-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TGTjcFwmwsWx4kJoG+UNVo/tyyRVLDIIDyWsMBWFSz/GwtIi/zYgMtaqgXBkRg2b hCLHJVZjpOl+tjX+Hziyww== 0000104169-98-000009.txt : 19981215 0000104169-98-000009.hdr.sgml : 19981215 ACCESSION NUMBER: 0000104169-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAL MART STORES INC CENTRAL INDEX KEY: 0000104169 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 710415188 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06991 FILM NUMBER: 98768717 BUSINESS ADDRESS: STREET 1: 702 SOUTHWEST 8TH ST CITY: BENTONVILLE STATE: AR ZIP: 72716 BUSINESS PHONE: 5012734000 MAIL ADDRESS: STREET 1: 702 SOUTHWEST 8TH STREET CITY: BENTONVILLE STATE: AR ZIP: 72716 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 31, 1998. or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______to______. Commission file number 1-6991 WAL-MART STORES, INC. (Exact name of registrant as specified in its charter) Delaware ___________71-0415188__________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 702 S.W. Eighth Street Bentonville, Arkansas ____________72716______________ (Address of principal executive offices) (Zip Code) (501) 273-4000 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. Yes _____ No _____ Applicable Only to Corporate Issuers Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.10 Par Value -- 2,223,453,506 shares as of October 31, 1998. PART I. FINANCIAL INFORMATION Item 1. Financial Statements WAL-MART STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in millions)
October 31, January 31, 1998 1998 ASSETS (Unaudited) (*Note) Cash and cash equivalents $ 1,009 $ 1,447 Receivables 1,401 976 Inventories 20,620 16,497 Other current assets 488 432 Total current assets 23,518 19,352 Property, plant and equipment 30,071 27,376 Less accumulated depreciation 7,030 5,907 Net property, plant and equipment 23,041 21,469 Property under capital leases 3,248 3,040 Less accumulated amortization 998 903 Net property under capital leases 2,250 2,137 Other assets and deferred charges 2,430 2,426 Total assets $ 51,239 $45,384 LIABILITIES AND SHAREHOLDERS' EQUITY Commercial paper $ 1,976 $ - Accounts payable 11,424 9,126 Accrued liabilities 4,969 3,628 Other current liabilities 984 1,706 Total current liabilities 19,353 14,460 Long-term debt 6,953 7,191 Long-term obligations under capital leases 2,637 2,483 Deferred income taxes and other 771 809 Minority Interest 1,811 1,938 Common stock and capital in excess of par value 805 809 Retained earnings 19,437 18,167 Other accumulated comprehensive income ( 528) ( 473) Total shareholders' equity 19,714 18,503 Total liabilities and shareholders' equity $ 51,239 $45,384
[FN] See accompanying notes to condensed consolidated financial statements *Note: The balance sheet at January 31, 1998, has been derived from the audited financial statements at that date, and condensed. WAL-MART STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Amounts in millions except per share data)
Three Months Ended Nine Months Ended October 31, October 31, 1998 1997 1998 1997 Revenues: Net sales $33,509 $28,777 $96,849 $82,572 Other income - net 415 350 1,112 954 33,924 29,127 97,961 83,526 Costs and expenses: Cost of sales 26,380 22,680 76,328 65,285 Operating, selling and general and administrative expenses 5,691 4,958 16,341 14,058 Interest costs: Debt 135 142 380 413 Capital leases 67 56 201 166 32,273 27,836 93,250 79,922 Income before income taxes, minority interest and equity in unconsolidated subsidiaries 1,651 1,291 4,711 3,604 Provision for income taxes 611 483 1,743 1,333 Income before minority interest and equity in unconsolidated subsidiaries 1,040 808 2,968 2,271 Minority interest and equity in unconsolidated subsidiaries ( 31) ( 16) ( 97) ( 32) Net income $ 1,009 $ 792 $ 2,871 $ 2,239 Net income per share - Basic and dilutive $ .45 $ .35 $ 1.28 $ .99 Dividends per share $ .0775 $ .0675 $ .2325 $ .2025 Average shareholders' equity $19,629 $17,409 $19,109 $17,349 Return for the period on average shareholders' equity 5.18% 4.55% 15.13% 12.91% Average number of common shares: Basic 2,231 2,253 2,235 2,262 Dilutive 2,246 2,263 2,251 2,266
[FN] See accompanying notes to condensed consolidated financial statements. WAL-MART STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in millions)
Nine Months Ended October 31, 1998 1997 Cash flows from operating activities: Net income $ 2,871 $ 2,239 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,400 1,178 Increase in inventories ( 4,136) ( 3,221) Increase in accounts payable 2,304 2,405 Increase in accrued liabilities 741 1,027 Noncash items and other ( 505) ( 647) Net cash provided by operating activities 2,675 3,248 Cash flows from investing activities: Payments for property, plant & equipment ( 2,652) ( 1,894) Acquisitions ( 47) ( 770) Other investing activities 69 72 Net cash used in investing activities ( 2,630) ( 2,592) Cash flows from financing activities: Increase in commercial paper 1,890 1,523 Proceeds from issuance of long-term debt 521 - Dividends paid ( 520) ( 459) Payment of long-term debt ( 1,046) ( 523) Purchase of Company stock ( 1,117) ( 1,367) Other financing activities ( 212) 15 Net cash used in financing activities ( 484) ( 811) Net decrease in cash and cash equivalents ( 438) ( 155) Cash and cash equivalents at beginning of year 1,447 883 Cash and cash equivalents at end of period $ 1,009 $ 728 Supplemental disclosure of cash flow information: Income tax paid $ 2,227 $ 1,396 Interest paid 581 598 Capital lease obligations incurred 203 176
