How did the two-for-one stock split affect shareholders?

The company announced a two-for-one split on March 4, 1999, with a record date of March 19 and distribution on April 19, 1999. Shares outstanding rose to about 4.45 billion, and all per-share figures, including the $0.99 EPS and dividends, are restated to reflect it. The split was a 100% stock dividend, so it did not change total equity value.

Is Wal-Mart's international expansion a meaningful driver of growth?

Yes, though it remains a minority of sales. International sales rose 63% to $12.2 billion, aided by acquisitions including Cifra in Mexico, Wertkauf in Germany, and the Interspar units. International operating profit more than doubled to $551 million, but its expense ratio is higher than the domestic segments, so margin contribution is still developing.

How strong is Wal-Mart's balance sheet and debt position?

The balance sheet is solid. Shareholders' equity rose to $21.1 billion, long-term debt declined to $6.9 billion from $7.2 billion, and the company had no short-term borrowings at year end. It holds $1.9 billion in cash and access to about $3.8 billion in committed and informal bank credit lines. Management stated it does not plan to finance future capital expenditures with debt.

What are the main risks or uncertainties highlighted in the filing?

The filing cites competitive pressures, cost of goods, inflation, consumer debt levels, currency fluctuations, trade restrictions, tariff and freight rates, interest rate movements, and Year 2000 issues. It also notes that third-party vendors and utilities may not complete their Year 2000 conversions on time. Currency exposure is significant in Mexico, which will exit highly inflationary accounting in fiscal 2000, and in Germany, where the company uses currency swaps to hedge its net investment.

Are there any material legal proceedings or pending claims?

The company reports no material pending legal proceedings beyond routine litigation. Two minor environmental matters from the Honesdale, Pennsylvania Supercenter construction were settled or are being negotiated, with payments of $25,000 in fines and $75,000 in community projects, plus a proposed $200,000 wetlands settlement with the Army Corps of Engineers. The company expects third-party contracts to reimburse these amounts.

WMT 10-K FY1999 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed April 19, 1999. Cited figures are marked; the original filing is the authoritative source.

Wal-Mart Stores, Inc. (WMT) reported fiscal 1999 (year ended January 31, 1999) net sales of $137.6 billion^a, up 17% from $118.0 billion, driven by store expansion and a 9% domestic comparative store sales increase.

Net income rose 26% to $4.43 billion^b, and diluted EPS reached $0.99 (restated for the two-for-one stock split payable April 19, 1999). Operating income before interest and taxes was $8.1 billion, and gross margin improved modestly as lower inventory levels reduced markdowns and shrink, even amid continued price rollbacks. Return on shareholders' equity was 22.4%, versus 19.8% a year earlier.

Growth came from both domestic and international operations. The company opened 37 Wal-Mart discount stores, 123 Supercenters, and 8 SAM'S Clubs, and added 114 international units, including the Cifra acquisition in Mexico (fiscal 1998), the Wertkauf chain in Germany, and Korean and Interspar hypermarket units. International sales reached $12.2 billion^c, about 8.9% of total sales, and international operating profit rose to $551 million from $262 million.

Cash flow from operations was $7.6 billion^d, which funded $3.7 billion in capital expenditures, $693 million in dividends, $855 million in acquisitions, and $1.2 billion in share repurchases, with no short-term borrowings needed for most of the year. Looking ahead, management plans roughly $4.9 billion in fiscal 2000 capital expenditures, funded primarily from operating cash flow, along with about 40 new Wal-Mart stores, 150 Supercenters, and 75 to 80 international units. The dividend was raised 29% to $0.20 per post-split share, the 27th consecutive annual increase, and the buyback authorization was increased to $2 billion.

Year 2000 remediation is substantially complete at an estimated incremental cost of $27 million, with no significant issues detected in testing so far. Investors should note that the filing incorporates much of its financial detail by reference to the Annual Report to Shareholders.

02—Key points

Key Highlights

Net sales rose 17% to $137.6 billion in fiscal 1999, with a 9% domestic comparative store sales increase.
Net income grew 26% to $4.43 billion; diluted EPS was $0.99 post-split, up from $0.78.
Return on shareholders' equity improved to 22.4% from 19.8%, and return on assets to 9.6% from 8.5%.
Operating cash flow reached $7.6 billion, funding $3.7 billion in capital expenditures and $1.2 billion in share repurchases.
International segment sales grew to $12.2 billion (about 8.9% of total), with operating profit up to $551 million from $262 million.
Dividend increased 29% to $0.20 per share for fiscal 2000; the buyback authorization was raised to $2 billion.
Planned fiscal 2000 capex of about $4.9 billion to support roughly 190 new domestic stores and 75 to 80 international units.

03—Questions

Frequently Asked Questions

How did the two-for-one stock split affect shareholders?
The company announced a two-for-one split on March 4, 1999, with a record date of March 19 and distribution on April 19, 1999. Shares outstanding rose to about 4.45 billion, and all per-share figures, including the $0.99 EPS and dividends, are restated to reflect it. The split was a 100% stock dividend, so it did not change total equity value.
Is Wal-Mart's international expansion a meaningful driver of growth?
Yes, though it remains a minority of sales. International sales rose 63% to $12.2 billion, aided by acquisitions including Cifra in Mexico, Wertkauf in Germany, and the Interspar units. International operating profit more than doubled to $551 million, but its expense ratio is higher than the domestic segments, so margin contribution is still developing.
How strong is Wal-Mart's balance sheet and debt position?
The balance sheet is solid. Shareholders' equity rose to $21.1 billion, long-term debt declined to $6.9 billion from $7.2 billion, and the company had no short-term borrowings at year end. It holds $1.9 billion in cash and access to about $3.8 billion in committed and informal bank credit lines. Management stated it does not plan to finance future capital expenditures with debt.
What are the main risks or uncertainties highlighted in the filing?
The filing cites competitive pressures, cost of goods, inflation, consumer debt levels, currency fluctuations, trade restrictions, tariff and freight rates, interest rate movements, and Year 2000 issues. It also notes that third-party vendors and utilities may not complete their Year 2000 conversions on time. Currency exposure is significant in Mexico, which will exit highly inflationary accounting in fiscal 2000, and in Germany, where the company uses currency swaps to hedge its net investment.
Are there any material legal proceedings or pending claims?
The company reports no material pending legal proceedings beyond routine litigation. Two minor environmental matters from the Honesdale, Pennsylvania Supercenter construction were settled or are being negotiated, with payments of $25,000 in fines and $75,000 in community projects, plus a proposed $200,000 wetlands settlement with the Army Corps of Engineers. The company expects third-party contracts to reimburse these amounts.

04—Continue

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