 1.7 1.6 1.7 Inventories/working capital 2.6 2.3 2.7 2.1 2.4 2.4 Return on assets* 9.0% 9.9% 11.1% 12.0% 13.2% 14.8% Return on shareholders equity** 22.8% 23.9% 25.3% 26.0% 27.7% 30.9% Other Year-End Data Number of domestic Wal-Mart stores 1,985 1,950 1,848 1,714 1,568 1,399 Number of domestic Supercenters 147 72 34 10 9 6 Number of domestic SAMS Club units 426 417 256 208 148 123 International units 226 24 10 - - - Number of Associates 622,000 528,000 434,000 371,000 328,000 271,000 Number of Shareholders 259,000 258,000 181,000 150,000 122,000 80,000
* Net income before minority interest, equity in unconsolidated subsidiaries and cumulative effect of
accounting change/average assets
** Net income/average shareholders equity
*** Calculated without giving effect to the amount by which a lawsuit settlement exceeded established
reserves. See Managements Discussion and Analysis.The effects of the change in accounting method for SAMS Club membership revenue recognition would not have a material impact on this summary prior to 1998. Therefore, pro forma information as if the accounting change had been in effect for all years presented has not been provided. See Managements Discussion and Analysis for discussion of the impact of the accounting change in fiscal 2000, 1999 and 1998.
The acquisition of the ASDA Group PLC and the Companys related debt issuance had a significant impact on the fiscal 2000 amounts in this summary. See Notes 3 and 6 to the Consolidated Financial Statements.
Wal-Mart Stores, Inc. Annual Report - Page 20
Managements Discussion and Analysis
Net Sales
Sales (in millions) by operating segment for the three fiscal years ended January 31, are as follows:
Fiscal Year Wal-Mart Stores SAMS Club International Other (McLane) Total Company Total Company Increase 2000 $108,721 $24,801 $22,728 $8,763 $165,013 20% 1999 95,395 22,881 12,247 7,111 137,634 17% 1998 83,820 20,668 7,517 5,953 117,958 12%
The Companys sales growth of 20% in fiscal 2000, when compared to fiscal 1999, is the result of the Companys expansion program, including international acquisition, and a domestic comparative store sales increase of 8%. The sales increase of 17% in fiscal 1999, when compared to fiscal 1998, was also attributable to our expansion program and a domestic comparative store sales increase of 9%.Costs and Expenses
Cost of sales, as a percentage of sales, decreased, resulting in increases in gross margin of .4% and .2% in fiscal 2000 and fiscal 1999, respectively. These improvements in gross margin occurred even with continued price rollbacks, our continuing commitment to always providing low prices and higher international and food department sales which generally have lower gross margins than domestic general merchandise. The fiscal 2000 improvement in gross margin can be attributed to a favorable sales mix of higher margin categories, improvements in shrinkage and markdowns, a favorable LIFO inventory adjustment and the slower growth of SAMS Club, which is our lowest gross margin retail operation. The gross margin improvement in fiscal 1999 was the result of lower inventory levels, which resulted in reduced markdowns and decreased shrinkage.Operating, selling, general and administrative expenses increased .1% as a percentage of sales in fiscal 2000 when compared with fiscal 1999. This increase was partially due to increased payroll cost incurred during the year. Additionally, in the second quarter of fiscal 2000, a $624 million jury verdict was rendered against the Company in a lawsuit. The Company agreed to settle the lawsuit for an amount less than the jury verdict. The Company had previously established reserves related to this lawsuit, which were not material to its results of operations or financial position. The settlement exceeded the Companys estimated reserves for this lawsuit and resulted in a charge in the second quarter of fiscal 2000 of $.03 per share net of taxes.
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 SAMS 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.
Wal-Mart Stores
Sales for the Companys Wal-Mart Stores segment increased by 14.0% in fiscal 2000 when compared to fiscal 1999, and 13.8% in fiscal 1999 when compared to fiscal 1998. The fiscal 2000 growth is the result of comparative store sales increases and the Companys expansion program. Segment expansion during fiscal 2000 included the opening of 29 Wal-Mart stores and 157 Supercenters (including the conversion of 96 existing Wal-Mart stores into Supercenters). Fiscal 1999 growth is also the result of comparative store sales increases and the Companys expansion program. Segment expansion during fiscal 1999 included the opening of 37 Wal-Mart stores and 123 Supercenters (including the conversion of 88 existing Wal-Mart stores into Supercenters). Operating income for the segment for fiscal 2000 increased by 19%, from $7.0 billion in fiscal 1999 to $8.4 billion in fiscal 2000. 1999 segment operating income increased by 21%, from $5.8 billion in 1998 to $7.0 billion in 1999. The improvement in operating income in 2000 has been driven by margin improvements resulting from improvements in markdowns and shrinkage. However, these margin improvements were somewhat offset by increased payroll costs. Fiscal 1999 margin improvements were the result of lower inventory levels, which generated lower markdowns and reduced shrinkage.SAMS Club
Sales for the Companys SAMS Club segment increased by 8.4% in fiscal 2000 when compared to fiscal 1999, and by 10.7% in fiscal 1999 when compared to fiscal 1998. SAMS Club sales continued to decrease as a percentage of total Company sales, decreasing from 17.5% in fiscal 1998 to 16.6% in fiscal 1999 and to 15.0% in fiscal 2000. This decrease as a percentage of total Company sales is primarily the result of the increased growth rate in the international segment. SAMS Club segment expansion during fiscal 2000 and 1999 consisted of the opening of twelve and eight clubs, respectively, and the Company has plans for continued new club openings in fiscal 2001. Additionally, the Company intends to continue its program of remodeling its existing SAMS Club. After consideration of the effects of the change in accounting method for membership revenue recognition, operating income for the segment in fiscal 2000 increased by 16.8%, from $650 million in fiscal 1999 to $759 million in fiscal 2000. The pretax impact of the change in accounting method would have been $57 million in fiscal 1999 and was $16 million in fiscal 2000. The impact of the accounting method change is greater on fiscal 1999 due to an increase in the cost of SAMS Club membership that occurred during that year. If the effect of this accounting change is not considered, operating income would have been basically flat as a percent of segment sales when comparing fiscal 1999 to fiscal 2000. Fiscal 1999 saw a 7.6% increase in operating income after consideration of the accounting change, when operating income increased from $604 million in fiscal 1998 to $650 million in fiscal 1999. The pretax impact of the accounting change on fiscal 1998 would have been $12 million. Ignoring the effect of this change, operating income increased from 3.0% of segment sales in fiscal 1998 to 3.1% of segment sales in fiscal 1999.Wal-Mart Stores, Inc. Annual Report - Page 21
International
International sales accounted for approximately 13.8% of total Company sales in fiscal 2000 compared with 8.9% in fiscal 1999. The largest portion of the increase in International sales is the result of the acquisition of the ASDA Group PLC (ASDA), which consisted of 229 stores and was completed during the third quarter of fiscal 2000. Additionally, fiscal 2000 was the first full year containing the operating results of the 74 units of the German Interspar hypermarket chain, which were acquired in the fourth quarter of fiscal 1999. Expansion in the international segment for fiscal 2000 consisted of the opening or acquisition of 288 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. Expansion in the international segment for fiscal 1999 consisted of the opening or acquisition of 114 units. 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.
