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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 April 30, 2005.
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
incorporation
or organization) |
(I.R.S.
Employer
Identification
No.)
|
|
702
S.W. Eighth Street
Bentonville,
Arkansas |
72716 |
|
(Address
of principal executive offices) |
(Zip
Code) |
(479)
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
¨
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes
x 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 - 4,182,021,601 shares as of May 23, 2005.
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
WAL-MART
STORES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
(Amounts
in millions except per share data)
| |
|
Three
Months Ended
April
30, |
|
| |
|
2005 |
|
2004 |
|
Revenues: |
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
70,908 |
|
$ |
64,763 |
|
|
Other
income, net |
|
|
772 |
|
|
680 |
|
|
|
|
|
71,680 |
|
|
65,443 |
|
|
Costs
and expenses: |
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
54,571 |
|
|
49,969 |
|
|
Operating,
selling, general and administrative expenses |
|
|
13,168 |
|
|
11,869 |
|
|
Operating
income |
|
|
3,941 |
|
|
3,605 |
|
| |
|
|
|
|
|
|
|
|
Interest: |
|
|
|
|
|
|
|
|
Debt |
|
|
199 |
|
|
185 |
|
|
Capital
leases |
|
|
53 |
|
|
65 |
|
|
Interest
income |
|
|
(52 |
) |
|
(42 |
) |
|
Interest,
net |
|
|
200 |
|
|
208 |
|
| |
|
|
|
|
|
|
|
|
Income
before income taxes and minority interest |
|
|
3,741 |
|
|
3,397 |
|
|
Provision
for income taxes |
|
|
1,212 |
|
|
1,189 |
|
|
Income
before minority interest |
|
|
2,529 |
|
|
2,208 |
|
|
Minority
interest |
|
|
(68 |
) |
|
(42 |
) |
|
Net
income |
|
$ |
2,461 |
|
$ |
2,166 |
|
| |
|
|
|
|
|
|
|
|
Basic
and diluted net income per common share |
|
$ |
0.58 |
|
$ |
0.50 |
|
| |
|
|
|
|
|
|
|
|
Weighted-average
number of common shares: |
|
|
|
|
|
|
|
|
Basic |
|
|
4,228 |
|
|
4,294 |
|
|
Diluted |
|
|
4,234 |
|
|
4,302 |
|
| |
|
|
|
|
|
|
|
|
Dividends
declared per common share |
|
$ |
0.60 |
|
$ |
0.52 |
|
See
accompanying notes.
WAL-MART
STORES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts
in millions)
| |
|
April
30,
2005 |
|
April
30,
2004 |
|
January
31,
2005 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
4,955 |
|
$ |
3,828 |
|
$ |
5,488 |
|
|
Receivables |
|
|
1,520 |
|
|
1,230 |
|
|
1,715 |
|
|
Inventories |
|
|
31,349 |
|
|
28,320 |
|
|
29,447 |
|
|
Prepaid
expenses and other |
|
|
1,817 |
|
|
1,375 |
|
|
1,841 |
|
|
Total
current assets |
|
|
39,641 |
|
|
34,753 |
|
|
38,491 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, at cost |
|
|
85,954 |
|
|
74,913 |
|
|
84,041 |
|
|
Less
accumulated depreciation |
|
|
(19,579 |
) |
|
(16,612 |
) |
|
(18,637 |
) |
|
Property, plant
and equipment, net |
|
|
66,375 |
|
|
58,301 |
|
|
65,404 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Property
under capital leases, net |
|
|
2,928 |
|
|
2,563 |
|
|
2,799 |
|
|
Goodwill |
|
|
10,786 |
|
|
10,134 |
|
|
10,803 |
|
|
Other
assets and deferred charges |
|
|
2,485 |
|
|
2,269 |
|
|
2,427 |
|
|
Total
assets |
|
$ |
122,215 |
|
$ |
108,020 |
|
$ |
119,924 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Commercial
paper |
|
$ |
7,017 |
|
$ |
4,161 |
|
$ |
3,812 |
|
|
Accounts
payable |
|
|
22,910 |
|
|
19,489 |
|
|
21,671 |
|
|
Dividends
payable |
|
|
1,946 |
|
|
1,642 |
|
|
— |
|
|
Accrued
liabilities |
|
|
11,056 |
|
|
9,895 |
|
|
12,161 |
|
|
Accrued
income taxes |
|
|
1,971 |
|
|
1,588 |
|
|
1,281 |
|
|
Long-term
debt due within one year |
|
|
4,040 |
|
|
4,498 |
|
|
3,759 |
|
|
Obligations
under capital leases due within one year |
|
|
228 |
|
|
189 |
|
|
223 |
|
|
Total
current liabilities |
|
|
49,168 |
|
|
41,462 |
|
|
42,907 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt |
|
|
18,232 |
|
|
17,468 |
|
|
20,087 |
|
|
Long-term
obligations under capital leases |
|
|
3,396 |
|
|
3,032 |
|
|
3,243 |
|
|
Deferred
income taxes and other |
|
|
2,867 |
|
|
2,215 |
|
|
2,951 |
|
|
Minority
interest |
|
|
1,361 |
|
|
1,271 |
|
|
1,340 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Common
stock and capital in excess of par value |
|
|
2,827 |
|
|
2,613 |
|
|
2,848 |
|
|
Retained
earnings |
|
|
42,153 |
|
|
38,292 |
|
|
43,854 |
|
|
Other
accumulated comprehensive income |
|
|
2,211 |
|
|
1,667 |
|
|
2,694 |
|
|
Total
shareholders’ equity |
|
|
47,191 |
|
|
42,572 |
|
|
49,396 |
|
|
Total
liabilities and shareholders’ equity |
|
$ |
122,215 |
|
$ |
108,020 |
|
$ |
119,924 |
|
See
accompanying notes.
