Walmart 2004 Annual Report Download

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It’s my
2004 Annual Report
Good Jobs ★Good Works ★Good Citizen ★Good Investment

Table of contents

  • Page 1
    2004 Annual Report It's my Good Jobs Good Works Good Citizen Good Investment â˜... â˜... â˜...

  • Page 2
    ... ...3 Good Jobs, Good Careers...4 Building Lasting Relationships with Suppliers ...8 Neighbors Helping Neighbors...10 Raising the Standard of Living...12 Good Investment ...14 Supporting our Service Men and Women...15 Financial Information ...16 Fiscal 2004 End-of-Year Store Count ...55 Corporate...

  • Page 3
    ... annual report, you'll meet five unique Associates - from a part-time bicycle assembler in El Cajon, Calif., to a Japanese national in the Company's international leadership training program. All of them are growing and learning in the Good Jobs and Good Careers Wal-Mart provides. Building Lasting...

  • Page 4
    ...everything our Associates have accomplished during the fiscal year ended January 31, 2004. Wal-Mart generated over $256 billion in global revenue, establishing a new record and adding more than $26 billion in sales. Your Company earned almost $9.1 billion in net income and grew earnings per share by...

  • Page 5
    ...behalf of the Board of Directors, I also invite and appreciate your thoughts and comments.You can contact us by e-mail, using the full name of the director as listed on the inside of the back cover of this Annual Report. For example, my e-mail address is [email protected]. To send a message...

  • Page 6
    ... have been shared worldwide about Wal-Mart's dedication to its Associates. Here are just a few: James McKinney As personnel manager for a Wal-Mart Distribution Center in New Albany, Miss., James McKinney was very familiar with the open-enrollment video for the Company's medical plan. The video...

  • Page 7
    ... she moved back home in 1992 and applied for a position as customer service manager at the local Wal-Mart, she was looking for a job, not a career. Today, after working in various Wal-Mart jobs over the last 12 years, Garcia serves as a Wal-Mart store manager back in her hometown, and says she can...

  • Page 8
    ... became a bridge between the two companies, sharing merchandising practices that helped make Seiyu more customer-focused. She did such a good job in this role that in 2003, Nakamura entered Wal-Mart's international leadership training program, arriving in Bentonville, Ark., in October to begin...

  • Page 9
    ... in San Antonio," Chadwick says. "Less than a year later, I was promoted to general manager at another Club in San Antonio, close to where I attended high school." Chadwick moved on to another general manager job in Baton Rouge, La., where he soon received a call from the home office in Bentonville...

  • Page 10
    .... The company needed to improve its logistics and information systems so it could expand distribution in the United States and move the product enjoying phenomenal sales, and we are proud to have the opportunity to grow alongside the greatest company in America." "The Wal-Mart people we have...

  • Page 11
    ... with Wal-Mart merchandise teams assisted the company in further developing the infrastructure needed to grow and expand. By 2001, Orange Glo had been named Wal-Mart's household and paper goods department Supplier of the Quarter. Then, in 2003, Wal-Mart named Orange Glo as one of its Global Sourcing...

  • Page 12
    ... per location to local literacy organizations. Since 2001, Wal-Mart has donated nearly $10 million to the cause of literacy, helping nonprofit and educational groups teach reading skills in thousands of communities. Words Are Your Wheels There are more than 44 million people in the United States who...

  • Page 13
    ... year. "Having the opportunity to work with Wal-Mart at the national and local level has been great for us," says Dubester. "My experience is that most corporations don't do multi-year grants, but Wal-Mart has supported us for three years, allowing us to provide essential services to thousands of...

  • Page 14
    ... toys, too!" she says with a laugh. "But I can only afford to buy toys for my dog at Wal-Mart!" Pamela Jordan Pamela Jordan grew up in the south Los Angeles neighborhood of Baldwin Hills, where oil rigs once pumped until developers discovered the area in the 1950s. Today, she lives with her 16-year...

  • Page 15
    ...'s schedule." "Most of all, it's nice to see how much Wal-Mart adds to the community with all the benefits they offer employees," says Vargas. "Where else could so many people have such a clean, positive working environment and have the ability to increase their wealth by staying loyal to a company...

