Walmart 2007 Annual Report Download - page 54

Wal-Mart 2007 Annual Report 52
In July 2006, the Company agreed to dispose of its German operations,
which operated 85 stores, to Metro AG, and recorded a pretax loss of
$918 million during  scal 2007. The transaction was approved by the
European competition authorities and closed during the third quarter
of  scal 2007. In addition, the Company recognized a tax bene t of
$126 million related to this transaction in  scal 2007. The transaction
continues to be subject to a post-closing adjustment and other
indemni cation obligations. In the event there are any additional
charges associated with this divestiture, we will record and report
such amounts through discontinued operations in future periods.
In addition to the gain and loss on the dispositions noted above,
discontinued operations as presented in the Company’s Consolidated
Statements of Income also include net sales and net operating losses
from our South Korean and German operations as follows:
Fiscal Year Ended January 31, 2007 2006 2005
Net sales $2,489 $3,482 $3,734
Net losses (142) (177) (215)
7
Share-Based
Compensation Plans
As of January 31, 2007, the Company has awarded share-based
compensation to executives and other associates of the Company
through various share-based compensation plans. The compensa-
tion cost recognized for all plans was $271 million, $244 million, and
$204 million for  scal 2007, 2006 and 2005, respectively. The total
income tax bene t recognized for all share-based compensation
plans was $101 million, $82 million and $71 million for  scal 2007,
2006 and 2005, respectively.
On February 1, 2003, the Company adopted the expense recognition
provisions of Statement of Financial Accounting Standards No. 123
(“SFAS 123”), restating results for prior periods. In December 2004, the
Financial Accounting Standards Board issued a revision of SFAS 123
(“SFAS 123(R)”). The Company adopted the provisions of SFAS 123(R)
upon its release. The adoption of SFAS 123(R) did not have a material
impact on our results of operations,  nancial position or cash  ows.
All share-based compensation is accounted for in accordance with
the fair-value based method of SFAS 123(R).
The Company’s Stock Incentive Plan of 2005 (the “Plan”), which is
shareholder-approved, was established to grant stock options, restricted
(non-vested) stock and performance share compensation awards to
its associates, and 210 million shares of common stock to be issued
under the Plan have been registered under the Securities Act of 1933.
The Company believes that such awards better align the interests of
its associates with those of its shareholders.
Under the Plan and prior plans, substantially all stock option awards
have been granted with an exercise price equal to the market price
of the Company’s stock at the date of grant. Generally, outstanding
options granted before  scal 2001 vest over seven years. Options
granted after  scal 2001 generally vest over  ve years. Shares issued
upon the exercise of options are newly issued. Options granted gen-
erally have a contractual term of 10 years.
The Company’s United Kingdom subsidiary, Asda, also o ers two other
stock option plans to its associates. The  rst plan, The Asda Colleague
Share Ownership Plan 1999 (“CSOP”), grants options to certain asso-
ciates. Options granted under the CSOP Plan generally expire six years
from the date of grant, with half vesting on the third anniversary of
the grant and the other half on the sixth anniversary of the date of
grant. Shares in the money at the vesting date are exercised while
shares out of the money at the vesting date expire. The second plan,
The Asda Sharesave Plan 2000 (“Sharesave”), grants options to certain
associates at 80% of market value on the date of grant. Sharesave
options become exercisable after either a three-year or  ve-year period
and generally lapse six months after becoming exercisable. The Asda
Colleague Share Ownership Plan 1999 and The Asda ShareSave Plan
2000 were registered to grant stock options to its colleagues for up
to 34 million shares of common stock.
The fair value of each stock option award is estimated on the date of
grant using the Black-Scholes-Merton option valuation model that
uses various assumptions for inputs, which are noted in the following
table. Generally, the Company uses expected volatilities and risk-free
interest rates that correlate with the expected term of the option when
estimating an option’s fair value. To determine the expected life of the
option, the Company bases its estimates on historical exercise and
expiration activity of grants with similar vesting periods. Expected
volatility is based on historical volatility of our stock and the expected
risk-free interest rate is based on the United States Treasury yield
curve at the time of the grant. The expected dividend yield is based
on the annual dividend rate at the time of grant. The following
tables represent a weighted average of the assumptions used by
the Company to estimate the fair values of the Company’s stock
options at the grant dates:
Fiscal Year Ended January 31, 2007 2006 2005
Dividend yield 2.3% 1.6% 1.1%
Volatility 19.4% 20.8% 25.7%
Risk-free interest rate 4.8% 4.0% 3.3%
Expected life in years 5.3 4.1 4.9
Notes to Consolidated Financial Statements