The Companys foreign operations are comprised of wholly-owned operations in Argentina, Canada, Germany, Korea, Puerto Rico and the United Kingdom; joint ventures in China; and majority-owned subsidiaries in Brazil and Mexico. As a result, the Companys 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 most known transactions.
Prior to fiscal 2000, Mexicos economy was considered highly-inflationary. Accordingly, the results of the operations of the Companys Mexican subsidiary were reported using United States dollars. Beginning in fiscal 2000, Mexico ceased to be considered a highly-inflationary economy and began reporting its operations in its local currency. The impact on the consolidated or international segment results of operations or financial position as a result of the change was not material. In fiscal 2000, the foreign currency translation adjustment decreased by $54 million to $455 million primarily due to the United States dollar weakening against the British pound and the Canadian dollar. This was partially offset by the United States dollar strengthening against the Brazilian real. 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.
After consideration of the effects of the change of accounting method for SAMS membership revenues, the international segments operating profit increased from $549 million in fiscal 1999 to $817 million in fiscal 2000. The largest portion of the increase in international operating profit is the result of the ASDA acquisition which was completed during the third quarter of fiscal 2000. Additionally, the Companys operations in Canada, Mexico and Puerto Rico had operating profit increases in fiscal 2000.
After consideration of the effects of the change of accounting method, the international segments operating profit increased from $260 million in fiscal 1998 to $549 million in fiscal 1999. Because the Cifra and Wertkauf 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 segments operating profit when comparing fiscal 1999 to fiscal 1998.
In February 2000, Cifra officially changed its name to Wal-Mart de Mexico, S.A. de C.V.
In March 2000, the Company announced the sale of all three of the Companys SAMS Clubs in Argentina. The sale is being made so that the Company can concentrate on expanding its Supercenter business within Argentina.
Interest Costs
Debt interest costs increased .08% as a percentage of sales from .38% in fiscal 1999 to .46% in fiscal 2000. This increase is the result of increased fiscal 2000 borrowings incurred as the result of the ASDA acquisition. Interest cost related to capital leases decreased by .03% as a percentage of sales from .19% in fiscal 1999 to .16% in fiscal 2000.Interest costs decreased .09% as a percentage of sales in fiscal 1999 when compared with fiscal 1998. The Company met cash requirements without short-term borrowings throughout most of fiscal 1999 due to enhanced operating cash flows. The interest on the Companys capital leases increased over fiscal 1998 due to continuing expansion. See Note 3 of the Notes to Consolidated Financial Statements for additional information on interest and debt.
Liquidity and Capital Resources Cash Flows Information
Cash flows from operating activities were $8,194 million in fiscal 2000, up from $7,580 million in fiscal 1999. In fiscal 2000, the Company invested $6,183 million in capital assets, paid dividends of $890 million, and had a net cash outlay of $10.4 billion primarily for acquisition of ASDA Group PLC, the third largest retailer in the United Kingdom. The ASDA cash outlay was financed with the issuance of long-term debt and commercial paper. See Note 6 of Notes to Consolidated Financial Statements for additional information on acquisitions.Market Risk
Market risks relating to the Companys operations result primarily from changes in interest rates and changes in foreign exchange rates.The Company enters into interest rate and cross currency swaps to minimize the risk and costs associated with financing activities and to hedge its net investment in certain foreign subsidiaries. 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 Companys 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 and cross currency 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 22
Interest Rate Sensitivity As of January 31, 2000
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
(Amounts in millions) 2001 2002 2003 2004 2005 Thereafter Total Fair value
1/31/00Liabilities Long-term debt including current portion Fixed rate debt $ 1,964 $ 2,070 $ 659 $ 742 $ 1,854 $ 8,347 $ 15,636 $ 14,992 Average interest rate -
USD rate6.9% 6.8% 6.8% 6.8% 6.8% 6.9% 6.9% Interest Rate Derivative Financial Instruments
Related to DebtInterest rate swap Pay variable/receive fixed 500 - - - - - 500 (1) Average rate paid - 30-day U.S. commercial
paper non-financial plus .245%Fixed rate received - USD
rate5.9% - - - - - 5.9% 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 - USD
rate5.7% - - - - - 5.7% Interest rate swap Pay variable/receive fixed 41 45 49 54 58 266 513 (7) Average rate paid - 30-day U.S. commercial
paper non-financialFixed rate received - USD
rate7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Interest rate swap Pay variable/receive fixed - - - - - 230 230 (14) Floating rate paid -
6-month U.S. LIBORFixed rate received - USD
rate- - - - - 7.0% 7.0% Interest rate swap Pay fixed/receive variable - - - - - 151 151 (11) Fixed rate paid - USD rate - - - - - 8.1% 8.1% Floating rate received -
3-month U.S. LIBORInterest Rate Derivative Financial Instruments
Related to Currency SwapsCurrency swap- German Deutschemarks Pay variable/receive
variable- - 1,101 - - - 1,101 122 Floating rate paid- 3-month German
Deutschemark LIBOR minus .0676%Average rate received- 30-day U.S. commercial
paper non-financialInterest rate swap- German Deutschemarks Pay fixed/receive variable - - 1,101 - - - 1,101 6 Fixed rate paid- German
Deutschemark rate- - 4.5% - - - 4.5% Floating rate received- 3-month German
Deutschemark LIBOR minus .0676%Interest rate swap- U. S. Dollars Pay variable/receive fixed - - 1,101 - - - 1,101 (38) Average rate paid- 30-day U.S. commercial
paper non-financialFixed rate received- USD
rate- - 5.8% - - - 5.8% Currency swap- German Deutschemarks Pay variable/receive
variable- - - 809 - - 809 129 Floating rate paid- 3-month German
Deutschemark LIBOR minus .055%Average rate received- 30-day U.S. commercial
paper non-financialInterest rate swap- German Deutschemarks Pay fixed/receive variable - - - 809 - - 809 40 Fixed rate paid- German
Deutschemark rate- - - 3.4% - - 3.4% Floating rate received- 3-month German
Deutschemark LIBOR minus .055%Interest rate swap- U.S. Dollars Pay variable/receive fixed - - - 809 - - 809 (57) Average rate paid- 30-day U.S. commercial
paper non-financialFixed rate received- USD
rate- - - 5.2% - - 5.2% Currency swap- Great Britain Pounds Pay variable/receive
variable- - - - - 3,500 3,500 (29) Floating rate paid- 6-month Great Britain
Pound LIBOR minus .1203%Floating rate received- 3-month U.S.
Dollar LIBOR minus .0842%Interest rate swap- Great Britain Pounds Pay fixed/receive variable - - - - - 3,500 3,500 83 Fixed rate paid- Great
Britain Pound rate- - - - - 6.2% 6.2% Floating rate received- 3-month Great Britain
Pound LIBOR minus .1203%Interest rate swap- U.S. Dollars Pay variable/receive fixed - - - - - 3,500 3,500 (71) Floating rate paid- 3-month U.S.