[FN] See accompanying notes to condensed consolidated financial statements. WAL-MART STORES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. Basis of Presentation The condensed consolidated balance sheet as of October 31, 1998, and the related condensed consolidated statements of income for the three and nine month periods ended October 31, 1998, and 1997, and the statements of cash flow for the nine month periods ended October 31, 1998, and 1997, are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included. The adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. Certain reclassifications have been made to the prior year's income statements to conform to current presentation. The financial statements and notes are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not contain certain information included in the Company's annual report. Therefore, the interim statements should be read in conjunction with the Company's annual report for the fiscal year ended January 31, 1998. NOTE 2. Inventories The Company uses the retail last-in, first-out (LIFO) method for the Wal-Mart Stores segment, cost LIFO for the Sam's Club segment, and other cost methods for the International segment. Inventories are not in excess of market value. Quarterly inventory determinations under LIFO are partially based on assumptions as to inventory levels at the end of the fiscal year, sales and the rate of inflation for the year. If the first- in, first-out (FIFO) method of accounting had been used by the Company, inventories at October 31, 1998, would have been $428 million higher than reported, an increase in the LIFO reserve of $80 million from January 31, 1998, and an increase of $25 million from July 31, 1998. If the FIFO method had been used at October 31, 1997, inventories would have been $344 million higher than reported, an increase in the LIFO reserve of $48 million from January 31, 1997, and an increase of $30 million from July 31, 1997. NOTE 3. Net Income Per Share The Company presents basic and dilutive net income per share according to guidance established in Statement of Financial Accounting Standards No. 128, "Earnings Per Share." Statement 128 replaces primary and fully dilutive net income per share with basic and dilutive net income per share. Unlike primary net income per share, basic net income per share excludes any dilutive effect of stock options. Basic and dilutive net income per share for all periods presented are the same as previously reported. Basic net income per share is based on the weighted average outstanding common shares. Dilutive net income per share is based on the weighted average outstanding common shares reduced by the dilutive effect of stock options. NOTE 4. Segments The Company is principally engaged in the operation of mass merchandising stores that serve customers primarily through the operation of three segments. The Company identifies its 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. The revenues in the "Corporate and Other" category result from sales to third parties by McLane Company, Inc., a wholesale distributor. Revenues by operating segment were as follows (in millions):
Three Months Ended Nine Months Ended October 31, October 31, 1998 1997 1998 1997 Wal-Mart Stores $23,244 $20,495 $67,214 $59,089 Sam's Club 5,589 5,062 16,316 14,824 International 2,961 1,781 8,514 4,555 Corporate and Other 1,715 1,439 4,805 4,104 Total Revenues $33,509 $28,777 $96,849 $82,572
Operating profit and reconciliation to income before income taxes, minority interest and equity in unconsolidated subsidiaries are as follows (in millions):
Three Months Ended Nine Months Ended October 31, October 31, 1998 1997 1998 1997 Wal-Mart Stores $ 1,640 $ 1,347 $ 4,827 $ 3,863 Sam's Club 172 138 471 398 International 109 52 315 85 Corporate and Other ( 68) ( 48) (321) (163) Operating profit 1,853 1,489 5,292 4,183 Interest expense 202 198 581 579 Income before income taxes, minority interest and equity in unconsolidated subsidiaries $ 1,651 $ 1,291 $ 4,711 $ 3,604