WAL-MART
STORES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts
in millions)
| |
|
Three
Months Ended
April
30, |
|
| |
|
2005 |
|
2004 |
|
Cash
flows from operating activities: |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
2,461 |
|
$ |
2,166 |
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
1,132 |
|
|
1,037 |
|
|
Other |
|
|
(44 |
) |
|
147 |
|
|
Changes
in certain assets and liabilities, net of effects of
acquisitions: |
|
|
|
|
|
|
|
|
Decrease in
accounts receivable |
|
|
185 |
|
|
137 |
|
|
Increase in
inventories |
|
|
(1,917 |
) |
|
(1,630 |
) |
|
Increase
(decrease) in accounts payable |
|
|
1,040 |
|
|
(7 |
) |
|
Decrease in
accrued liabilities |
|
|
(344 |
) |
|
(983 |
) |
|
Net
cash provided by operating activities |
|
|
2,513 |
|
|
867 |
|
| |
|
|
|
|
|
|
|
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
|
Payments for
property, plant and equipment |
|
|
(2,772 |
) |
|
(2,645 |
) |
|
Disposal of
assets |
|
|
301 |
|
|
242 |
|
|
Investment in
international operations |
|
|
— |
|
|
(315 |
) |
|
Other
investing activities |
|
|
(25 |
) |
|
(64 |
) |
|
Net
cash used in investing activities |
|
|
(2,496 |
) |
|
(2,782 |
) |
| |
|
|
|
|
|
|
|
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
Increase in
commercial paper |
|
|
3,205 |
|
|
894 |
|
|
Proceeds from
issuance of long-term debt |
|
|
— |
|
|
2,015 |
|
|
Payment
of long-term debt |
|
|
(1,508 |
) |
|
(37 |
) |
|
Dividends
paid |
|
|
(635 |
) |
|
(558 |
) |
|
Purchase of
Company stock |
|
|
(1,415 |
) |
|
(1,943 |
) |
|
Other
financing activities |
|
|
(156 |
) |
|
106 |
|
|
Net
cash provided by (used in) financing activities |
|
|
(509 |
) |
|
477 |
|
| |
|
|
|
|
|
|
|
|
Effect
of exchange rates on cash |
|
|
(41 |
) |
|
67 |
|
|
Net
decrease in cash and cash equivalents |
|
|
(533 |
) |
|
(1,371 |
) |
|
Cash
and cash equivalents at beginning of year |
|
|
5,488 |
|
|
5,199 |
|
|
Cash
and cash equivalents at end of period |
|
$ |
4,955 |
|
$ |
3,828 |
|
| |
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Income
taxes paid |
|
$ |
810 |
|
$ |
973 |
|
|
Interest
paid |
|
$ |
339 |
|
$ |
293 |
|
See
accompanying notes.
WAL-MART
STORES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1. Basis of Presentation
The
condensed consolidated balance sheets of Wal-Mart Stores, Inc. and its
subsidiaries (the “Company”) as of April 30, 2005 and 2004, and the related
consolidated statements of income and condensed consolidated statements of cash
flows for the quarters ended April 30, 2005 and 2004, are unaudited. The
condensed consolidated balance sheet as of January 31, 2005 is derived from the
audited financial statements at that date.
In the
opinion of management, all adjustments necessary for a fair presentation of the
financial statements have been included. Such adjustments are of a normal
recurring nature. Additionally, certain reclassifications have been made to
prior periods to conform to the current period presentation. Interim results are
not necessarily indicative of results for a full year.
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 to shareholders for the
fiscal year ended January 31, 2005. Therefore, the interim financial statements
should be read in conjunction with that annual report to
shareholders.
NOTE
2. 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 common
shares including the dilutive effect of stock options and restricted stock
grants amounting to a weighted-average of 6.0 million and 8.5 million shares for
the quarters ended April 30, 2005, and 2004, respectively.
NOTE
3. Inventories
The
Company values inventories at the lower of cost or market as determined
primarily by the retail method of accounting, using the last-in, first-out
(“LIFO”) method for substantially all merchandise inventories in the United
States, except SAM’S CLUB merchandise, which is based on average cost using the
LIFO method. Inventories of foreign operations are primarily valued by the
retail method of accounting, using the first-in, first-out (“FIFO”) method. The
Company’s inventories valued at LIFO approximate those inventories if they were
valued at FIFO.
NOTE
4. Segments
The
Company is principally engaged in the operation of mass merchandising stores
located in all 50 states, Argentina, Brazil, Canada, Germany, South Korea,
Puerto Rico and the United Kingdom, through joint ventures in China, and through
a majority-owned subsidiary in Mexico. The Company identifies segments based on
management responsibility within the United States and in total for
international units.
The
Wal-Mart Stores segment includes the Company’s Supercenters, Discount Stores and
Neighborhood Markets in the United States as well as Walmart.com. The SAM’S CLUB
segment includes the warehouse membership Clubs in the United States as well as
samsclub.com. The International segment consists of the Company’s operations in
Argentina, Brazil, Canada, China, Germany, Mexico, Puerto Rico, South Korea and
the United Kingdom. The amounts under the caption “Other” in the following table
are unallocated corporate overhead, including our real estate operations in the
United States. The Company’s portion of the results of our unconsolidated
minority interest in The Seiyu, Ltd. is also included under the caption
“Other.”
The
Company measures the profit of its segments as “segment operating income,” which
is defined as income before net interest expense, income taxes and minority
interest. Information on segments and the reconciliation to income before income
taxes and minority interest appear in the following tables.
Net sales
by operating segment were as follows (in millions):
| |
|
Quarter
Ended
April
30, |
|
| |
|
2005 |
|
2004 |
|
Wal-Mart
Stores |
|
$ |
47,641 |
|
$ |
43,571 |
|
|
SAM’S
CLUB |
|
|
9,155 |
|
|
8,641 |
|
|
International |
|
|
14,112 |
|
|
12,551 |
|
|
Total
net sales |
|
$ |
70,908 |
|
$ |
64,763 |
|
Segment
operating income and the reconciliation to income before income taxes and
minority interest are as follows (in millions):
| |
|
Quarter
Ended
April
30, |
|
| |
|
2005 |
|
2004 |
|
Wal-Mart
Stores |
|
$ |
3,307 |
|
$ |
3,121 |
|
|
SAM’S
CLUB |
|
|
295 |
|
|
267 |
|
|
International |
|
|
667 |
|
|
563 |
|
|
Other |
|
|
(328 |
) |
|
(346 |
) |
|
Operating
income |
|
|
3,941 |
|
|
3,605 |
|
|
Interest
expense, net |
|
|
200 |
|
|
208 |
|
|
Income
before income taxes and minority interest |
|
$ |
3,741 |
|
$ |
3,397 |
|
Goodwill
is recorded on the balance sheet in the operating segments as follows (in
millions):
| |
|
April
30,
2005 |
|
April
30,
2004 |
|
January
31,
2005 |
|
International |
|
$ |
10,481 |
|
$ |
9,829 |
|
$ |
10,498 |
|
|
SAM’S
CLUB |
|
|
305 |
|
|
305 |
|
|
305 |
|
|
Total
goodwill |
|
$ |
10,786 |
|
$ |
10,134 |
|
$ |
10,803 |
|
The
change in the International segment’s goodwill since the first quarter of fiscal
2005 is primarily the result of foreign exchange rate fluctuations.
NOTE
5. Comprehensive Income
Comprehensive
income is net income plus certain other items that are recorded directly to
shareholders’ equity, which generally consist of currency translation and hedge
accounting adjustments. Comprehensive income was $2.0 billion and $2.8 billion
for the quarters ended April 30, 2005, and 2004, respectively.