Dollar LIBOR minus .0842%Fixed rate received- USD
rate- - - - - 6.9% 6.9%
Wal-Mart Stores, Inc. Annual Report - Page 23Interest Rate Sensitivity As of January 31, 1999
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
(Amounts in millions) 2000 2001 2002 2003 2004 Thereafter Total Fair value
1/31/99Liabilities Long-term debt including current portion Fixed rate debt $ 900 $ 830 $ 801 $ 558 $ 739 $ 3,980 $ 7,808 $ 8,323 Average interest rate-USD rate 7.1% 7.2% 7.1% 6.9% 7.0% 7.2% 7.2% Long-term obligation related to
real estate investment trustFixed rate obligation 39 43 46 50 55 327 560 $641 Fixed interest rate-USD rate 8.4% 8.4% 8.4% 8.4% 8.4% 8.4% 8.4% Interest Rate Derivative Financial Instruments
Related to DebtInterest 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-USD 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-USD rate - 5.9% - - - - 5.9% Interest Rate Derivative Financial Instruments
Related to Real Estate Investment Trust ObligationInterest rate swap Pay variable/receive fixed 38 41 45 49 54 324 551 44 Average rate paid-30-day U.S. commercial
paper non-financialFixed rate received-USD 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 Floating rate paid-6-month U.S. LIBOR Fixed rate received-USD rate - - - - - 7.0% 7.0% Interest Rate Derivative Financial Instruments
Related to Currency SwapsCurrency swap-German Deutschemarks Pay variable/receive variable - - - 1,101 - - 1,101 (43) Floating rate paid-3-month German
Deutschemark LIBOR minus .0676%Average rate received-30-day U.S. commercial
paper non-financialInterest rate swap-German Deutschemarks Pay fixed/receive variable - - - 1,101 - - 1,101 (58) Fixed rate paid-German
Deutschemark rate- - - 4.5% - - 4.5% Floating 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-financialFixed rate received-USD rate - - - 5.8% - - 5.8% Currency swap-German Deutschemarks Pay variable/receive variable - - - - 809 - 809 18 Floating rate paid-3-month German
Deutschemark LIBOR minus .055%Average rate received-30-day U.S. commercial
paper non-financialInterest rate swap-German Deutschemarks Pay fixed/receive variable - - - - 809 - 809 3 Fixed rate paid-German
Deutschemark rate- - - - 3.4% - 3.4% Floating 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-financialFixed rate received-USD rate - - - - 5.2% - 5.2%
In fiscal 2000, the Company converted the long-term obligation related to a real estate investment trust in which it acquired the equity interest to long-term debt and, accordingly, has included this debt in the long-term debt section above.
Wal-Mart Stores, Inc. Annual Report - Page 24
The Company routinely enters into forward currency exchange contracts in the regular course of business to manage its exposure against foreign currency fluctuations on cross-border purchases of inventory. These contracts are generally for durations of six months or less. In addition, the Company entered into a series of foreign currency swaps to hedge the net investment in Germany and the United Kingdom.
The following tables provide information about the Companys 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 weighted average exchange rates by contractual maturity dates.
Foreign Currency Exchange Rate Sensitivity As of January 31, 2000
Principal (Notional) Amount by Expected Maturity
(Amounts in millions) 2001 2002 2003 2004 2005 Thereafter Total Fair value
1/31/2000Forward Contracts to Sell Canadian
Dollars for Foreign CurrenciesUnited States Dollars Notional amount $ 91 - - - - - $ 91 (1) Average contract rate 1.5 - - - - - 1.5 Forward Contracts to Sell British
Pounds for Foreign CurrenciesHong Kong Dollars Notional amount 70 - - - - - 70 1 Average contract rate 12.8 - - - - - 12.8 United States Dollars Notional amount 40 - - - - - 40 1 Average contract rate 1.6 - - - - - 1.6 Other Currencies Notional amount 45 - - - - - 45 (2) Average contract rate Various - - - - - Various Currency Swap Agreements Payment of German Deutschemarks Notional amount - - 1,101 - - - 1,101 122 Average contract rate - - 1.8 - - - 1.8 Payment of German Deutschemarks Notional amount - - - 809 - - 809 129 Average contract rate - - - 1.7 - - 1.7 Payment of Great Britain Pounds Notional amount - - - - - 3,500 3,500 (29) Average contract rate - - - - - 0.6 0.6 Foreign Currency Exchange Rate Sensitivity As of January 31, 1999
Principal (Notional) Amount by Expected Maturity
(Amounts in millions) 2000 2001 2002 2003 2004 Thereafter Total Fair value
1/31/99Forward Contracts to Sell Canadian
Dollars for Foreign CurrenciesUnited States Dollars Notional amount $ 45 - - - - - $ 45 (1) Average contract rate 1.5 - - - - - 1.5 Forward Contracts to Sell German
Deutschemarks for Foreign CurrenciesHong Kong Dollars Notional amount 1 - - - - - 1 - Average contract rate 0.2 - - - - - 0.2 United States Dollars Notional amount 1 - - - - - 1 - Average contract 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
Wal-Mart Stores, Inc. Annual Report - Page 25
Company Stock Purchase and Common Stock Dividends
In fiscal 2000 and 1999, the Company repurchased over 2 million and 21 million shares of its common stock for $101 million and $1,202 million, respectively. In the Companys quarterly report on Form 10-Q for the third quarter of fiscal 2000, the Company announced its intent to postpone any further share repurchases until the ratio of debt to total book capitalization was approximately 40%. At January 31, 2000, the Companys total debt to capitalization ratio including commercial paper was 46%. Subsequent to year-end, the Companys stock price decreased and in February and March 2000, the Company repurchased 4.1 million shares of its common stock for $193 million.
The Company paid dividends totaling $.20 per share in fiscal 2000. In March 2000, the Company increased its dividend 20% to $.24 per share for fiscal 2001. This marks the 28th consecutive yearly increase in dividends.
Borrowing Information
The Company had committed lines of credit with 85 firms and banks, aggregating $4,872 million and informal lines of credit with various other banks, totaling an additional $1,500 million, which were used to support commercial paper. These lines of credit and their anticipated cyclical increases should be 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, and after consideration of $1 billion in notes issued in February and March of 2000, the Company is permitted to sell up to $3.5 billion 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 165 new Supercenters in fiscal 2000. Relocations or expansions of existing discount stores will account for 107 of the Supercenters, while approximately 58 will be new locations. Due to the continued positive customer feedback on the Neighborhood Market concept, which is being tested in seven locations, the Company plans to add five to ten new locations. Also planned for fiscal 2001 are 19 new SAMS Clubs, including eight relocations. In addition, the Company will remodel approximately 140 of the existing SAMS Clubs and expand two units. In order to serve these and future developments, the Company will begin shipping from 11 new distribution centers (including one replacement unit) in the next fiscal year. Internationally, plans are to develop or relocate 90 to 100 retail units. These units are planned in Argentina, Brazil, Canada, China, Germany, Korea, Mexico, Puerto Rico and the United Kingdom. Total planned growth represents approximately 34.9 million square feet of net additional retail space.
Total planned capital expenditures for fiscal 2001 approximate $8 billion. We plan to finance our expansion primarily with operating cash flows.