NOTE 5. Comprehensive Income As of February 1, 1998, 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. Comprehensive income is net income, plus certain other items that are recorded directly to shareholders' equity, bypassing net income. The only such item currently applicable to the Company is foreign currency translation adjustments. Comprehensive income was $986 million and $766 million for the quarters ended October 31, 1998 and 1997, respectively, and was $2,816 million and $2,193 million for the nine months ended October 31, 1998 and 1997, respectively. The adoption of this Statement had no effect on the Company's results of operations or financial position. NOTE 6. Acquisition 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 for approximately $179 million. The four units were previously operated by Korea Makro. The purchase price included $130 million for newly issued shares in the acquired company. The proceeds were used to reduce debt and to provide for working capital needs. The transaction has been accounted for as a purchase. The net assets and liabilities acquired are recorded at fair value. The Company is evaluating the useful life of the resulting goodwill and will amortize the goodwill over that period. The results of operations since the effective date of the acquisition have been included in the Company's results. The transaction should not have a material impact on the fiscal 1999 consolidated operating results. Pro forma results of operations are not presented due to the insignificant differences from the historical results. NOTE 7. Pre-opening costs During the second quarter, 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. NOTE 8. Subsequent event On December 9, 1998, the Company announced that it had reached an agreement to purchase 74 units of the Interspar hypermarket chain in Germany. Pending government approval, the agreement is expected to be final by the end of December. The units are being acquired from Spar Handels AG, a German company that owns multiple retail formats and wholesale operations throughout Germany. If consummated, the transaction should not have a material impact on the fiscal 1999 consolidated operating results. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company had a 16% sales increase for the quarter and a 17% sales increase for the nine-month period ended October 31, 1998. The sales increases noted above were attributable to an increase in comparable sales in the Wal-Mart Stores segment of 9% for the third quarter of fiscal 1999 and the nine months ended October 31, 1998, an increase in comparable sales in the Sam's Club segment of 9% for the third quarter of fiscal 1999 and the nine months ended October 31, 1998, and to the Company's expansion activities in those segments and its International segment. Domestic expansion activity during the first nine months of fiscal 1999 included 22 new Wal-Mart stores, the expansion of two Wal-Mart stores, the conversion of 80 Wal-Mart stores to Supercenters, 22 new Supercenters, seven new Sam's Clubs and the relocation or expansion of four Sam's Clubs. International expansion during the first nine months of fiscal 1999 included the addition of four units in Argentina, three units in Brazil, six units in Canada, four units in Korea and 24 units in Mexico. At October 31, 1998, the Company had 1,863 Wal-Mart stores, 543 Supercenters and 450 Sam's Clubs in the United States, along with 13 units in Argentina, 11 units in Brazil, 150 Wal-Mart stores in Canada, three units in China (operated under joint venture agreements), 21 units in Germany, four units in Korea (operated under joint venture agreements), 409 units in Mexico, and 14 units in Puerto Rico. This compares with 1,904 Wal-Mart stores, 436 Supercenters, and 444 Sam's Clubs in the United States, along with eight units in Argentina, eight units in Brazil, 144 Wal-Mart stores in Canada, three units in China (operated under joint venture agreements), 396 units in Mexico, and 12 units in Puerto Rico at the same time last year. The International segment had a 66% sales increase for the third quarter and an 87% sales increase for the nine-month period ended October 31, 1998. These increases were due principally to expansion activities which included the merger of the Mexican joint venture companies owned by Wal-Mart Stores, Inc. and Cifra, S. A. de C. V. (Cifra) and the tender offer that increased the Company's ownership in Cifra that occurred in September 1997, the acquisition of the Wertkauf hypermarket chain in Germany that occurred in December 1997, and the acquisition of four units previously operated by Korea Makro in Korea that occurred in July 1998. Due to the timing of these acquisitions, sales for the third quarter and the nine-month period ended October 31, 1998, are not comparable to the same periods last year due to the additional sales generated by these acquisitions in the current year's periods. Sam's Clubs sales as a percentage of total Company sales fell from 18% in the third quarter of fiscal 1998 and nine-month period ended October 31, 1997, to 17% for the quarter and nine-month period ended October 31, 1998, largely as a result of more rapid growth of sales in other segments. International sales accounted for 9% of total Company sales in both the third quarter and the nine-month period ended October 31, 1998, compared with 6% during the same periods in fiscal 1998. The Company's gross profit