  • Page 16
    ...11 stock splits. Despite the Company's strong history of growth, investors and Shareholders still ask if Wal-Mart can move far beyond its $256 billion in annual sales. This year, Wal-Mart plans to add more than 250 new stores with more than 50 million square feet of new retail space, and Associates...

  • Page 17
    ...service of these Associates, Wal-Mart continues their benefits, provides assistance to their families, and makes up the difference between military pay and regular Wal-Mart wages. to send more than 331,000 messages of support to military men and women through in-store gift registry kiosks. Wal-Mart...

  • Page 18
    ... capital leases Shareholders' equity Financial Ratios Current ratio Return on assets** Return on Shareholders' equity*** Other Year-End Data Domestic Discount Stores Domestic Supercenters Domestic SAM'S CLUBS Domestic Neighborhood Markets International units Shareholders of record 2004 $ 256,329...

  • Page 19
    ... of the ASDA Group PLC and the Company's related debt issuance had a significant impact on the fiscal 2000 amounts in this summary. Years prior to 1998 have not been restated for the effects of the change in accounting method for SAM'S CLUB membership revenue recognition as the effects of this...

  • Page 20
    ... financial statements. Overview Wal-Mart is a global retailer committed to growing by improving the standard of living for our Customers throughout the world. We earn the trust of our Customers every day by providing a broad assortment of quality merchandise and services at every day low prices...

  • Page 21
    ... This change in accounting reduced fiscal 2004 net income by $140 million on an after-tax basis, or $0.03 per share. As a result of adopting this standard, we account for substantially all consideration from vendors as a reduction of inventory purchases. Company Performance Measures Management uses...

  • Page 22
    ... trade area are not considered closings. Internationally, we added 83 units net of closings. Worldwide, square footage increased approximately 46 million square feet, or 8%, during fiscal 2004. The Wal-Mart Stores segment net sales amounted to approximately 68% of total Company net sales in fiscal...

  • Page 23
    ... Markets and 213 Supercenters (including the conversion and/or relocation of 130 existing Discount Stores into Supercenters). One store closed in fiscal 2004. During fiscal 2004, our total expansion program added approximately 34 million, or 8.8%, of store square footage. Segment expansion during...

  • Page 24
    ... results and our international expansion program. In fiscal 2004, the International segment opened 83 units, net of relocations and closings, which added 9 million, or 8.5%, of additional unit square footage. Additionally, the impact of changes in foreign currency exchange rates favorably affected...

  • Page 25
    ... markets in which the Company does business. The Company minimizes exposure to the risk of devaluation of foreign currencies by operating in local currencies. Summary of Critical Accounting Policies Management strives to report the financial results of the Company in a clear and understandable...

  • Page 26
    ...Stock Repurchase Program and Common Stock Dividends In June 2003, our Board of Directors reset the common stock repurchase program authorization so that the Company may make future repurchases of its stock of up to $5 billion. In January 2004, our Board of Directors authorized a new $7 billion share...

  • Page 27
    ... the expansion of our distribution network within Canada, we have guaranteed specific obligations of a third-party logistics provider. In the unlikely event this provider fails to perform its financial obligations regarding certain Wal-Mart-related projects, we would be obligated to pay an amount of...

  • Page 28
    ... In order to serve these and future developments, the Company plans to construct five new distribution centers in the next fiscal year. Internationally, the Company plans to open 130 to 140 new units, of which approximately 30 will be conversions and/or relocations. Projects scheduled to open within...

  • Page 29
    ... 5.6% Interest Rate Position as of January 31, 2004 Notional Amount by Expected Maturity Average Interest Swap Rate (Dollar amounts in millions) Interest Rate Derivative Financial Instruments Related to Debt Interest rate swaps - Pay variable/receive fixed Weighted-average rate paid - Rate B plus...

  • Page 30
    ... our net investment in the United Kingdom. The following tables provide information about our cross-currency interest rate swap agreements by functional currency and present the information in United States dollar equivalents. For these instruments the tables present notional amounts, exchange rates...