NOTE
6. Common Stock Dividends
During
the first quarter of fiscal 2006, the Company’s Board of Directors declared an
annual dividend of $0.60 per share on shares of the Company’s common stock. The
fiscal 2006 dividend is payable in four equal quarterly installments on April 4,
June 6, and September 6, 2005 and January 3, 2006 to holders of record on March
18, May 20, August 19 and December 16, 2005, respectively. A $0.52 per share
annual dividend was declared in the first quarter of fiscal 2005 and paid in
four equal quarterly installments.
NOTE
7. Income Taxes
The
Company’s effective tax rate for the first quarter of fiscal 2006 was 32.4%
which is less than the Company's underlying estimated annual effective tax rate
due to non-cash tax adjustments of $77 million in the quarter primarily
resulting from the Company's assessment of the outcome of certain tax matters.
With the impact of the lower rate for the first quarter, the full year rate is
currently forecast to be approximately 34.2%, although there may be quarterly
volatility.
In
determining the quarterly provision for income taxes, the Company uses an
estimated annual effective tax rate based on expected annual income by
jurisdiction, statutory tax rates, and tax planning opportunities available in
the various jurisdictions in which the Company operates. The impact of
significant discrete items is separately recognized in the quarter in which they
occur. Currently, no effective tax rate impact is expected from the repatriation
of cash under the American Jobs Creation Act.
The
Company is involved in a number of legal proceedings, which include consumer,
employment, tort and other litigation. The lawsuits discussed below, if decided
adversely to or settled by the Company, may result in liability material to the
Company’s financial condition or results of operations. The Company may enter
into discussions regarding settlement of these and other lawsuits, and may enter
into settlement agreements, if it believes settlement is in the best interests
of the Company’s shareholders. In accordance with Statement of Financial
Accounting Standards No. 5, “Accounting for Contingencies,” the Company has made
accruals with respect to these lawsuits, where appropriate, which are reflected
in the Company’s consolidated financial statements.
The
Company is a defendant in numerous cases containing class-action allegations in
which the plaintiffs have brought claims under the Fair Labor Standards Act
(“FLSA”), corresponding state statutes, or other laws. The plaintiffs in these
lawsuits are current and former hourly Associates who allege, among other
things, that the Company forced them to work “off the clock” and failed to
provide work breaks. The complaints generally seek unspecified monetary damages,
injunctive relief, or both. Class certification has yet to be addressed in a
majority of the cases. Class certification has been denied or overturned in
Arizona, Arkansas, Florida, Georgia, Indiana, Louisiana, Maryland, Michigan,
North Carolina, Ohio, Texas (state court), West Virginia, and Wisconsin. Some or
all of the requested classes have been certified in California, Colorado,
Massachusetts, Minnesota, New Mexico, Oregon, and Washington. Conditional
certifications for notice purposes under the FLSA have been allowed in Georgia,
Michigan, and Texas (federal court).
A
putative class action is pending in California challenging the methodology of
payments made under various Associate incentive bonus plans, and a second
putative class action in California asserts that the Company has omitted to
include bonus payments in calculating Associates’ regular rate of pay for
purposes of determining overtime.
The
Company is currently a defendant in six putative class actions brought on behalf
of assistant store managers who challenge their exempt status under state and
federal courts, which are pending in California, Michigan, New Mexico, and
Tennessee. Conditional certification for notice purposes under FLSA has been
granted in one of these cases (Comer
v. WM).
Otherwise, no determination has been made as to class certification in any of
these cases.
The
Company is a defendant in
Dukes v. Wal-Mart Stores, Inc., a
class-action lawsuit commenced in June 2001 and pending in the United States
District Court for the Northern District of California. The case was brought on
behalf of all past and present female employees in all of the Company’s retail
stores and wholesale clubs in the United States. The complaint alleges that the
Company has engaged in a pattern and practice of discriminating against women in
promotions, pay, training and job assignments. The complaint seeks, among other
things, injunctive relief, front pay, back pay, punitive damages, and attorneys’
fees. Following a hearing on class certification on September 24, 2003, on June
21, 2004, the District Court issued an order granting in part and denying in
part the plaintiffs’ motion for class certification. The class, which was
certified by the District Court for purposes of liability, injunctive and
declaratory relief, punitive damages, and lost pay, subject to certain
exceptions, includes all women employed at any Wal-Mart domestic retail store at
any time since December 26, 1998, who have been or may be subjected to the pay
and management track promotions policies and practices challenged by the
plaintiffs. The class as certified currently includes approximately 1.6 million
present and former female Associates.
The
Company believes that the District Court’s ruling is incorrect. The United
States Court of Appeals for the Ninth Circuit has granted the Company’s petition
for discretionary review of the ruling. If the Company is not successful in its
appeal of class certification, or an appellate court issues a ruling that allows
for the certification of a class or classes with a different size or scope, and
if there is a subsequent adverse verdict on the merits from which there is no
successful appeal, or in the event of a negotiated settlement of the litigation,
the resulting liability could be material to the Company. The plaintiffs also
seek punitive damages which, if awarded, could result in the payment of
additional amounts material to the Company. However, because of the uncertainty
of the outcome of the appeal from the District Court’s certification decision,
because of the uncertainty of the balance of the proceedings contemplated by the
District Court, and because the Company’s liability, if any, arising from the
litigation, including the size of any damages award if plaintiffs are successful
in the litigation or any negotiated settlement, could vary widely, the Company
cannot reasonably estimate the possible loss or range of loss which may arise
from the litigation.
The
Company is a defendant in
Mauldin v. Wal-Mart Stores, Inc., a
class-action lawsuit that was filed on October 16, 2001, in the United States
District Court for the Northern District of Georgia, Atlanta Division. The class
was certified on August 23, 2002. On September 30, 2003, the court denied the
Company’s motion to reconsider that ruling. The class is composed of female
Wal-Mart Associates who were participants in the Associates Health and Welfare
Plan at any time from March 8, 2001, to the present and who were using
prescription contraceptives. The class seeks amendment of the Plan to include
coverage for prescription contraceptives, back pay for all members in the form
of reimbursement of the cost of prescription contraceptives, pre-judgment
interest, and attorneys’ fees. The complaint alleges that the Company’s Health
Plan violates Title VII’s prohibition against gender discrimination in that the
Health Plan’s Reproductive Systems provision does not provide coverage for
prescription contraceptives.