as a percentage of sales increased from 21.19% in the third quarter of fiscal 1998 to 21.27% during the third quarter of fiscal 1999. For the nine-month period ended October 31, 1998, gross profit as a percentage of sales was 21.19%, up from 20.94% in last fiscal year's comparable period. Gross profit as a percentage of sales improved in the Wal-Mart and International operating segments due to better mix of merchandise sold offset in part by competitive pricing and growth in the lower margin food business. Sam's Club operating segment's gross profit as a percentage of sales is down for the nine- month period due to retail price reductions on over 18% of its merchandise assortment as a result of Sam's price rollback program to enhance member value. This decrease is offset in part due to a better mix of merchandise sold within the Sam's Club. As the Sam's Club segment comprises a lower percentage of consolidated Company sales, the gross profit stated as a percentage of sales for the Company as a whole, is positively impacted since its contribution to gross margin is a lower percentage when compared with the Wal-Mart and International operating segments. Operating, selling, general and administrative expenses decreased as a percentage of sales from 17.23% during the third quarter of fiscal 1998 to 16.98% for the third quarter of fiscal 1999. For the nine-month period ended October 31, 1998, operating, selling, general and administrative expenses were 16.87%, down from 17.03% in last fiscal year's comparable period. During the second quarter of fiscal 1998, the Company took a one-time charge of $50 million for closing the majority of the Bud's Discount City stores. Without the one-time charge, year to date expenses would have been 16.97% of sales for the nine-month period ended October 31, 1997. All operating segments made improvements in their expenses, as a percentage of sales, for the nine-month period when compared to the previous period. The expense leverage was mitigated in the consolidated results due to the percentage of the total volume decreasing in the Sam's Clubs 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 Sam's Clubs. Also, the Company was affected by the tighter labor markets and the increase in the minimum wage that occurred during last fiscal year's third quarter. The International segment's operating profit increased from $52 million in the third quarter of fiscal 1998 to $109 million for the third quarter of fiscal 1999 and increased from $85 million for the nine months ended October 31, 1997, to $315 million in the comparable period in fiscal 1999. As noted above, the results for the periods in 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 large part of the increase in the International segment operating profit. Currently, Mexico is considered to operate in a highly-inflationary economy and reports its operations using U.S. 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. Liquidity and Capital Resources Cash flows provided by operating activities were $2,675 million for the nine months ended October 31, 1998, compared with $3,248 million for the comparable period in fiscal 1998. Operating cash flow was down in the nine months ended October 31, 1998, primarily due to the addition of $4,136 million in inventory compared with an increase in inventory of $3,221 million in the comparable period in fiscal 1998 and due to a smaller increase of $2,304 in accounts payable compared with an increase in accounts payable of $2,405 million in fiscal 1998. During the first nine months of fiscal 1999, the Company repurchased $1,117 million of its common stock, paid dividends of $520 million and invested $2,652 million in capital expenditures. At October 31, 1998, the Company had total assets of $51,239 million compared with total assets of $45,384 million at January 31, 1998. Working capital at October 31, 1998, was $4,165 million, down $727 million from January 31, 1998. The ratio of current assets to current liabilities was 1.2 to 1.0 at October 31, 1998 and 1.3 to 1.0 at October 31, 1997, and January 31, 1998. In March 1998, the Company announced its intention to increase the size of its existing share repurchase program by approximately $1.6 billion. With this amount and the remaining portion of last year's program, the Company may repurchase up to $2 billion of its common stock. Of this amount, $823 million is available after the repurchase of $1,117 during the first nine months of fiscal 1999. The Company also increased dividends by 15% to $.31 per share for fiscal 1999. On May 7, 1998, the Company filed with the Securities and Exchange Commission a registration statement for debt securities aggregating $750 million. In June 1998, the Company sold $500 million of bonds pursuant to a previously filed shelf registration statement and the registration statement described above. The bonds bear interest at 5.85% until June 1, 2000. At that date and every second June 1 thereafter (reset date), the interest rate may