Walmart 1999 Annual Report Download - page 33

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Foreign exchange instruments
The Company has entered into two foreign currency swap agree-
ments to hedge its net investment in Germany. In fiscal 1998, the
Company entered into a foreign currency swap where it will pay
1,960 million in German Deutschemarks in 2003 and will receive
$1,101 million in United States Dollars. In fiscal 1999, the Company
entered into a foreign currency swap where it will pay 1,360 million
in German Deutschemarks in 2004 and will receive $809 million in
United States Dollars.
The Company routinely enters into forward currency exchange con-
tracts in the regular course of business to manage its exposure
against foreign currency fluctuations on cross-border purchases of
inventory. These contracts are generally for short durations of six
months or less and are insignificant to the Company’s operations or
financial position. There were approximately $46 million notional
outstanding at January 31, 1999.
Fair value of financial instruments
Cash and cash equivalents: The carry 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 $8,323 million at
January 31, 1999 and is based on the Company’s current incremen-
tal 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 external sources.
33
5 Income Taxes
Fiscal years ended January 31 1999 1998 1997
Current
Federal $ 3,043 $ 1,891 $ 1,769
State and local 254 186 201
International 83 18 4
Total current tax provision 3,380 2,095 1,974
Deferred
Federal (655) (5) (97)
State and local (28) (2) (9)
International 43 27 (74)
Total deferred tax provision (640) 20 (180)
Total provision for income taxes $ 2,740 $ 2,115 $ 1,794
The income tax provision consists of the following (in millions):
Notional amount Maturity Rate Rate Fair
(in millions) date received paid value
January 31, 1999
$551 2007 7.0% 30-day U.S. commercial $44
paper non-financial
500 2001 5.9% 30-day U.S. commercial 5
paper non-financial plus .245%
500 2001 5.7% 30-day U.S. commercial 10
paper non-financial plus .134%
1,101 2003 5.8% 30-day U.S. commercial 28
paper non-financial
1,101 2003 30-day U.S. commercial 3-month German DEM (43)
paper non-financial LIBOR minus .0676%
1,101 2003 3-month German DEM 4.5% – DEM rate (58)
LIBOR minus .0676%
809 2004 5.2% 30-day U.S. commercial 1
paper non-financial
809 2004 30-day U.S. commercial 3-month German DEM 18
paper non-financial LIBOR minus .055%
809 2004 3-month German DEM 3.4% – DEM rate 3
LIBOR minus .055%
230 2027 7.0% 6-month U.S. LIBOR 30
January 31, 1998
$ 585 2007 7.0% 30-day U.S. commercial $17
paper non-financial
500 2001 5.7% 30-day U.S. commercial –
paper non-financial plus .134%
1,101 2003 30-day U.S. commercial 3-month German DEM (1)
paper non-financial LIBOR minus .0676%
230 2027 7.0% 6-month U.S. LIBOR 20