The
Company is a defendant in a lawsuit that was filed on August 24, 2001, in the
United States District Court for the Eastern District of Kentucky. EEOC
(Janice Smith) v. Wal-Mart Stores, Inc. is an
action brought by the EEOC on behalf of Janice Smith and all other females who
made application or transfer requests at the London, Kentucky, Distribution
Center from 1995 to the present, and who were not hired or transferred into the
warehouse positions for which they applied. The class seeks back pay for those
females not selected for hire or transfer during the relevant time period. The
class also seeks injunctive and prospective affirmative relief. The complaint
alleges that the Company based hiring decisions on gender in violation of Title
VII of the 1964 Civil Rights Act as amended. The EEOC can maintain this action
as a class without certification.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
This
discussion relates to Wal-Mart Stores, Inc. and its consolidated subsidiaries
(the “Company”) and should be read in conjunction with our financial statements
included under Part I, Item 1 of this Quarterly Report on Form 10-Q and our
financial statements as of January 31, 2005, and the year then ended, and
Management’s Discussion and Analysis of Results of Operations and Financial
Condition both contained in our Annual Report to Shareholders for the year ended
January 31, 2005, which is included as an exhibit to our Annual Report on Form
10-K for the year ended January 31, 2005.
We intend
for this discussion to provide the reader with information that will assist in
understanding our financial statements, the changes in certain key items in
those financial statements from period to period, and the primary factors that
accounted for those changes, as well as how certain accounting principles affect
our financial statements. The discussion also provides information about the
financial results of the various segments of our business to provide a better
understanding of how those segments and their results affect the financial
condition and results of operations of the Company as a whole.
Throughout
this Management’s Discussion and Analysis of Results of Operations and Financial
Condition, we discuss segment operating income and comparative store sales.
Segment operating income refers to income before net interest expense, income
taxes and minority interest. Segment operating income does not include
unallocated corporate overhead. Comparative store sales is a measure which
indicates the performance of our existing stores by measuring the growth in
sales for such stores for a particular period over the corresponding period in
the prior year. We consider comparative store sales to be sales at stores that
were open as of February 1st of the prior fiscal year and have not been expanded
or relocated since that date. Stores that were expanded or relocated during that
period are not included in the calculation. Comparative store sales is also
referred to as “same-store” sales by others within the retail industry. The
method of calculating comparative store sales varies across the retail industry.
As a result, our calculation of comparative store sales is not necessarily
comparable to similarly titled measures reported by other
companies.
Key
Items in the First Quarter
Significant
financial items related to the first quarter of fiscal 2006
include:
| • |
Net
sales for the first quarter of fiscal 2006 increased 9.5% to $70.9 billion
from $64.8 billion in the first quarter of fiscal
2005. |
| • |
Net
income increased 13.6% to $2.5 billion, or $0.58 per share, in the first
quarter of fiscal 2006. Net income for the first quarter of fiscal 2006
includes the favorable impact of two items amounting to $145 million after
tax, or $0.03 per share: $77 million from favorable tax resolutions and
positive legal developments of $68 million after tax.
|
| • |
Total
assets increased 13.1% to $122.2 billion at April 30, 2005 when compared
to April 30, 2004. During the first quarter of fiscal 2006, we made $2.8
billion of capital expenditures. |
| • |
Domestic
comparative store sales increased 2.9% for the quarter ended April 30,
2005, which compares to a 6.4% increase for the quarter ended April 30,
2004. Comparative store sales at our Wal-Mart Stores segment increased
2.8% for the first quarter of fiscal 2006 compared with 5.9% in the first
quarter of fiscal 2005. SAM’S CLUB’s comparative store sales increased
3.5% in the first quarter of fiscal 2006 compared with 8.8% in the first
quarter of fiscal 2005. |
| • |
Net
sales at our International segment increased 12.4% when compared with the
first quarter of fiscal 2005. |
| • |
When
compared with the first quarter of fiscal 2005, our International and
SAM’S CLUB segment operating income for the first quarter of fiscal 2006
increased 18.5% and 10.5%, respectively. Operating income in these
segments grew faster than segment net sales. Our Wal-Mart Stores segment
operating income grew 6.0% which was slower than the growth in segment net
sales primarily because sales were below plan and because operating
expenses increased as a percentage of segment net
sales. |
| • |
Our
Board of Directors declared an annual dividend of $0.60 per share, payable
in equal quarterly installments. This dividend represents an increase of
15% over fiscal year 2005. |
Results
of Operations
The
Company and each of its operating segments had net sales for the quarters ended
April 30, 2005 and 2004 as follows (dollars in millions):
| |
|
Quarter
ended
April
30, 2005 |
|
Quarter
ended
April
30, 2004 |
|
|
|
| |
|
Net
sales |
|
Percent
of
total |
|
Net
sales |
|
Percent
of
total |
|
Percent
increase |
|
Wal-Mart
Stores |
|
$ |
47,641 |
|
|
67.2 |
% |
$ |
43,571 |
|
|
67.3 |
% |
|
9.3 |
% |
|
SAM’S
CLUB |
|
|
9,155 |
|
|
12.9 |
% |
|
8,641 |
|
|
13.3 |
% |
|
5.9 |
% |
|
International |
|
|
14,112 |
|
|
19.9 |
% |
|
12,551 |
|
|
19.4 |
% |
|
12.4 |
% |
|
Total
net sales |
|
$ |
70,908 |
|
|
100.0 |
% |
$ |
64,763 |
|
|
100.0 |
% |
|
9.5 |
% |
The
increase in our net sales for the quarter ended April 30, 2005 resulted from our
expansion programs and a comparative store sales increase of 2.9% in the United
States.
The
increase in the International segment’s net sales as a percentage of total net
sales and the corresponding decrease in the other segments are largely due to
the favorable impact of foreign exchange on the International segment’s net
sales in the first quarter of fiscal 2006 which amounted to $386 million. The
decrease in the SAM’S CLUB segment’s net sales as a percentage of total net
sales resulted from the more rapid development of new stores in the Wal-Mart
Stores segment than the SAM’S CLUB segment.
Our total
gross profit as a percentage of sales (our “gross margin”) increased from 22.8%
in the first quarter of fiscal 2005 to 23.0% during the first quarter of fiscal
2006. Because the Wal-Mart segment and International segment sales yield higher
gross margins than does the SAM’S CLUB segment, the greater increases in net
sales for the Wal-Mart Stores and International segments had a favorable impact
on the Company’s total gross margin.
Operating,
selling, general and administrative expenses (“operating expenses”) as a
percentage of net sales were 18.6% for the first quarter of fiscal 2006, up from
18.3% in the corresponding period in fiscal 2005. This increase was primarily
due to increases in wage, utility and fuel costs. These costs were partially
offset by the impact of positive legal developments previously discussed which
resulted in favorable adjustments to our litigation accruals.
Interest,
net, remained relatively unchanged in the first quarter of fiscal 2006 when
compared with the first quarter of fiscal 2005.
Our
effective income tax rate for the first quarter of fiscal 2006 was 32.4% which
is compared to 35.0% in the first quarter of fiscal 2005. The effective tax rate
for the first quarter of fiscal 2006 is less than the Company's underlying
estimated annual effective tax rate due to non-cash tax adjustments of $77
million in the quarter primarily resulting from the Company's assessment of the
outcome of certain tax matters.
