Walmart 1999 Annual Report Download - page 24

International Operations
The Company’s foreign operations are comprised of wholly-owned
operations in Argentina, Canada, Germany and Puerto Rico; joint
ventures in China and Korea; and majority-owned subsidiaries in
Brazil and Mexico. As a result, the Company’s financial results
could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in the foreign mar-
kets in which the Company does business. The Company minimizes
exposure to the risk of devaluation of foreign currencies by oper-
ating in local currencies and through buying forward contracts,
where feasible, for known transactions.
All foreign operations are measured in their local currencies with
the exception of Mexico, which operates in a highly-inflationary
economy and reports operations using United States 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 seg-
ment’s results of operations or financial position as a result of the
change. In fiscal 1999, the foreign currency translation adjustment
increased by $36 million to $509 million primarily due to the
exchange rates in Brazil and Canada, and in fiscal 1998, the
foreign currency translation adjustment increased by $73 million
to $473 million primarily due to the exchange rate in Canada.
The International segment’s operating profit increased from $262
million in fiscal 1998 to $551 million in fiscal 1999. As noted above,
the results for 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 part of the increase in the
International segment’s operating profit.
Liquidity and Capital Resources
Cash Flows Information
Cash flows from operating activities were $7,580 million in fiscal
1999, up from $7,123 million in fiscal 1998. In fiscal 1999, the
Company invested $3,734 million in capital assets, paid dividends
of $693 million, and had a net cash outlay of $855 million for acqui-
sitions. Acquisitions include the purchase of six undeveloped sites
and four units in Korea which had been operated by Korea Makro,
and 74 Interspar hypermarkets in Germany from Spar Handels AG.
See Note 6 of Notes to Consolidated Financial Statements for addi-
tional information on acquisitions.
Company Stock Purchase and Common Stock
Dividends
In fiscal 1999, the Company repurchased over 21 million shares of
its common stock for $1,202 million. In March of 1999 the
Company announced plans to increase the existing common stock
repurchase program by $1.2 billion, resulting in a total outstanding
authorization of $2 billion. Additionally, the Company increased
the dividend 29% to $.20 per share (after the two-for-one common
stock split, which was also announced in March of 1999) for fiscal
2000. This marks the 27th consecutive yearly increase in dividends.
Borrowing Information
The Company had committed lines of credit with 78 banks, aggre-
gating $1,872 million and informal lines of credit with various
other banks, totaling an additional $1,950 million, which were
used to support short-term borrowing and commercial paper.
These lines of credit and their anticipated cyclical increases were
sufficient to finance the seasonal buildups in merchandise inven-
tories and other cash requirements.
The Company anticipates generating sufficient operating cash flow
to pay the increased dividend and to fund all capital expenditures.
Accordingly, management does not plan to finance future capital
expenditures with debt. However, the Company plans to refinance
existing long-term debt as it matures and may desire to obtain
additional long-term financing for other uses of cash or for strate-
gic reasons. The Company anticipates no difficulty in obtaining
long-term financing in view of an excellent credit rating and favor-
able experiences in the debt market in the recent past. In addition
to the available credit lines mentioned above, the Company may
sell up to $501 million of public debt under shelf registration state-
ments previously filed with the United States Securities and
Exchange Commission.
Expansion
Domestically, the Company plans to open approximately 40 new
Wal-Mart stores and approximately 150 new Supercenters.
Relocations or expansions of existing discount stores will account
for 90 of the Supercenters, while approximately 60 will be new
locations. Due to the positive customer feedback on the
Neighborhood Market concept, which is being tested in four loca-
tions, the Company plans to expand the test to additional areas.
Also planned for fiscal 2000 are ten to fifteen new SAM’S Clubs,
including six relocations. In addition, the Company will remodel
approximately 140 of the existing SAM’S Clubs and expand one
unit. In order to serve these and future developments, the
Company will begin shipping from three new distribution centers
in the next fiscal year. Internationally, plans are to develop 75 to
80 new retail units. These stores are planned in Argentina, Brazil,
Canada, China, Korea, Mexico, and Puerto Rico. Total planned
growth represents approximately 34 million square feet of net
additional retail space.
Total planned capital expenditures for fiscal 2000 approximate
$4.9 billion. We plan to finance our expansion primarily with oper-
ating cash flows.
Year 2000 Issue State of Readiness
Historically, computer software has been programmed to make
assumptions about the century when given a date that only uses
two digits to represent the year. Although these assumptions have
been perfectly acceptable the past few decades, they are a potential
cause for concern for software used in the year 2000 and beyond.
Specifically, this abbreviated date format makes it difficult for an
application or computer user to distinguish between dates starting
with 19xx and 20xx. The Company has been evaluating and adjust-
ing all of its known date-sensitive systems and equipment for Year
2000 compliance, including those systems and equipment which
support the Company’s International segment. The assessment
phase of the Year 2000 project is substantially complete and
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