be reset. The bonds have put options imbedded that, if exercised, would require the Company to purchase the outstanding bonds at 100% of the principal amount. The put options may be exercised on each reset date. The proceeds of the sale were used to meet general working capital requirements. The Company anticipates that it will continue to generate significant operating cash flow. The Company foresees no difficulty in obtaining long-term financing in view of its credit rating and favorable experiences in the debt market in the past few years. The Company may issue public debt securities aggregating $501 million under shelf registration statements on file with the Securities and Exchange Commission. Operating cash flow along with the Company's ability to obtain short-term or long-term financing should provide sufficient cash to use for capital expenditures, pay dividends, meet maturing debt demands, and continue the share repurchase program. Accounting Pronouncements In March 1998, the Accounting Standards Executive Committee (AcSEC) 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. In June 1998, the Financial Accounting Standards Board (FASB) 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. Year 2000 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 supports the Company's International segment. The assessment phase of the Year 2000 project is substantially complete and included both information technology, such as point-of-sale computer systems, as well as non-information technology equipment, such as warehouse conveyor systems. Over 95% of the required coding conversions on information technology have occurred to date. The Company anticipates completing all known remaining coding conversions during the current fiscal year. Virtually all of the compliance was performed or is 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. No significant issues have been detected thus far in the testing. The initial testing for all business-critical systems will be substantially complete by April 30, 1999. The Company will continue system level testing throughout 1999 to ensure version upgrades, new releases and enhancements are Year 2000 compliant. The total estimated cost of the conversion is $12 million, which is being expensed as incurred. Approximately $9 million of the cost is related to reprogramming or replacement of software, while approximately $3 million is related to acquisition of hardware. Approximately $7 million of the $12 million cost of conversion has been incurred as of the end of the third quarter of fiscal 1999. All of these costs are being funded through operating cash flows. These costs are an immaterial part of the Company's information technology budget. The Company's Information Systems Division has not deferred any information technology projects to address the Year 2000 issue. 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 on to determine the extent to which those companies are addressing their Year 2000 compliance. Testing began during the third quarter of the current fiscal year and will be substantially complete by July 31, 1999. Thus far, no significant issues have been detected in the testing. 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 will 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 plan 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 July 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 Item 5 of this report, which addresses forward-looking statements made by the Company. PART II. OTHER INFORMATION Item 5. Other Information The Private Securities Litigation Reform Act of 1995 ("the Act") provides a safe harbor for forward-looking statements made by or on behalf of the Company. Certain statements contained in Management's Discussion and Analysis and in other Company filings are forward-looking statements. These statements discuss, among other things, expected growth, future revenues, future cash flows and future performance. The forward-looking statements are subject to risks and uncertainties including but not limited to 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 Securities and Exchange Commission. Actual results may materially differ from anticipated results described in these statements. Item 6. Exhibits and Reports on Form 8-K (a) The following document is filed as an exhibit to this Form 10-Q: Exhibit 27 - Financial Data Schedule (b) There were no reports on Form 8-K for the quarter ended October 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WAL-MART STORES, INC. Date: December 9, 1998 /s/David D. Glass________________ David D. Glass President and Chief Executive Officer Date: December 9, 1998 /s/John B. Menzer________________ John B. Menzer Executive Vice President and Chief Financial Officer EX-27 2
5 9-MOS JAN-31-1999 OCT-31-1998 1,009 0 1,401 0 20,620 23,518 30,071 7,030 51,239 19,353 0 0 0 222 19,492 51,239 96,849 97,961 76,328 93,250 0 0 581 4,711 1,743 2,871 0 0 0 2,871 1.28 1.28
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