  • Page 31
    29 Foreign Currency Exchange Rate Position as of January 31, 2004 Principal Amount by Expected Maturity Average Interest Rate (Dollar amounts in millions) Liabilities USD denominated long-term debt including current portion Fixed-rate debt Average interest rate Great Britain pound denominated long-...

  • Page 32
    ... including current portion Fixed-rate debt Average interest rate 2004 2005 2006 2007 2008 Thereafter Total Fair Value 1/31/03 $- - $- - $- - $ 325 5.6% $- - $- - $ 325 5.6% $ 342 9 9.6% 94 4.4% - - 37 8.4% - - 1,635 5.2% 1,775 5.3% 1,862 Foreign Currency Exchange Rate Position as...

  • Page 33
    ..., identifiable cost incurred in selling the vendor's product should be recorded as a reduction of that expense. Wal-Mart had historically recorded certain consideration from vendors as a reduction of expenses, primarily advertising. We adopted EITF 02-16 on February 1, 2003, and now account for this...

  • Page 34
    ... of Wal-Mart and its Management as to future occurrences and trends. These forward-looking statements are subject to risks, uncertainties and other factors, in the United States and internationally, that could affect our financial performance, business strategy, plans, goals and objectives. Those...

  • Page 35
    ...Statements of Income (Amounts in millions except per share data) Fiscal years ended January 31, Revenues: Net sales Other income, net Costs and Expenses: Cost of sales Operating, selling, general and administrative expenses Operating Profit Interest: Debt Capital leases Interest income 2004... Current ...

  • Page 36
    ...lease Less accumulated amortization Property under capital leases, net Other Assets and Deferred Charges: Goodwill Other assets and deferred charges Other assets of discontinued operation Total Assets Liabilities and Shareholders' Equity Current Liabilities: Commercial paper Accounts payable Accrued...

  • Page 37
    ... adjustment Hedge accounting adjustment Minimum pension liability adjustment Total Comprehensive Income Cash dividends ($0.30 per share) Purchase of Company stock Stock options exercised and other Balance - January 31, 2003 Comprehensive Income Net income from continuing operations Net income from...

  • Page 38
    .../(decrease) in commercial paper Proceeds from issuance of long-term debt Purchase of Company stock Dividends paid Payment of long-term debt Payment of capital lease obligations Other financing activities Net cash used in financing activities Effect of exchange rate changes on cash Net increase in...

  • Page 39
    37 1 Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of Wal-Mart Stores, Inc. ("Wal-Mart") and its subsidiaries. Significant intercompany transactions have been eliminated in consolidation. Investments in which the Company has a 20...

  • Page 40
    ...includes actual product cost, change in inventory, the cost of transportation to the Company's warehouses from suppliers, the cost of transportation from the Company's warehouses to the stores and Clubs and the cost of warehousing for our SAM'S CLUB segment. Payments from Suppliers Wal-Mart receives...

  • Page 41
    ... and administrative expenses include all operating costs of the Company that are not related to the transportation of products from the supplier to the warehouse or from the warehouse to the store. Additionally, the cost of warehousing and occupancy for our Wal-Mart Stores segment distribution...

  • Page 42
    ..., identifiable cost incurred in selling the vendor's product should be recorded as a reduction of that expense. Wal-Mart had historically recorded certain consideration from vendors primarily as a reduction of advertising expense. We adopted EITF 02-16 on February 1, 2003, and now account for this...

  • Page 43
    ...paper. At January 31, 2004, the Company had committed lines of $5.1 billion with 73 firms and banks and informal lines of credit with various banks totaling an additional $145 million, which were used to support commercial paper. Long-term debt at January 31, consists of (in millions): Interest Rate...

  • Page 44
    ... under our shelf registration statement. 3 Financial Instruments The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to interest and foreign exchange rates. Use of derivative financial instruments in hedging programs subjects the Company to...