In the fourth quarter of fiscal 2000, the Company joined with Accel Partners, a venture capital firm, to form Wal-Mart.com, Inc. Wal-Mart.com, Inc. will base its operations in Palo Alto, California and was formed to further develop and operate the Internet retail site, Wal-Mart.com, and to further the Companys efforts to attract customers to the Internet with the Wal-Mart name.
Year 2000 Issue Update
The Company did not experience any significant malfunctions or errors in its operating or business systems when the date changed from 1999 to 2000. Based on operations since January 1, 2000, the Company does not expect any significant impact to its ongoing business as a result of the Year 2000 issue. However, it is possible that the full impact of the date change, which was of concern due to computer programs that use two digits instead of four digits to define years, has not been fully recognized. For example, it is possible that Year 2000 or similar issues such as leap year-related problems may occur with billing, payroll, or financial closings at month, quarter, or year end. The Company believes that any such problems are unlikely and that should they occur, they will be minor and correctable. In addition, the Company could still be negatively affected if its suppliers are adversely affected by the Year 2000 or similar issues. The Company currently is not aware of any significant Year 2000 or similar problems that have arisen for its suppliers.
The Company expended $28.2 million on Year 2000 readiness efforts through January 31, 2000. Of this, $18.7 million is related to reprogramming, replacement, extensive testing and validation of software, which was expensed as incurred, while $9.5 million was related to acquisition of hardware, which is being capitalized. $2.2 million of the cost was assumed as a result of the acquisition of ASDA Group PLC.
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 Managements Discussion and Analysis, in other parts of this report 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 Companys 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
Consolidated Statements of Income
(Amounts in millions except per share data)
Fiscal years ended January 31, 2000 1999 1998 Revenues: Net sales $ 165,013 $ 137,634 $ 117,958 Other income-net 1,796 1,574 1,341 166,809 139,208 119,299 Costs and Expenses: Cost of sales 129,664 108,725 93,438 Operating, selling and general
and administrative expenses27,040 22,363 19,358 Interest Costs: Debt 756 529 555 Capital leases 266 268 229 157,726 131,885 113,580 Income Before Income Taxes, Minority Interest,
Equity in Unconsolidated Subsidiaries and
Cumulative Effect of Accounting Change9,083 7,323 5,719 Provision for Income Taxes Current 3,476 3,380 2,095 Deferred (138) (640) 20 3,338 2,740 2,115 Income Before Minority Interest, Equity in
Unconsolidated Subsidiaries and Cumulative
Effect of Accounting Change5,745 4,583 3,604 Minority Interest and Equity in Unconsolidated Subsidiaries (170) (153) (78) Income Before Cumulative Effect of Accounting Change 5,575 4,430 3,526 Cumulative Effect of Accounting Change, net of tax
benefit of $119(198) - - Net Income $ 5,377 $ 4,430 $ 3,526 Net Income Per Common Share:
Basic Net Income Per Common Share:Income before cumulative effect of accounting change $ 1.25 $ 0.99 $ 0.78 Cumulative effect of accounting change, net of tax (0.04) - - Net Income Per Common Share $ 1.21 $ 0.99 $ 0.78 Average number of Common Shares 4,451 4,464 4,516 Diluted Net Income Per Common Share: Income before cumulative effect of accounting change $ 1.25 $ 0.99 $ 0.78 Cumulative effect of accounting change, net of tax (0.04) 0.00 0.00 Net Income Per Common Share $ 1.20 $ 0.99 $ 0.78 Average number of Common Shares 4,474 4,485 4,533 Pro forma amounts assuming accounting change had
been in effect in fiscal 2000, 1999 and 1998:Net Income $ 5,575 $ 4,393 $ 3,517 Net income per common share, basic and diluted $ 1.25 $ 0.98 $ 0.78
See accompanying notes.
Wal-Mart Stores, Inc. Annual Report - Page 27
Consolidated Balance Sheets
(Amounts in millions)
January 31, 2000 1999 Assets Current Assets: Cash and cash equivalents $ 1,856 $ 1,879 Receivables 1,341 1,118 Inventories At replacement cost 20,171 17,549 Less LIFO reserve 378 473 Inventories at LIFO cost 19,793 17,076 Prepaid expenses and other 1,366 1,059 Total Current Assets 24,356 21,132 Property, Plant and Equipment, at Cost: Land 8,785 5,219 Building and improvements 21,169 16,061 Fixtures and equipment 10,362 9,296 Transportation equipment 747 553 41,063 31,129 Less accumulated depreciation 8,224 7,455 Net property, plant and equipment 32,839 23,674 Property Under Capital Lease: Property under capital lease 4,285 3,335 Less accumulated amortization 1,155 1,036 Net property under capital leases 3,130 2,299 Other Assets and Deferred Charges: Net goodwill and other acquired intangible assets 9,392 2,538 Other assets and deferred charges 632 353 Total Assets $ 70,349 $ 49,996 Liabilities and Shareholders Equity Current Liabilities: Commercial paper $ 3,323 $ - Accounts payable 13,105 10,257 Accrued liabilities 6,161 4,998 Accrued income taxes 1,129 501 Long-term debt due within one year 1,964 900 Obligations under capital leases due within one year 121 106 Total Current Liabilities 25,803 16,762 Long-Term Debt 13,672 6,908 Long-Term Obligations Under Capital Leases 3,002 2,699 Deferred Income Taxes and Other 759 716 Minority Interest 1,279 1,799 Shareholders Equity Preferred stock ($.10 par value; 100 shares authorized, none issued) Common stock ($.10 par value; 5,500 shares authorized, 4,457
and 4,448 issued and outstanding in 2000 and 1999, respectively)446 445 Capital in excess of par value 714 435 Retained earnings 25,129 20,741 Other accumulated comprehensive income (455) (509) Total Shareholders Equity 25,834 21,112 Total Liabilities and Shareholders Equity $ 70,349 $ 49,996
See accompanying notes.
Wal-Mart Stores, Inc. Annual Report - Page 28
Consolidated Statements of Shareholders Equity
(Amounts in millions except per share data) Number
of sharesCommon
stockCapital in
excess of
par valueRetained
earningsOther
accumulated
comprehensive
incomeTotal 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 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 Comprehensive Income Net income 5,377 5,377 Other accumulated comprehensive income Foreign currency translation adjustment 54 54 Total Comprehensive Income $ 5,431 Cash dividends ($.20 per share) (890) (890) Purchase of Company stock (2) (2) (99) (101) Stock options exercised and other 11 1 281 282 Balance - January 31, 2000 4,457 $ 446 $ 714 $ 25,129 ($455) $ 25,834
See accompanying notes.