Net
income for the first quarter of fiscal 2006 increased 13.6% over the first
quarter of fiscal 2005 largely as a result of the increase in operating income
and the $145 million favorable impact of positive legal developments and tax
resolutions previously discussed.
Wal-Mart
Stores Segment
|
Quarter
ended
April
30, |
Segment
net
sales
(in
millions) |
Segment
net
sales
increase
from
prior
fiscal
year
first
quarter |
Segment
operating
income
(in
millions) |
Segment
operating
income
increase
from
prior fiscal
year
first
quarter |
Segment
operating
income
as a
percentage
of
segment
net
sales |
|
2005 |
$ 47,641 |
9.3% |
$ 3,307 |
6.0% |
6.9% |
|
2004 |
$ 43,571 |
12.8% |
$ 3,121 |
13.4% |
7.2% |
The first
quarter fiscal 2006 sales increase for the Wal-Mart Stores segment resulted from
our continued expansion activities within the segment and sales increases in
comparable stores. Expansion in the Wal-Mart Stores segment since April 30, 2004
has consisted of the opening of 36 Discount Stores (including the expansion of
one Discount Store), 19 Neighborhood Markets and 228 Supercenters (including 143
conversions of existing Discount Stores into Supercenters). The comparative
store sales increase for the segment was 2.8% for the first quarter of fiscal
2006. The increase occurred despite the impact of leap year on the first quarter
of fiscal 2005, which added an additional day of sales in the prior year first
quarter.
Segment
operating income as a percent of segment net sales decreased in the first
quarter of fiscal 2006 compared to the first quarter of fiscal 2005 primarily
due to a reduction in gross margin as a percent of segment sales and an increase
in operating expenses. Gross margin as a percent of segment sales decreased for
the first time in recent quarters as the Company experienced margin pressures
from increasing transportation costs resulting from higher fuel prices as well
as from sales mix, with stronger sales in lower margin departments. Operating
expenses as a percent of segment net sales increased as the segment experienced
pressures from wage, insurance, utility and maintenance costs during the first
quarter of fiscal 2006.
The
segment operating income increase of 13.4% in the quarter ended April 30, 2004
benefited from a comparison to the quarter ended April 30, 2003 in which the
Wal-Mart Stores segment recognized a $51 million charge resulting from the
adoption of Emerging Issues Task Force Issue No. 02-16, “Accounting by a
Reseller for Cash Consideration Received from a Vendor” (“EITF
02-16”).
We
anticipate that high fuel costs and fuel surcharges will continue to exert
pressure on our gross margin. Additionally, we anticipate the impact of higher
fuel costs on our customers could continue to place pressure on our Wal-Mart
Stores segment’s net sales.
SAM’S
CLUB Segment
|
Quarter
ended
April
30, |
Segment
net
sales
(in
millions) |
Segment
net
sales
increase
from
prior
fiscal
year
first
quarter |
Segment
operating
income
(in
millions) |
Segment
operating
income
increase
from
prior fiscal
year
first
quarter |
Segment
operating
income
as a
percentage
of
segment
net
sales |
|
2005 |
$ 9,155 |
5.9% |
$ 295 |
10.5% |
3.2% |
|
2004 |
$ 8,641 |
10.5% |
$ 267 |
30.9% |
3.1% |
The SAM’S
CLUB segment’s sales increase for the first quarter of fiscal 2006 resulted from
the growth in comparative Club sales and the segment’s continued expansion
activities since April 30, 2004, which resulted in the opening of 14 new Clubs
and the relocation or expansion of 19 existing Clubs. First quarter comparative
Club sales increased 3.5%, including a 1.2% contribution from gasoline sales.
Our continued focus on the business member has resulted in strong sales in key
business categories. Sales comparisons in the current quarter were negatively
impacted due to one less day of sales, as last year was a leap
year.
The
increase in the segment’s operating income as a percentage of segment net sales
for the first quarter of fiscal year 2006 resulted primarily from leveraging
expenses and a slight improvement in gross margin. The increase in gross margin
is primarily a result of strong sales increases in higher margin
categories.
The
segment’s operating income increase of 30.9% in the quarter ended April 30, 2004
benefited from a comparison to the quarter ended April 30, 2003 in which the
SAM’S CLUB segment recognized a $36 million charge resulting from the adoption
of EITF 02-16.
International
Segment
|
Quarter
ended
April
30, |
Segment
net
sales
(in
millions) |
Segment
net
sales
increase
from
prior
fiscal
year
first
quarter |
Segment
operating
income
(in
millions) |
Segment
operating
income
increase
from
prior fiscal
year
first
quarter |
Segment
operating
income
as a
percentage
of
segment
net
sales |
|
2005 |
$ 14,112 |
12.4% |
$ 667 |
18.5% |
4.7% |
|
2004 |
$ 12,551 |
22.1% |
$ 563 |
46.6% |
4.5% |
International
segment net sales for the first quarter of fiscal 2006, when compared to net
sales in the same period in fiscal 2005, increased as a result of favorable
exchange rate movements (primarily in the British Pound, Euro and Canadian
Dollar), continued expansion activities within the segment and improved
operating results. Expansion in the International segment since April 30, 2004,
has consisted of the opening of 114 additional units (net of five closures) and
the relocation or expansion of 38 units. Changes in foreign currency rates had a
favorable impact of $386 million on net sales during the quarter.
The
International segment’s operating income increased as a percentage of segment
net sales from the first quarter of fiscal 2005 to the first quarter of fiscal
2006 as a result of increases in gross margin and other income as a percentage
of segment net sales, partially offset by an increase in operating expenses as a
percentage of net sales. Gross margin increased because of a shift in sales to
higher margin categories and reduced markdown activity in Mexico, Germany,
China, and Korea. Other income was positively impacted by real estate
development activities within the segment. Operating expenses in the
International segment increased as a percentage of segment net sales reflecting
a higher base wage and overall expense pressures from current sales growth
trends in Canada and the United Kingdom. The first quarter of fiscal 2005
includes two months of operations from our acquisition of Bompreço S.A.
Supermercados do Nordeste in Brazil (“Bompreço”) while the first quarter of
fiscal 2006 includes a full quarter of operations for Bompreço. Changes in
foreign currency rates had a favorable impact of $13 million on operating income
during the first quarter of fiscal 2006.
Liquidity
and Capital Resources
Overview
Cash
flows provided by operating activities of continuing operations provide us with
a significant source of liquidity. Cash flows provided by operating activities
of continuing operations in the first quarter of fiscal 2006 were $2.5 billion,
compared with $867 million for the comparable period in fiscal 2005. The
increase in operating cash flow from continuing operations is primarily
attributable to differences in the timing of supplier and tax payments in fiscal
2006 compared with fiscal 2005.
