Walmart 2002 Annual Report Download - page 22

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The Company has entered into lease commitments for land and buildings for 20 future locations. These lease commitments with real estate developers
provide for minimum rentals for 10 to 20 years, excluding renewal options, which, if consummated based on current cost estimates, will approximate
$25 million annually over the lease terms.
Management believes that cash flows from operations and proceeds from the sale of commercial paper will be sufficient to finance any seasonal buildups
in merchandise inventories and meet other cash requirements. If the operating cash flow we generate is not sufficient to pay dividends and to fund all
capital expenditures, the Company anticipates funding any shortfall in these expenditures with a combination of commercial paper and long-term debt.
We plan to refinance existing long-term debt as it matures. We may also desire to obtain additional long-term financing for other corporate purposes.
We anticipate no difficulty in obtaining long-term financing in view of an excellent credit rating and favorable experiences in the debt market in the
recent past. During fiscal 2002, the Company issued $4.6 billion of long-term debt. The proceeds from the issuance of this debt were used to reduce
short-term borrowings, to refinance existing debt, financing expansion activities and other corporate purposes.
At January 31, 2002, the Company’s ratio of debt to total capitalization, including commercial paper borrowings, was 38.4%. This is in line with
management’s objective to maintain a debt to total capitalization ratio of approximately 40%.
In March 2002, the Company sold notes totaling $500 million under its existing shelf registration statement. These notes bear interest at 4.15% and are
due in June 2005. The proceeds from the sale of these notes will be used for general corporate purposes, which could include financing the repurchase
of shares of our common stock pursuant to our existing stock repurchase program. After consideration of this debt issuance and the debt issued in fiscal
2002, the Company is permitted to sell up to $2 billion of public debt under a shelf registration statement previously filed with the United States
Securities and Exchange Commission.
Expansion
In the United States, we plan to open approximately 50 new Wal-Mart stores and approximately 180 to 185 new Supercenters in fiscal 2003.
Relocations or expansions of existing discount stores will account for 110 to 115 of the new Supercenters, with the balance being new locations. We
also plan to further expand our Neighborhood Market concept by adding 15 to 20 units during fiscal 2003. The SAM’S CLUB segment plans to
open 50 to 55 Clubs during fiscal 2003, approximately half of which will be relocations or expansions of existing clubs. The SAM’S CLUB segment
will also continue its remodeling program, with approximately 100 projects expected to be completed during fiscal 2003. In order to serve these and
future developments, the Company plans to construct seven new distribution centers in the next fiscal year. Internationally, the Company plans to
open 120 to 130 new units. Projects are scheduled to open within the international operating group and will include new stores and clubs as well as
relocations of a few existing units. The units also include several restaurants, department stores and supermarkets in Mexico. In addition, the Company’s
German operation will continue to remodel its supercenter units. Total planned growth represents approximately 46 million square feet of net additional
retail space. Not included in the planned expansion discussed above is the Company’s recently announced Puerto Rico supermarket chain acquisition.
In February 2002, we announced our intent to purchase 35 Supermercado Amigo supermarkets in Puerto Rico. The transaction is scheduled to be
completed once necessary regulatory approval is obtained. Also not included in the above discussion is the Company’s planned acquisition of 6.1%
of the stock of The Seiyu Ltd. (Seiyu), a Japanese retail chain. Under the terms of the proposed purchase agreement, which was announced in March
2002, Wal-Mart will pay 6 billion yen or $46 million for an initial 6.1% ownership interest and will have the ability to invest up to 260 billion yen or
$2 billion in Seiyu which would increase our ownership to 66.7% over time. The transaction is subject to approval from Seiyu’s shareholders and other
approvals. Total planned capital expenditures for fiscal 2003 approximate $10.2 billion. We plan to finance expansion primarily with a combination of
commercial paper and the issuance of long-term debt.
Market Risk
Market risks relating to our operations include changes in interest rates and changes in foreign exchange rates. We enter into interest rate swaps to
minimize the risk and costs associated with financing activities, as well as to attain an appropriate mix of fixed and floating rate debt. The swap
agreements are contracts to exchange fixed or variable rates for variable or fixed interest rate payments periodically over the life of the instruments. The
following tables provide information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest
rates. For debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. For interest rate
swaps, the table presents notional amounts and interest rates by contractual maturity dates. The applicable floating rate index is included for variable
rate instruments. All amounts are stated in United States dollar equivalents.
Interest Rate Sensitivity as of January 31, 2002
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
Fair value
(Amounts in millions) 2003 2004 2005 2006 2007 Thereafter Total 1/31/02
Liabilities
U.S. dollar denominated long-term debt
including current portion
Fixed rate debt $ 2,164 $ 3,445 $ 1,874 $ 704 $ 2,235 $ 5,850 $ 16,272 $ 17,201
Average interest rate – USD rate 6.3% 6.0% 6.7% 6.7% 6.7% 7.2% 6.8%
Great Britain pound denominated long-term
debt including current portion
Fixed rate debt 93 129 – – – 1,450 1,672 1,718
Average interest rate 9.6% 3.8% 7.3% 6.9%