Wal-Mart Stores, Inc. Annual Report - Page 29
Consolidated Statements of Cash Flows
(Amounts in millions)
Fiscal years ended January 31, 2000 1999 1998 Cash flows from operating activities Net Income $ 5,377 $ 4,430 $ 3,526 Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization 2,375 1,872 1,634 Cumulative effect of accounting change, net of tax 198 - - Increase in accounts receivable (255) (148) (78) Increase in inventories (2,088) (379) (365) Increase in accounts payable 1,849 1,108 1,048 Increase in accrued liabilities 1,015 1,259 1,329 Deferred income taxes (138) (640) 20 Other (139) 78 9 Net cash provided by operating activities 8,194 7,580 7,123 Cash flows from investing activities Payments for property, plant and equipment (6,183) (3,734) (2,636) Investment in international operations (net of cash acquired,
$195 million in Fiscal 2000)(10,419) (855) (1,865) Other investing activities (244) 171 80 Net cash used in investing activities (16,846) (4,418) (4,421) Cash flows from financing activities Increase in commercial paper 4,316 - - Proceeds from issuance of long-term debt 6,000 536 547 Purchase of Company stock (101) (1,202) (1,569) Dividends paid (890) (693) (611) Payment of long-term debt (863) (1,075) (554) Payment of capital lease obligations (133) (101) (94) Other financing activities 300 (195) 143 Net cash provided by (used in) financing activities 8,629 (2,730) (2,138) Net (decrease)/increase in cash and cash equivalents (23) 432 564 Cash and cash equivalents at beginning of year 1,879 1,447 883 Cash and cash equivalents at end of year $ 1,856 $ 1,879 $ 1,447 Supplemental disclosure of cash flow information Income tax paid $ 2,780 $ 3,458 $ 1,971 Interest paid 849 805 796 Capital lease obligations incurred 378 347 309 Investment in unconsolidated subsidiary exchanged
in acquisition- - 226 Property, plant and equipment acquired with debt 65 - - ASDA acquisition cost satisfied with debt 264 - - ASDA acquisition cost satisfied with Company stock 175 - -
See accompanying notes.
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 SAMS 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 on fiscal 1999 was $8 million net of taxes. Due to the immateriality to the Companys 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 $57 million, $41 million, and $33 million in 2000, 1999 and 1998, respectively.Financial Instruments
The Company uses derivative financial instruments for purposes other than trading to reduce its exposure to fluctuations in foreign currencies and to minimize the risk and cost associated with financial and global operating activities. 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.Advertising costs
Advertising costs are expensed as incurred and were $523 million, $405 million and $292 million in 2000, 1999 and 1998, 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. Depreciation expense for the years 2000, 1999 and 1998 was $1,998 million, $1,648 million and $1,426 million, respectively. 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 - 50 years Fixtures and equipment 5 - 12 years Transportation equipment 2 - 5 years Goodwill and other acquired
intangible assets20 - 40 years Internally developed software 3 years
Costs of computer software
During fiscal 2000, the Company adopted the Accounting Standards Executive Committee Statement of Position (SOP) 98-1, Accounting For the Costs of Computer Software Developed For or Obtained For Internal Use. This SOP requires the capitalization of certain costs incurred in connection with developing or obtaining software for internal use. Previously, costs related to developing internal-use software were expensed as incurred. Under the new method these costs are capitalized and amortized over a three year life. The impact of the adoption of SOP 98-1 was to capitalize $32 million of costs in fiscal 2000, which would have previously been expensed. The impact of the change would not have a material effect on any of the years presented prior to fiscal 2000.Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. 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. In July 1999, the FASB issued Statement No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of the effective Date of FASB Statement No. 133", which postponed the effective date of Statement No. 133 for one year. Statement 133 will now be effective for the Company beginning February 1, 2001. The Company currently does not anticipate there will be a material impact on the results of operations or financial position upon adoption of Statement No. 133.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. Su ch 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.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.
Wal-Mart Stores, Inc. Annual Report - Page 31
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 was March 19, 1999, and it was distributed April 19, 1999. Consequently, the stock option data and per share data for fiscal 1999 and 1998 have been restated to reflect the stock split.Net income per share
Basic net income per share is based on the weighted average outstanding common shares. Diluted net income per share is based on the weighted average outstanding shares reduced by the dilutive effect of stock options (23 million, 21 million and 17 million shares in 2000, 1999 and 1998, respectively).Foreign currency translation
The assets and liabilities of all foreign subsidiaries are translated at current exchange rates and any related translation adjustments are recorded as a component of accumulated comprehensive income.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.New accounting pronouncement
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements (SAB 101). This SAB deals with various revenue recognition issues, several of which are common within the retail industry. As a result of the issuance of this SAB, the Company changed its method of recognizing revenues for SAMS Club membership fees effective as of the beginning of fiscal 2000. The Company is currently evaluating the effects of the SAB on its method of recognizing revenues related to layaway sales and will make any accounting method changes necessary during the first quarter of fiscal 2001.Accounting principle change
In fiscal 2000 the Company changed its method of accounting for SAMS membership fee revenue both domestically and internationally. Previously the Company had recognized membership fee revenues when received. Under the new accounting method the Company recognizes membership fee revenues over the term of the membership, which is 12 months. The Company recorded a non-cash charge of $198 million (after reduction for income taxes of $119 million), or $.04 per share, to reflect the cumulative effect of the accounting change as of the beginning of the fiscal year. The effect of this change on the year ended January 31, 2000, before the cumulative effect of the accounting change was to decrease net income $12 million, or almost $.01 per share. If the new accounting method had been in effect in fiscal 1999 and 1998, net income would have been $4,393 million, or $.98 per basic or dilutive share and $3,517 million, or $.78 per basic or dilutive share, respectively.The following table provides unearned revenues, membership fees received from members and the amount of revenues recognized in earnings for each of the fiscal years ended 1998, 1999 and 2000 as if the accounting change had been in effect for each of those years
(in millions):
Deferred revenue January 31, 1997 $ 244 Membership fees received 494 Membership revenue recognized (480) Deferred revenue January 31, 1998 258 Membership fees received 600 Membership revenue recognized (541) Deferred revenue January 31, 1999 317 Membership fees received 646 Membership revenue recognized (626) Deferred revenue January 31, 2000 $ 337
The Companys deferred revenue is included in accrued liabilities in the January 31, 2000 consolidated balance sheet. The Companys analysis of historical membership fee refunds indicates that such refunds have been de minimis. Accordingly, no reserve has been established for membership fee refunds at January 31, 2000.Revenue recognition
The Company recognizes sales revenue at the time the sale is made to the customer. Effective as of the first quarter of fiscal 2000, the Company began recognizing SAMS Club membership fee revenue over the term of the membership, which is 12 months.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 a percentage of their earnings. During fiscal 2000 participants could contribute up to 10% of their earnings. Effective fiscal 2001 the allowable participant contributions were increased to 15%.
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 $429 million, $388 million and $321 million in 2000, 1999 and 1998, respectively.