During
the first three months of fiscal 2006, we paid dividends of $635 million, made
$2.8 billion in capital expenditures, issued $3.2 billion of commercial paper
(net of commercial paper repaid in that period), repaid $1.5 billion of
long-term debt and paid $1.4 billion for the repurchase of outstanding shares of
our common stock.
On June
2, 2005, we executed the sale of $1.25 billion of 4.125% notes due July 2010,
and $750 million of 4.5% notes due July 2015. This transaction is expected to
close on or about June 9, 2005.
Working
Capital
Current
liabilities exceeded current assets at April 30, 2005 by $9.5 billion, an
increase of $5.1 billion from January 31, 2005. The ratio of our current assets
to our current liabilities was 0.8 to 1.0, at April 30, 2005, 0.9 to 1.0 at
January 31, 2005, and 0.8 to 1.0 at April 30, 2004. The decrease in the ratio
from January 31, 2005 to April 30, 2005 is due to an increase in dividends
payable, resulting from an annual dividend being declared in the first quarter
of fiscal 2006, and the timing of items discussed under the heading
“Overview.”
Company
Stock Repurchase Program and Common Stock Dividends
We
repurchase shares of our common stock under a $10.0 billion share repurchase
program authorized by our Board of Directors in September 2004. During the first
quarter of fiscal 2006, we repurchased $1.7 billion of shares under this
repurchase program. At April 30, 2005, approximately $8.0 billion of additional
shares may be repurchased under the current authorization. There is no
expiration date governing the period over which we can make our share
repurchases. Under the program, repurchased shares are constructively retired
and returned to unissued status. Share repurchases are generally settled in cash
within three days of our purchase date.
We
consider several factors in determining when to make share repurchases,
including among other things, our current cash needs, our cost of borrowing, and
the market price of the stock. The authorization approved in September 2004, in
part, contemplated repurchases of our shares that become available for purchase
as a result of the Standard & Poors (“S&P”) Index float adjustment, a
portion of which was implemented in March with the remaining portion planned for
implementation in September 2005. Under the float adjustment, share counts used
to determine the S&P indices will reflect only those shares that are
available to investors, not all outstanding shares. The float adjustment will
exclude shares closely held by control groups. As a result, our relative weight
in the S&P declined in March 2005 and will further decline in September
2005. As was the case in March 2005, we expect that the September 2005
adjustment in the S&P indices will cause investment funds that base their
portfolio allocations on S&P indices to sell a portion of the shares of the
Company they hold in order to rebalance their funds based on the new S&P
index weightings.
In March
2005, we announced that we had increased the annual dividend on our common stock
by 15% to $0.60 per share. The fiscal 2006 dividend is payable in four equal
quarterly installments on April 4, June 6, and September 6, 2005 and January 3,
2006 to holders of record on March 18, May 20, August 19 and December 16, 2005,
respectively. We have increased our dividend every year since our first declared
dividend in March 1974.
Capital
Resources
If our
operating cash flows are not sufficient to pay the increased dividend and to
fund our capital expenditures, we anticipate funding any shortfall in these
expenditures with a combination of commercial paper and long-term debt. We plan
to refinance existing long-term debt as it matures and may desire to obtain
additional long-term financing for other corporate purposes. We anticipate no
difficulty in obtaining long-term financing in view of our credit rating and
favorable experiences in the debt market in the recent past. Our current
strategy is to maintain a debt to total capitalization ratio averaging 40%. At
April 30, 2005, April 30, 2004 and January 31, 2005, the ratio of our debt to
our total capitalization was 41%, 41% and 39%, respectively.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
Market
Risk
Market
risks relating to our operations result primarily from changes in interest rates
and changes in currency exchange rates. Our market risks at April 30, 2005 are
similar to those disclosed in our Form 10-K for the year ended January 31,
2005.
The
information concerning market risk under the sub-caption “Market Risk” of the
caption “Management’s Discussion and Analysis of Results of Operations and
Financial Condition” on page 30 of the Annual Report to Shareholders for the
year ended January 31, 2005, that is an exhibit to our Annual Report on Form
10-K for the year ended January 31, 2005, is hereby incorporated by reference
into this Quarterly Report on Form 10-Q.
Item
4. Controls and Procedures
We
maintain a system of disclosure controls and procedures that are designed to
provide reasonable assurance that information, which is required to be timely
disclosed, is accumulated and communicated to management in a timely fashion. An
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) (our “Disclosure Controls”) was
performed as of the end of the period covered by this report. This evaluation
was performed under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that these Disclosure Controls are effective to provide reasonable
assurance that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure and are effective to provide reasonable assurance that such
information is recorded, processed, summarized and reported within the time
periods specified by the SEC’s rules and forms.
There has
been no change in our internal control over financial reporting that occurred
during the quarter covered by this report that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings
I.
SUPPLEMENTAL INFORMATION:
We
discuss certain legal proceedings pending against the Company in Part I of this
Quarterly Report on Form 10-Q under the caption “Item 1. Financial Statements,”
in Note 8 to our financial statements, which is captioned “Contingencies,” and
refer you to that discussion for important information concerning those legal
proceedings, including the basis for such action and the relief sought.
We
provide the following additional information concerning those legal proceedings
which sets forth the name of the lawsuit, the court in which the lawsuit is
pending and the date on which the petition commencing the lawsuit was filed. In
each lawsuit’s name, the letters “WM” refer to Wal-Mart Stores,
Inc.
Wage
and Hour “Off the Clock” Class Actions:
Adcox v. WM, US
Dist. Ct. (“USDC”), Southern Dist. of TX, 11/9/04;
Armijo v. WM,
1st Judicial
Dist. Ct., Rio Arriba County, NM, 9/18/00;
Bailey v. WM, Marion
County Superior Ct. IN, 8/17/00;
Barnett v. WM,
Superior Ct. of WA, King County, 9/10/01;
Basco v. WM, USDC,
Eastern Dist. of LA, 9/5/00;
Braun v. WM,
1st Judicial
Dist. Ct. Dakota County MN, 9/12/01;
Braun v. WM, Ct. of
Common Pleas, Philadelphia County, PA, 3/20/02;
Brogan v. WM,
Superior Ct. of NH, Strafford County, 2/17/05; Brown
v. WM,
14th Judicial
Circuit Ct., Rock Island, IL, 6/20/01; Carr
v. WM,
Superior Ct. of Fulton County, GA, 8/14/01;
Culver v. WM, USDC,
Dist. of CO, 12/10/1996;
Carter v. WM, Ct. of
Common Pleas, Colleton County, SC, 7/31/02;
Gamble v. WM, Supreme
Ct. of the State of NY, County of Albany, 12/7/01;
Gross v. WM, Circuit
Ct., Laurel County, KY, 9/29/04; Hale
v. WM, Circuit
Ct., Jackson County, MO, 8/15/01; Hall
v. WM,
8th Judicial
Dist. Ct., Clark County, NV, 9/9/99;
Harrison v. WM,
Superior Ct. of Forsyth County, NC, 11/29/00;
Holcomb v. WM, State
Ct. of Chatham County, GA, 3/28/00;
Hummel v. WM, Common
Pleas Ct. of Philadelphia County, PA, 8/30/04;
Iliadis v. WM,
Superior Ct. of NJ, Middlesex County, 5/30/02;
Jackson v. WM,
Superior Ct. of DE, New Castle County, 4/4/05; Kuhlmann
(In Re: Wal-Mart Employee Litigation) v. WM, Circuit
Ct., Milwaukee County, WI, 8/30/01;
Lerma v. WM, Dist.
