Walmart 1999 Annual Report Download - page 34

Fiscal years ended January 31, 1999 1998 1997
Deferred tax liabilities:
Property, plant and equipment $ 695 $ 797 $ 721
Inventory 286 275 145
International, principally asset basis differences 272 387 83
Other 36 33 45
Total deferred tax liabilities 1,289 1,492 994
Deferred tax assets:
Amounts accrued for financial reporting purposes
not yet deductible for tax purposes 985 441 295
Capital leases 188 190 169
International, asset basis and loss carryforwards 143 258 314
Deferred revenue 66 89 113
Other 184 108 68
Total deferred tax assets 1,566 1,086 959
Net deferred tax (assets) liabilities $ (277) $ 406 $ 35
Fiscal years ended January 31, 1999 1998 1997
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit 2.0% 2.1% 2.2%
International (0.5%) (0.3%) (1.5%)
Other 0.9% 0.2% 1.1%
37.4% 37.0% 36.8%
Items that give rise to significant portions of the deferred tax accounts at January 31, are as follows (in millions):
A reconciliation of the significant differences between the effective income tax rate and the federal
statutory rate on pretax income follows:
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6 Acquisitions
On January 1, 1999, the Company took possession of 74 units from
the Interspar hypermarket chain in Germany. The units were
acquired from Spar Handels AG, a German company that owns
multiple retail formats and wholesale operations throughout
Germany. The transaction closed on December 29, 1998; therefore,
the assets are included in the Company’s consolidated balance
sheet and the results of operations will be included beginning in
fiscal 2000. The transaction has been recorded as a purchase. The
net assets and liabilities acquired are recorded at fair value.
Resulting goodwill is being amortized over 40 years.
In July 1998, the Company extended its presence in Asia with an
investment in Korea. The Company acquired a majority interest in
four units as well as six undeveloped sites. The four units were pre-
viously operated by Korea Makro. The transaction has been
accounted for as a purchase. The new assets and liabilities
acquired are recorded at fair value. The goodwill is being amor-
tized over 40 years. The results of operations since the effective
date of the acquisition have been included in the Company’s
results.
A merger of the Mexican joint venture companies owned by
Wal-Mart Stores, Inc. and Cifra, S.A. de C.V. (Cifra) with, and into
Cifra, was consummated with an effective merger date of
September 1, 1997. The Company received voting shares of Cifra
equaling approximately 33.5% of the outstanding voting shares of
Cifra in exchange for the Company’s joint venture interests having
a net book value of approximately $644 million.
The Company then acquired 593,100,000 shares of the Series “A”
Common Shares and Series “B” Common Shares of Cifra, for
approximately $1.2 billion. The transaction has been accounted
for as a purchase. The net assets and liabilities acquired are
recorded at fair value. Resulting goodwill is being amortized over
40 years. As a result of the merger and tender offer, Wal-Mart holds
a majority interest of the outstanding voting shares of Cifra. The
results of operations for Cifra, since the effective merger date,
have been included in the Company’s results.
In December 1997, the Company acquired the Wertkauf hyper-
market chain in Germany, as well as certain real estate. The 21
hypermarkets are one-stop shopping centers that offer a broad
assortment of high quality general merchandise and food and are
similar to the Wal-Mart Supercenter format in the United States.
The transaction has been accounted for as a purchase. Net assets
and liabilities of Wertkauf and the real estate are recorded at fair
value. The goodwill is being amortized over 40 years. The transac-
tion closed on December 30, 1997; therefore, the assets are includ-
ed in the January 31, 1998 consolidated balance sheet and the
results of operations are included in fiscal 1999.