Walmart 1998 Annual Report Download - page 32

In fiscal 1998, the Company borrowed $500 million due
in 2010 with put options imbedded. Beginning in 2000, and
every second year, thereafter until 2010, the holders of the
debt may require the Company to repurchase the debt at face
value.
Long-term debt is unsecured except for $202 million, which
is collateralized by property with an aggregate carrying value
of approximately $349 million. Annual maturities of long-term
debt during the next five years are (in millions):
The Company has agreed to observe certain covenants
under the terms of its note agreements, the most restrictive
of which, relates to amounts of additional secured debt and
long-term leases.
The Company has entered into sale/leaseback transactions
involving buildings while retaining title to the undering land.
These transactions were accounted for as financings and are
included in long-term debt and the annual maturities sched-
ules above. The resulting obligations are amortized over the
lease terms. Future minimum lease payments for each
of the five succeeding years, as of January 31, 1998, are
(in millions):
At January 31, 1998 and 1997, the Company had letters
of credit outstanding totaling $673 million and $811 million,
respectively. These letters of credit were issued primarily for
the purchase of inventory.
Under shelf registration statements previously filed with
the Securities and Exchange Commission, the Company may
issue debt securities aggregating $251 million.
3 Financial Instruments:
Interest rate instruments
The Company enters into interest rate swaps to
minimize the risks and costs associated with its financial
activities. The swap agreements are contracts to exchange
fixed or variable rates for floating interest rate payments
periodically over the life of the instruments. The notional
amounts are used to measure interest to be paid or received
and do not represent the exposure to credit loss. The rates
paid on these swaps range from 3-month Deutschmark LIBOR
minus .0676% to 30-day Commercial Paper Non-Financial
plus .134%. These instruments are not recorded on the balance sheet,
and as of January 31, 1998 and 1997, are as follows:
Foreign exchange instruments
The Company has entered into a foreign currency swap
to hedge its investment in Germany. Under the agreement,
the Company will pay $1,960 million in German Deutschmarks
in 2003 and will receive $1,101 million in United States
Dollars. At January 31, 1998, the fair value of this swap
was $30 million.
The Company enters routinely into forward currency
exchange contracts in the regular course of business to
manage its exposure against foreign currency fluctuations on
inventory purchases denominated in foreign currencies.
These contracts are for short durations (six months or less) and
are insignificant to the Company’s operations or financial
position. (There were approximately $27 million outstanding
at January 31, 1998.)
Fair value of financial instruments
Cash and cash equivalents: The carrying amount approximates
fair value due to the short maturity of these instruments.
Long-term debt: The fair value of the Company’s long-term
debt, including current maturities, approximates $8,639
million at January 31, 1998 and is based on the
Company’s current incremental borrowing rate for similar
types of borrowing arrangements.
Interest rate instruments: The fair values are estimated
amounts the Company would receive or pay to terminate the
agreements as of the reporting dates.
Foreign currency contracts: The fair value of foreign currency
contracts are estimated by obtaining quotes from brokers.
Fiscal year ending Annual
January 31, maturity
1999 $ 1,039
2000 815
2001 2,018
2002 52
2003 559
Thereafter 3,747
Fiscal years ending Minimum
January 31, rentals
1999 $ 76
2000 104
2001 100
2002 94
2003 98
Thereafter 817
January 31, 1998
Notional amount Maturity Rate Fair
(in millions) received value
$ 585 2006 6.97% $17
$ 500 2000 5.65% –
$ 1,101 2003 30-day commercial ($1)
paper non-financial
January 31, 1997
Notional amount Maturity Rate
(in millions) received
$ 630 2006 6.97%
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