Wal-Mart Stores, Inc. Annual Report - Page 32
3 Commercial Paper and Long-term Debt
Information on short-term borrowings and interest rates is as follows (dollar amounts in millions):
Fiscal years ended January 31, 2000 1999 1998 Maximum amount outstanding at month-end $ 6,588 $ 1,976 $ 1,530 Average daily short-term borrowings 2,233 256 212 Weighted average interest rate 5.4% 5.1% 5.6%
At January 31, 2000, short-term borrowings consisting of $3,323 million of commercial paper were outstanding. At January 31, 1999, there were no short-term borrowings outstanding. At January 31, 2000, the Company had committed lines of $4,872 million with 85 firms and banks and informal lines of credit with various banks totaling an additional $1,500 million, which were used to support commercial paper.Long-term debt at January 31, consist of (amounts in millions):
Fiscal years ended January 31, 2000 1999 6.875% Notes due August 2009 $ 3,500 - 6.550% Notes due August 2004 1,250 - 6.150% Notes due August 2001 1,250 - 8.625% Notes due April 2001 750 750 5.875% Notes due October 2005 597 597 7.500% Notes due May 2004 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 398 427 6.750% Notes due May 2002 300 300 7.000% - 8.000%Obligations from sale/leaseback transactions due 2013 275 292 8.500% Notes due September 2024 250 250 6.750% Notes due October 2023 250 250 8.000% Notes due September 2006 250 250 6.375% Notes due March 2003 228 228 6.750% Eurobond due May 2002 200 200 5.850% Notes due June 2018 with biannual put options - 500 5.650% Notes due February 2010 with biannual put options - 500 9.100% Notes due July 2000 - 500 6.125% Eurobond due November 2000 - 250 7.290% Notes due July 2006 435 4.410% - 10.880%Notes acquired in ASDA acquisition due 2002-2015 1,026 - Commercial paper classified as long-term debt 993 - Other 321 215 $ 13,672 $ 6,908
The Company has $1 billion of outstanding debt with imbedded put options. Beginning in fiscal 2001, and every second year thereafter, the holders of debt may require the Company to repurchase the debt at face value. In February 2000, $500 million of this debt was put to the Company. The debt was refinanced with commercial paper at that time. The remaining $500 million of debt can be put to the Company later in 2000 and has been classified as a current liability in the January 31, 2000 consolidated balance sheet.In February and March of 2000, the Company sold notes totaling $1 billion. These notes bear interest at 7.55% and will be due in 2030. The proceeds from the sale of these notes were used to reduce the commercial paper balance and, therefore, the Company classified $993 million of commercial paper as long-term debt in its January 31, 2000 consolidated balance sheet.
Long-term debt is unsecured except for $170 million which is collateralized by property with an aggregate carrying value of approximately $516 million. Annual maturities of long-term debt during the next five years are (in millions):
Fiscal year ended
January 31,Annual
maturity2001 $ 1,964 2002 2,070 2003 659 2004 742 2005 1,854 Thereafter 8,347
The Company has agreed to observe certain covenants under the terms of its note agreements, the most restrictive of which relates to amounts of additional secured debt and long-term leases.The Company has entered into sale/leaseback transactions involving buildings while retaining title to the 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.
Wal-Mart Stores, Inc. Annual Report - Page 33
Future minimum lease payments for each of the five succeeding years as of January 31, 2000, are (in millions):
Fiscal year ended
January 31,Minimum
payments2001 $ 100 2002 94 2003 98 2004 93 2005 130 Thereafter 594
At January 31, 2000 and 1999, the Company had letters of credit outstanding totaling $902 million and $767 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, and after consideration of the $1 billion in notes issued in February and March of 2000 discussed previously, the Company is permitted to issue debt securities aggregating $3.5 billion.
4 Financial Instruments
Interest rate instruments
The Company enters into interest rate swaps to minimize the risks and costs associated with its financial activities. The swap agreements are contracts to exchange fixed or variable rate interest for variable or fixed 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.Net Investment instruments
The Company has entered into cross currency interest rate swap agreements to hedge its net investments in Germany and the United Kingdom. The swap agreements are contracts to exchange fixed rate payments in United States dollars for fixed rate payments in foreign currencies. Settlements of currency swaps are accounted for by recording the net payments as an adjustment to currency translation adjustment. In February and March 2000, the Company entered into two interest rate swap agreements to hedge an additio nal $1 billion of net investments in Great Britain pounds. These instruments are not recorded on the balance sheet, and as of January 31, 2000 and 1999, are as follows:
USD notional
(amounts
in millions)FX notional
(amounts
in millions)Fiscal
maturity
dateRate
receivedRate
paidFair
value
1/31/2000Fair
value
1/31/1999Interest Rate Instruments $ 500 - 2001 5.9% (USD rate) Rate A plus .245% $ (1) $ 5 500 - 2001 5.7% (USD rate) Rate A plus .134% - 10 513 ($551 in FYE 1999) - 2027 7.0% (USD rate) Rate A (7) 44 230 - 2027 7.0% (USD rate) Rate B (14) 30 151 - 2027 Rate C 8.1% (USD rate) (11) N/A Cross Currency Instruments 3,500 2,010 GBP 2010 Rate C minus .0842% Rate D minus .1203% (29) N/A 3,500 - 2010 6.9% (USD rate) Rate C minus .0842% (71) N/A - 2,010 GBP 2010 Rate D minus .1203% 6.2% (GBP rate) 83 N/A 1,101 1,960 DEM 2003 Rate A Rate E minus .0676% 122 (43) 1,101 - 2003 5.8% (USD rate) Rate A (38) 28 - 1,960 DEM 2003 Rate E minus .0676% 4.5% (DEM rate) 6 (58) 809 1,360 DEM 2004 Rate A Rate E minus .055% 129 18 809 - 2004 5.2% (USD rate) Rate A (57) 1 - 1,360 DEM 2004 Rate E minus .055% 3.4% (DEM rate) 40 3
Rate A 30-day U.S. dollar commercial paper non-financial
Rate B 6-month U.S. dollar LIBOR
Rate C 3-month U.S. dollar LIBOR
Rate D 6-month Great Britain pound LIBOR
Rate E 3-month German DEM LIBORThe 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 Companys operations or financial position. There were approximately $246 million and $47 million notional outstanding at January 31, 2000 and 1999, respectively. These contracts had a fair value of approximately $(1) million at January 31, 2000 and 1999, respectively.
Wal-Mart Stores, Inc. Annual Report - Page 34
Fair value of financial instruments
Cash and cash equivalents: The carrying amount approximates fair value due to the short maturity of these instruments.
Long-term debt: Fair value approximates $14,992 million at January 31, 2000 and is based on the Companys current incremental borrowing rate for similar types of borrowing arrangements.
