Walmart 2008 Annual Report Download - page 42

40 WAL-MART 2008 ANNUAL REPORT
Notes to Consolidated Financial Statements
6 Acquisitions, Investments and Disposals
Acquisitions and Investments
In February 2007, the Company announced the purchase of a 35%
interest in BCL. BCL operates 101 hypermarkets in 34 cities in China
under the Trust-Mart banner. The purchase price for the 35% interest
was $264 million. As additional consideration, the Company paid
$376 million to extinguish a loan issued to the selling BCL sharehold-
ers that is secured by the pledge of the remaining equity of BCL.
Concurrent with its initial investment in BCL, the Company entered
into a stockholders agreement which provides the Company with
voting rights associated with a portion of the common stock of
BCL securing the loan, amounting to an additional 30% of the aggre-
gate outstanding shares. Pursuant to the purchase agreement, the
Company is committed to purchase the remaining interest in BCL
on or before February 2010 subject to certain conditions. The nal
purchase price for the remaining interest will be approximately
$320 million, net of loan repayments and subject to reduction under
certain circumstances.
After closing the acquisition, the Company began consolidating BCL
using a December 31 scal year-end. The Company’s Consolidated
Statements of Income for scal year 2008 include the results of BCL
for the period commencing upon the acquisition of the Company’s
interest in BCL and ending December 31, 2007. BCL’s results of opera-
tions were not material to the Company. Assets recorded in the
acquisition were approximately $1.6 billion, including approximately
$1.1 billion in goodwill, and liabilities assumed were approximately
$1.0 billion. The Consolidated Financial Statements of BCL, as well as
the allocation of the purchase price, are preliminary.
In August 2007, the Company announced an agreement between
Wal-Mart and Bharti Enterprises, an Indian company, to establish
a joint venture called Bharti Wal-Mart Private Limited to conduct
wholesale cash-and-carry and back-end supply chain management
operations in India, in compliance with Government of India guide-
lines. The rst wholesale facility is targeted to open in late scal 2009.
The joint venture was formed to establish wholesale warehouse
facilities to serve retailers and business owners by selling them mer-
chandise at wholesale prices, including Bharti Retail, a wholly-owned
subsidiary of Bharti Enterprises, that is developing a chain of retail
stores in India. In addition, Bharti Retail has entered into a franchise
agreement with an Indian subsidiary of Wal-Mart under which it will
provide technical support to its retail business.
In October 2007, the Company announced the launch of a tender
oer to acquire the remaining outstanding common and preferred
shares of our Japanese subsidiary, Seiyu. Prior to the offer, the
Company owned 50.9% of Seiyu. The tender oer commenced on
October 23, expired on December 4, and closed on December 11,
2007. At closing, the Company acquired the majority of the common
shares and all minority preferred shares for approximately $865 mil-
lion, and expects to nalize the purchase of any remaining minority
common shareholders by April 2008. The Company now owns
approximately 95% of the common shares and all of the preferred
shares of Seiyu. This acquisition of the remaining Seiyu shares not
owned by the Company resulted in the recording of $547 million of
goodwill and the elimination of $318 million minority interest related
to the preferred shareholders. The allocation of the purchase price
is preliminary and will be nalized in scal 2009.
Disposals
During scal 2007, the Company disposed of its operations in South
Korea and Germany, which had been included in our International
segment. Consequently, the net losses and cash flows related to
these operations are presented as discontinued operations in our
Consolidated Statements of Income and our Consolidated State-
ments of Cash Flows for the appropriate periods presented.
The Company recorded a pretax gain on the sale of its retail business
in South Korea of $103 million, and tax expense of $63 million during
scal 2007. In determining the gain on the disposition of our South
Korean operations, the Company allocated $206 million of goodwill
from the International reporting unit.
The Company recorded a loss of $918 million on the disposal of its
German operations during scal 2007. In addition, the Company
recognized a tax benet of $126 million related to this transaction in
scal 2007. The Company recorded a charge of $153 million in scal
2008 to discontinued operations related to the settlement of a post-
closing adjustment and certain other indemnication obligations.
In addition to the gain and loss on the dispositions noted above, dis-
continued 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 (in millions):
Fiscal Year Ended January 31,
(Amounts in millions) 2007 2006
Net sales $2,489 $3,482
Net losses (142) (177)
7 Share-Based Compensation Plans
As of January 31, 2008, 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 $276 million, $271 million and
$244 million for scal 2008, 2007 and 2006, respectively. The total
income tax benet recognized for all share-based compensation
plans was $102 million, $101 million and $82 million for scal 2008,
2007 and 2006, respectively.
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 “Securities Act”).