  • Page 45
    ..., we have applied the "short-cut" method of accounting provided under FAS 133 and FAS 138. As such, the derivative instruments were assumed to be perfect hedges and all changes in fair value of the hedges were recorded on the balance sheet with no net impact on the income statement. Net Investment...

  • Page 46
    ... instruments: The fair values are estimated amounts the Company would receive or pay to terminate the agreements as of the reporting dates. 4 Other Accumulated Comprehensive Income Comprehensive income is net income plus certain other items that are recorded directly to Shareholders' equity. The...

  • Page 47
    ... rate State income taxes, net of federal income tax benefit International Other 2003 35.00% 1.36% (1.29%) 0.16% 35.23% Federal and state income taxes have not been provided on accumulated but undistributed earnings of foreign subsidiaries aggregating approximately $4.0 billion at January 31, 2004...

  • Page 48
    ... the terms of the agreement, Wal-Mart, through a series of warrants exercisable in specified series through 2007, can contribute approximately 235 billion yen, or $2.2 billion at January 31, 2004, using an exchange rate of 105.7 yen per dollar, for additional shares of stock in Seiyu. If all the...

  • Page 49
    ... - 56.80 $ 4.24 - 60.90 $ $ 1,297,604,000 (180,666,000) (171,389,000) $ 3,213,990,000 124,589,000 102,459,000 Income tax benefit resulting from the tax deductions triggered by employee exercise of stock options amounted to $83 million, $84 million and $106 million in fiscal...

  • Page 50
    ... the exempt status of Wal-Mart assistant store managers and photo-center managers under California law have been filed in Los Angeles County Superior Court. No determination has been made as to class certification in any of these cases. The Company is a defendant in Dukes v. Wal-Mart Stores, Inc...

  • Page 51
    ... or transfer requests at the London, Kentucky, Distribution Center from 1995 to the present, and who were not hired or transferred into the warehouse positions for which they applied. The class seeks back pay for those females not selected for hire or transfer during the relevant time period...

  • Page 52
    ... Stores, Supercenters and Neighborhood Markets in the United States as well as Wal-Mart.com. The SAM'S CLUB segment includes the warehouse membership Clubs in the United States. The International segment consists of the Company's operations in Argentina, Brazil, China, Germany, South Korea, Mexico...

  • Page 53
    ...the total operations of the International segment. ASDA sales during fiscal 2004, 2003 and 2002 were $21.7 billion, $18.1 billion and $15.3 billion, respectively. At January 31, 2004 and 2003, ASDA long-lived assets, including primarily net plant, property and equipment and net goodwill, totaled $16...

  • Page 54
    ...0.01 0.57 0.56 0.01 0.57 The sum of quarterly financial data will not agree to annual amounts due to rounding. Fiscal 2003 has been restated for the adoption of FAS 123 for which the Company elected the retroactive restatement transition method and for the sale of McLane as a discontinued operation...

  • Page 55
    53 Report of Independent Auditors The Board of Directors and Shareholders, Wal-Mart Stores, Inc. We have audited the accompanying consolidated balance sheets of Wal-Mart Stores, Inc. as of January 31, 2004 and 2003, and the related consolidated statements of income, shareholders' equity and cash ...

  • Page 56
    .... Through the open door policy all Associates are encouraged to inform Management at the appropriate level when they are concerned about any matter pertaining to the Company. Wal-Mart has adopted a Statement of Ethics to guide our Associates in the continued observance of high ethical standards such...

  • Page 57
    ... Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina 27...

  • Page 58
    ...Corporate Address: Wal-Mart Stores, Inc. 702 S.W. 8th Street Bentonville, Arkansas 72716 Telephone: (479) 273-4000 Retail Internet Site: http://www.walmart.com Corporate Internet Site: http://www.walmartstores.com The following reports are available without charge upon request by writing the Company...

  • Page 59
    ... in the San Antonio, Texas, office of the law firm of Akin, Gump, Strauss, Hauer & Feld LLP. John T. Walton Mr. Walton is the Chairman of True North Partners, LLC, which holds investments in technology companies. S. Robson Walton Mr. Walton is the Chairman of the Board of Wal-Mart. Shareholders As...

  • Page 60