Interest rate instruments and net investment 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):
Fiscal years ended January 31, 2000 1999 1998 Current Federal $ 2,920 $ 3,043 $ 1,891 State and local 299 254 186 International 257 83 18 Total current tax provision 3,476 3,380 2,095 Deferred Federal (71) (655) (5) State and local (3) (28) (2) International (183) 43 27 Total deferred tax provision (257) (640) 20 Total provision for income taxes $ 3,219 (a) $ 2,740 $ 2,115
(a) Total provision for income tax includes a provision on income before the cumulative effect of accounting change of $3,338 and a tax benefit of $119 resulting from the cumulative effect of the accounting change.Earnings before income taxes are as follows (in millions):
Fiscal years ended January 31, 2000 1999 1998 Domestic $ 8,414 $ 6,866 $ 5,528 International 669 457 191 Total earnings before income taxes $ 9,083 $ 7,323 $ 5,719
Items that give rise to significant portions of the deferred tax accounts at January 31, are as follows (in millions):
2000 1999 1998 Deferred tax liabilities: Property, plant, and equipment $ 748 $ 695 $ 797 Inventory 393 286 275 International, principally asset basis difference 348 272 387 Acquired asset basis difference 314 - - Other 66 36 33 Total deferred tax liabilities 1,869 1,289 1,492 Deferred tax assets: Amounts accrued for financial reporting purposes
not yet deductible for tax purposes1,098 985 441 Capital leases 193 188 190 International, asset basis and loss carryforwards 402 143 258 Deferred revenue 181 66 89 Other 215 184 108 Total deferred tax assets 2,089 1,566 1,086 Net deferred tax liabilities (assets) $ (220) $ (277) $ 406
A reconciliation of the significant differences between the effective income tax rate and the federal statutory rate on pretax income follows:
Fiscal years ended January 31, 2000 1999 1998 Statutory tax rate 35.00% 35.00% 35.00% State income taxes, net of federal income tax benefit 2.18% 2.01% 2.07% International -0.74% -0.50% -0.30% Other 0.31% 0.90% 0.20% 36.75% 37.41% 36.97%
Wal-Mart Stores, Inc. Annual Report - Page 35
6 Acquisitions
During the second quarter of fiscal 2000, the Company began acquiring ASDA Group PLC (ASDA), the third largest retailer in the United Kingdom with 229 stores. The Company acquired approximately 29% of the outstanding ASDA shares on the open market during June and July 1999. On July 27, 1999, a tender offer for all remaining ASDA shares became unconditional and the majority of the remaining shares were tendered. The Company owned 100% of the outstanding shares of ASDA as of the end of the third quarter of fiscal 2000. The transaction has been accounted for as a purchase. The purchase price of approximately $11 billion has been allocated to the net assets acquired and liabilities assumed based on their estimated fair value. The resulting goodwill and other acquired intangible assets of approximately $7 billion are being amortized over 40 years. ASDA reports on a December 31 fiscal year-end, therefore, the ASDA financial statements are consolidated on a trailing month reporting basis. The results of operations are included in the consolidated Company results since the date of acquisition.
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 January 31, 1999 consolidated balance sheet and the results of operations are included 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 previously operated by Korea Makro as well as six undeveloped sites. The transaction has been accounted for as a purchase. The net 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 Companys results. In December 1999, the Company acquired most of the minority interest of its operation in Korea from its joint venture partner and anticipates that the remaining minority interest will be acquired in early fiscal 2001.
A merger of the Mexican joint venture companies owned by Wal-Mart Stores, Inc. and Cifra, S.A. de C.V. (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 Companys 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 of the outstanding voting shares of Cifra. The results of operations for Cifra, since the effective merger date, have been included in the Companys 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 results of operations are included beginning in fiscal 1999.
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 Companys original ownership percentage of the joint venture.
The fair value of the assets and liabilities recorded as a result of these transactions is as follows (in millions):
2000 1999 1998 Cash and cash equivalents $ 195 $ 137 $ 500 Receivables 16 - 97 Inventories 655 200 266 Prepaid expenses and other 403 - - Net property, plant and equipment 5,290 219 2,105 Net property under capital leases 612 - - Goodwill 7,020 576 1,213 Accounts payable (1,159) (112) (431) Accrued liabilities (564) (60) (132) Accrued income taxes (283) - - Long-term debt and obligations under capital leases (1,272) - - Deferred income taxes (58) 32 (353) Minority interest - (22) (705) Other (7) 22 31 10,848 992 2,591 Investment in unconsolidated Mexican subsidiary exchanged - - (226) $ 10,848 $ 992 $ 2,365
Wal-Mart Stores, Inc. Annual Report - Page 36
The following presents the unaudited pro forma results as if the ASDA acquisition had occurred at the beginning of the fiscal years ended January 31, 1999 and 2000. Adjustments to net income are primarily related to the amortization of goodwill and other acquired intangible assets and additional interest expense on the debt incurred to finance the acquisition. The ASDA results were converted from Great Britain pounds to United States dollars at the average exchange rate for the periods presented and range from 1.60 to 1.66.
The aggregate impact of other acquisitions in these periods are not presented due to the insignificant differences from historical results (amounts in millions except per share data):
Fiscal years ended January 31, 2000 1999 Sales $ 172,295 $ 149,844 Net income $ 5,551 $ 4,435 Net income per share - basic $ 1.25 $ 0.99 Net income per share - diluted $ 1.24 $ 0.99
7 Stock Option PlansAt January 31, 2000, 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 Companys 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 4.4% and 6.7%, dividend yields between 0.4% and 1.2%, volatility factors between .23 and .30, and an expected life of the option of 7.4 years for the options issued prior to November 17, 1995, 5.8 years for options issued thereafter and 2.0 to 4.0 years for options converted from ASDA stock options.
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 Companys 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 managements 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, 2000, 1999, and 1998, were $13, $14, and $7 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 Companys consolidated financial statements as demonstrated below (amounts in millions except per share data):
Fiscal years ended January 31, 2000 1999 1998 Pro forma net income $ 5,324 $ 4,397 $ 3,504 Pro forma earnings
per share - basic$ 1.20 $ 0.98 $ 0.78 Pro forma earnings
per share - dilutive$ 1.19 $ 0.98 $ 0.77
The following table summarizes information about stock options outstanding as of January 31, 2000:
Range
of exercise
pricesNumber of
outstanding
optionsWeighted
average
remaining
life in yearsWeighted average
exercise price of
outstanding
optionsNumber of
options
exerciseableWeighted average
exercise price of
exerciseable
options$ 4.39 to 5.33 24,000 <1.0 $ 5.33 24,000 $ 5.33 6.63 to 8.84 686,000 1.0 7.27 681,000 7.26 10.00 to 15.41 28,336,000 5.6 12.00 9,039,000 12.23 17.53 to 19.97 10,443,000 8.0 19.31 1,728,000 19.14 24.97 to 34.53 709,000 8.6 29.60 48,000 28.57 39.88 to 43.00 6,374,000 9.0 40.11 722,000 39.88 45.56 to 55.94 4,742,000 4.5 46.97 725,000 46.17 $ 5.33 to 55.94 51,314,000 6.4 $ 20.39 12,967,000 $ 16.38
Wal-Mart Stores, Inc. Annual Report - Page 37
Further information concerning the options is as follows:
Shares Option price
per shareWeighted Average
per shareTotal January 31, 1997 60,772,000 $ 3.25 - 15.41 $ 11.26 $ 683,884,000 (12,896,000 shares exerciseable) 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 3.59 - 19.97 12.75 773,213,000 (13,462,000 shares exerciseable) 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 exerciseable) Options granted 1,540,000 41.25 - 55.94 44.62 68,703,000 ASDA options converted to Wal-Mart options 4,250,000 46.17 46.17 196,244,000 Options canceled (2,452,000) 5.33 - 43.00 17.27 (42,337,000) Options exercised (8,182,000) 4.39 - 39.88 11.44 (93,583,000) January 31, 2000 51,314,000 $ 5.33 - 55.94 $ 20.39 $ 1,045,702,000 (12,967,000 shares exerciseable) Shares available for option: January 31, 1999 75,256,000 January 31, 2000 71,918,000
8 Commitments and ContingenciesThe 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 $573 million, $654 million, and $596 million in 2000, 1999, and 1998, respectively. Aggregate minimum annual rentals at January 31, 2000, under non-cancelable leases are as follows (in millions):
Fiscal
yearOperating
leasesCapital
leases2001 $ 387 $ 377 2002 402 392 2003 385 390 2004 370 389 2005 363 387 Thereafter 3,055 3,674 Total minimum rentals $ 4,962 5,609 Less estimated executory costs 65 Net minimum lease payments 5,544 Less imputed interest at rates ranging from 6.1% to 14.0% 2,421 Present value of minimum lease payments $ 3,123
Certain of the leases provide for contingent additional rentals based on percentage of sales. Such additional rentals amounted to $51 million, $49 million and $46 million in 2000, 1999 and 1998, 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 34 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 $36 million annually over the lease terms.