Ct., Cleveland County, OK, 8/31/01;
Lopez v. WM,
23rd Judicial
Dist. Ct. of Brazoria County, TX, 6/23/00;
McFarlin v. WM,
Superior Ct. of AK at Anchorage, 4/7/05; Mendoza
v. WM,
Superior Ct. of CA, Ventura County, 3/2/04;
Michell v. WM, USDC,
Eastern Dist. of TX, Marshall Div., 9/13/02;
Montgomery v. WM, USDC,
Southern Dist. of MS, 12/30/02;
Mussman v. WM, IA
Dist. Ct., Clinton County, 6/5/01; Nagy
v. WM, Circuit
Ct. of Boyd County, KY, 8/29/01;
Newland v. WM,
Superior Ct. of CA, Alameda County, CA, 01/14/05;
Osuna v. WM,
Superior Ct. of AZ, Pima County, 11/30/01;
Pickett v. WM, Circuit
Court, Shelby County, TN, 10/22/03;
Pittman v. WM, Circuit
Ct. for Prince George’s County, MD, 7/31/02;
Pritchett v. WM, Circuit
Ct. of Jefferson County, AL, 2/17/05;
Robinson v. WM, Circuit
Ct., Holmes County, MS, 12/30/02; Sago
v. WM, Circuit
Ct., Holmes County, MS, 12/31/02;
Romero v. WM,
Superior Ct. of CA, Monterey County, 03/25/04;
Salvas v. WM,
Superior Ct., Middlesex County, MA, 8/21/01;
Sarda v. WM, Circuit
Ct., Washington County, FL, 9/21/01;
Savaglio v. WM,
Superior Ct. of CA, Alameda County, 2/6/01;
Scott v. WM, Circuit
Ct. of Saginaw County, MI, 9/26/01;
Smith v. WM, Circuit
Ct., Holmes County, MS, 12/31/02;
Thiebes v. WM, USDC,
Dist. of OR, 6/30/98;
Willey v. WM, Dist.
Ct. of Wyandotte County, KS, 9/21/01;
Williams v. WM,
Superior Ct. of CA, Alameda County, 3/23/04;
Wilson v. WM, Common
Pleas Ct. of Butler County, OH, 10/27/03; Winters
v. WM, Circuit
Ct., Holmes County, MS, 5/28/02; Works
v. WM, Circuit
Ct., Miller County, AR, 5/18/05.
California
Labor Code Cases: Cruz
v. WM,
Superior Ct. of CA, Los Angeles County, 10/24/03;
Fries v. SAM’S and WM,
Superior Ct. of CA, Los Angeles County, 06/28/04.
Exempt
Status Cases: Fox
v. WM, USDC,
Middle Dist. of TN, 01/27/05;
Ramsey v. WM, USDC,
Western Dist. of MI, Northern Div., 12/23/02;
Comer v. WM, Western
Dist. of MI, Northern Div., 2/27/04;
Highland v. WM, USDC,
Dist. of NM, 06/24/04;
Sepulveda v. WM,
Superior Ct. of CA, Los Angeles County, CA, 1/14/04; Reiner
v. WM,
Superior Ct. of CA, Orange County, CA, 2/15/05.
Dukes
v. WM:
Dukes v. WM, USDC,
Northern Dist. of CA, San Francisco Div., 6/19/01; 9th Circuit
Ct. of Appeals, San Francisco, CA, 8/26/04.
Mauldin
v. WM:
Mauldin v. WM, USDC,
Northern Dist. of GA, Atlanta Div., 10/16/01.
EEOC
(Smith) v. WM: EEOC
(Smith) v. WM, USDC,
Eastern Dist. of KY, London Div., 8/31/01.
II.
ENVIRONMENTAL MATTERS: Item
103 of SEC Regulation S-K requires disclosure of certain environmental matters.
The following matters are disclosed in accordance with that
requirement:
During
fiscal 2001, the State of Connecticut filed suit against the Company in the
Superior Court for the Judicial District of Hartford alleging various violations
of state environmental laws and alleging that the Company failed to obtain the
appropriate permits or failed to maintain required records relating to storm
water management practices at 12 stores. In December 2003, the State filed an
amended complaint alleging that the Company also had discharged wastewater
associated with vehicle maintenance activities and photo processing activities
without proper permits. The suit seeks to ensure the Company’s compliance with
the general permits applicable to those activities.
The
United States Environmental Protection Agency (“EPA”) and the states of
Tennessee and Utah have alleged that the Company and some of its construction
contractors have violated the EPA’s stormwater regulations at specified sites
around the country. On July 31, 2003, the Company served the EPA with a Notice
of Dispute as required by a national consent decree entered into between the
Company and the EPA in August 2001. Serving the Notice of Dispute initiated an
informal dispute resolution process in accordance with the terms of the consent
decree. The Company has settled these allegations without admitting any
wrongdoing or violations of the regulations by agreeing to pay a $3.1 million
civil penalty and entering into a new consent decree. The parties are awaiting
entry by the court of the final Consent Decree.
The EPA
has alleged that the Company has violated certain air quality restrictions at
various locations in Massachusetts and Connecticut, including state and local
restrictions on the amount of time truck engines are allowed to idle. The
parties are currently negotiating toward a resolution of the
matter.
The
District Attorney for the County of Solano, California, has alleged that the
Company’s store in Vacaville, California, failed to comply with certain
California statutes regulating hazardous waste and hazardous materials handling
practices. The
parties are currently negotiating toward a resolution of the
matter.
Item
2(c). Purchases of Equity Securities
We
repurchase shares of our common stock under a $10.0 billion share repurchase
program authorized by our Board of Directors in September 2004. Shares purchased
under our share repurchase program are constructively retired and returned to
unissued status. There is no expiration date for or other restriction limiting
the period over which we can make our share repurchases under the program which
will expire if and when we have repurchased an aggregate of $10 billion of
shares.