The Company and its subsidiaries are involved from time to time in claims, proceedings and litigation arising from the operation of its business. The Company does not believe that any such claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Companys financial position or results of its operations.
Wal-Mart Stores, Inc. Annual Report - Page 38
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, Korea, Puerto Rico, and the United Kingdom, and through joint ventures in China, 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 Sores segment included 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, China, Germany, Korea, Mexico and the United Kingdom are consolidated using a December 31 fiscal year end, generally due to statutory reporting requirements. There were no significant intervening events which materially affected the financial statements. The Company's operations in Canada and Puerto Rico are consolidated using a January 31 fiscal year end. The Company measures segment profit as operating profit, which is defined as income before interest expense, income taxes, minority interest, equity in unconsolidated subsidiaries and cumulative effect of accounting change. Information on segments and a reconciliation to income, before income taxes, minority interest, equity in unconsolidated subsidiaries and cumulative effect of accounting change, are as follows (in millions):
Fiscal year ended January 31, 2000 Wal-Mart Stores SAMS Club International Other Consolidated Revenues from external customers $ 108,721 $ 24,801 $ 22,728 $ 8,763 $ 165,013 Intercompany real estate charge (income) 1,542 366 (1,908) Depreciation and amortization 812 124 402 1,037 2,375 Operating income 8,419 759 817 110 10,105 Interest expense (1,022) Income before income taxes, minority interest, equity in
unconsolidated subsidiaries and cumulative effect of
accounting change9,083 Total assets $ 18,213 $ 3,586 $ 25,330 $ 23,220 $ 70,349
Fiscal year ended January 31, 1999 Wal-Mart Stores SAMS Club International Other Consolidated 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 (loss) 7,075 650 549 (213) 8,061 Interest expense (797) Reverse adjustment for accounting change - 57 2 - 59 Income before income taxes, minority interest and equity
in unconsolidated subsidiaries7,323 Total assets $ 16,950 $ 2,834 $ 9,537 $ 20,675 $ 49,996
Fiscal year ended January 31, 1998 Wal-Mart Stores SAMS Club International Other Consolidated 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 (loss) 5,833 604 260 (208) 6,489 Interest expense (784) Reverse adjustment for accounting change - 12 2 - 14 Income before income taxes, minority interest and equity
in unconsolidated subsidiaries5,719 Total assets $ 16,229 $ 2,933 $ 7,390 $ 18,832 $ 45,384
Wal-Mart Stores, Inc. Annual Report - Page 39
For comparative purposes 1999 and 1998 operating income have been adjusted to reflect the impact of the membership fee revenue accounting change described in Note 1. This is reversed for purposes of reconciling operating profit to income before taxes, minority interest and equity in unconsolidated subsidiaries.
Domestic long-lived assets excluding goodwill were $25,227 million, $21,929 million and $20,069 million in 2000, 1999 and 1998, respectively. Additions to domestic long-lived assets were $3,814 million, $3,317 million and $2,050 million in 2000, 1999 and 1998, respectively. International long-lived assets excluding goodwill were $10,742 million, $4,044 million and $3,537 million in 2000, 1999 and 1998, respectively. Additions to international long-lived assets were $7,070 million, $732 million and $2,401 million in 2000, 1999 and 1998, 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 SAMS 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 Companys Wal-Mart Stores and SAMS Club segments. McLane is not a significant segment and therefore, results are not presented separately.
10 Quarterly Financial Data (Unaudited)
Quarters ended
Amounts in millions (except per share information) April 30, July 31, October 31, January 31, 2000 Net sales $ 34,717 $ 38,470 $ 40,432 $ 51,394 Cost of sales 27,241 30,123 31,606 40,694 Income before cumulative effect of accounting change 1,110 1,249 1,299 1,917 Cumulative effect of accounting change, net of tax (198) - - - Net income $ 912 $ 1,249 $ 1,299 $ 1,917 Net income per common share: Income before cumulative effect of accounting change $ 0.25 $ 0.28 $ 0.29 $ 0.43 Cumulative effect of accounting change (0.04) - - - Net income per common share, basic and diluted $ 0.20 $ 0.28 $ 0.29 $ 0.43 Pro forma amounts assuming accounting change
had been in effect for all of fiscal 2000:Net Income $ 1,114 $ 1,251 $ 1,294 $ 1,916 Net income per common share, basic and diluted $ 0.25 $ 0.28 $ 0.29 $ 0.43
1999Net 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 common share, basic and diluted $ 0.18 $ 0.23 $ 0.23 $ 0.35 Pro forma amounts assuming accounting change
had been in effect in fiscal 1999:Net Income $ 826 $ 1,029 $ 990 $ 1,548 Net income per common share, basic and diluted $ 0.18 $ 0.23 $ 0.22 $ 0.35
Wal-Mart Stores, Inc. Annual Report - Page 40
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, 2000 and 1999, and the related consolidated statements of income, shareholders equity and cash flows for each of the three years in the period ended January 31, 2000. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 31, 2000, in conformity with accounting principles generally accepted in the United States.
As explained in Note 1 to the consolidated financial statements, the Company changed its method of accounting for membership fee income from a cash basis to a deferred basis whereby membership fee income is recognized ratably over the twelve-month life of the membership.
Tulsa, Oklahoma
March 24, 2000
Wal-Mart Stores, Inc. Annual Report - Page 41
Corporate Information
Listings - Stock Symbol: WMT
New York Stock Exchange
Pacific Stock ExchangeMarket Price of Common Stock
Fiscal years ended January 31, 2000 1999 Quarterly Ended Hi Low Hi Low April 30 $52.44 $40.47 $26.94 $20.41 July 31 $49.19 $41.13 $34.50 $24.97 October 31 $57.06 $40.19 $34.53 $26.56 January 31 $69.44 $54.75 $43.00 $33.44
Dividends Paid Per Share **
Fiscal years ended January 31, Quarterly 2000 1999 April 19 $0.0500 April 6 $0.0388 July 12 $0.0500 July 13 $0.0388 October 12 $0.0500 October 12 $0.0388 January 10 $0.0500 January 11 $0.0388
Walmart (WMT) 10-K2000 FY Annual report
Filed: 17 Apr 00, 12:00am