The
following table sets forth information on the Company’s common stock repurchase
program activity for the quarter ended April 30, 2005 (amounts in thousands,
except per share amounts):
|
Period |
|
Total
Number
of
Shares
Repurchased
(1) |
|
Average
Price
Paid
per
Share |
|
Total
Number of
Shares
Purchased as part
of Publicly
Announced
Program |
|
Maximum
Dollar
Value
of Shares
that
May Yet Be
Purchased
Under
the
Program |
|
February
1 through February 28, 2005 |
|
|
9 |
|
$ |
51.79 |
|
|
— |
|
$ |
9,662,728 |
|
|
March
1 through March 31, 2005 |
|
|
12,791 |
|
$ |
51.24 |
|
|
12,789 |
|
$ |
9,007,372 |
|
|
April
1 through April 30, 2005 |
|
|
21,771 |
|
$ |
47.37 |
|
|
21,770 |
|
$ |
7,975,998 |
|
|
Total
first quarter |
|
|
34,571 |
|
$ |
48.81 |
|
|
34,559 |
|
$ |
7,975,998 |
|
(1)
Includes
a nominal amount of shares repurchased from employees to satisfy the exercise
price of certain stock option exercises.
Item
5. Other Information
This
Quarterly Report contains statements that Wal-Mart believes are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, and intended to enjoy the protection of the safe harbor for
forward-looking statements provided by that Act. These forward-looking
statements include a statement in Note 7 to our financial statements regarding
the forecasted full year tax rate for our fiscal year 2006 and statements under
the subcaption “Wal-Mart Stores Segment” under the caption “Results of
Operations” and under the caption “Capital Resources” in Management’s Discussion
and Analysis of Financial Condition and Results of Operations above with respect
to the potential impact of fuel costs on our results of operations, our intent
and ability to fund certain cash flow shortfalls by the sale of commercial paper
and long-term debt securities and our ability to sell our long-term debt
securities. These statements are identified by the use of the words “forecast,”
“anticipate” and “plan.” These forward-looking statements are subject to risks,
uncertainties and other factors, including, fuel price movements, interest rate
fluctuations, other capital market conditions, and other factors and risks. We
discuss certain of these matters more fully, as well as certain risk factors
that may affect our business operations, financial condition and results of
operations, in other of our filings with the SEC, including our Annual Report on
Form 10-K for the year ended January 31, 2005. This Quarterly Report should be
read in conjunction with that Annual Report on Form 10-K, and all our other
filings, including Current Reports on Form 8-K, made with the SEC through the
date of this report. We urge you to consider all of these risks, uncertainties
and other factors carefully in evaluating the forward-looking statements
contained in this Quarterly Report. As a result of these matters, including
changes in facts or other factors, the actual circumstances relating to the
subject matter of any forward-looking statement in this Quarterly Report may
differ materially from the anticipated results expressed or implied in that
forward-looking statement. The forward-looking statements included in this
Quarterly Report are made only as of the date of this report and we undertake no
obligation to update these forward-looking statements to reflect subsequent
events or circumstances.
Item
6. Exhibits
The following documents are
filed as an exhibit to this Form 10-Q:
|
Exhibit
3(i) |
Restated
Certificate of Incorporation of the Company is incorporated herein by
reference to Exhibit 3(a) from the Annual Report on Form 10-K of the
Company for the year ended January 31, 1989, the Certificate of Amendment
to the Restated Certificate of Incorporation is incorporated herein by
reference to Registration Statement on Form S-8 (File Number 33-43315) and
the Certificate of Amendment to the Restated Certificate of Incorporation
is incorporated hereby by reference to the Current Report on Form 8-K
dated June 27, 1999. |
|
Exhibit
3(ii) |
Amended
and Restated Bylaws of the Company are incorporated herein by reference to
Exhibit 3.1 to the Current Report on Form 8-K of the Company dated March
8, 2005. |
|
Exhibit
12* |
Ratio
of Earnings to Fixed Charges |
|
Exhibit
31.1* |
Chief
Executive Officer Section 302 Certification |
|
Exhibit
31.2* |
Chief
Financial Officer Section 302 Certification |
|
Exhibit
32.1** |
Chief
Executive Officer Section 906 Certification |
|
Exhibit
32.2** |
Chief
Financial Officer Section 906 Certification |
|
Exhibit
99 |
All
information incorporated by reference in Part I, Item 3 of this Quarterly
Report on Form 10-Q from the Annual Report on Form 10-K of the Company for
the year ended January 31, 2005. |
| *
|
Filed
herewith as an Exhibit. |
| ** |
Furnished
herewith as an Exhibit. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| |
|
|
| |
WAL-MART STORES,
INC. |
|
|
|
| Date: June 3, 2005 |
By: |
/s/ H. Lee Scott,
Jr. |
| |
H.
Lee Scott, Jr. |
| |
|
President and
Chief
Executive Officer |
|
|
|
| Date: June 3, 2005 |
By: |
/s/ Thomas M.
Schoewe |
| |
Thomas
M. Schoewe |
| |
Executive
Vice President and
Chief
Financial
Officer |
| |
|
|
|
|
|
| Date: June 3, 2005 |
By: |
/s/ Charles
M. Holley, Jr. |
| |
|
| |
Senior
Vice President and Controller
(Principal
Accounting
Officer) |
Index
to Exhibits
|
Exhibit
Number |
Description
of Document |
|
3(i)
|
Restated
Certificate of Incorporation of the Company is incorporated herein by
reference to Exhibit 3(a) from the Annual Report on Form 10-K of the
Company for the year ended January 31, 1989, the Certificate of Amendment
to the Restated Certificate of Incorporation is incorporated herein by
reference to Registration Statement on Form S-8 (File Number 33-43315) and
the Certificate of Amendment to the Restated Certificate of Incorporation
is incorporated hereby by reference to the Current Report on Form 8-K
dated June 27, 1999.
|
|
3(ii) |
Amended
and Restated Bylaws of the Company are incorporated herein by reference to
Exhibit 3.1 to the Current Report on Form 8-K of the Company dated March
8, 2005. |
|
12* |
Ratio
of Earnings to Fixed Charges |
|
31.1* |
Chief
Executive Officer Section 302 Certification |
|
31.2* |
Chief
Financial Officer Section 302 Certification |
|
32.1** |
Chief
Executive Officer Section 906 Certification |
|
32.2** |
Chief
Financial Officer Section 906 Certification |
|
99 |
All
information incorporated by reference in Part I, Item 3 of this Quarterly
Report on Form 10-Q from the Annual Report on Form 10-K of the Company for
the year ended January 31, 2005. |
| *
|
Filed
herewith as an Exhibit. |
| ** |
Furnished
herewith as an Exhibit. |
