EX-13 9 wmt13114ars.htm PORTIONS OF OUR ANNUAL REPORT TO SHAREHOLDERS WMT 1/31/14 ARS

Five-Year Financial Summary
Exhibit 13
Wal-Mart Stores, Inc.
 

 
 
As of and for the Fiscal Years Ended January 31,
(Amounts in millions, except per share and unit count data)
 
2014
 
2013
 
2012
 
2011
 
2010
Operating results
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
476,294

 
$
468,651

 
$
446,509

 
$
421,395

 
$
407,697

Percentage change in total revenues from previous fiscal year
 
1.6
 %
 
5.0
%
 
6.0
%
 
3.4
 %
 
8.1
 %
Net sales
 
473,076

 
465,604

 
443,416

 
418,500

 
404,743

Percentage change in net sales from previous fiscal year
 
1.6
 %
 
5.0
%
 
6.0
%
 
3.4
 %
 
0.9
 %
Increase (decrease) in calendar comparable sales(1) in the United States
 
(0.5
)%
 
2.4
%
 
1.6
%
 
(0.6
)%
 
(0.8
)%
Walmart U.S.
 
(0.6
)%
 
2.0
%
 
0.3
%
 
(1.5
)%
 
(0.7
)%
Sam's Club
 
0.3
 %
 
4.1
%
 
8.4
%
 
3.9
 %
 
(1.4
)%
Gross profit margin
 
24.3
 %
 
24.3
%
 
24.5
%
 
24.8
 %
 
24.9
 %
Operating, selling, general and administrative expenses, as a percentage of net sales
 
19.3
 %
 
19.0
%
 
19.2
%
 
19.4
 %
 
19.7
 %
Operating income
 
$
26,872

 
$
27,725

 
$
26,491

 
$
25,508

 
$
23,969

Income from continuing operations attributable to Walmart
 
15,918

 
16,963

 
15,734

 
15,340

 
14,433

Net income per common share:
 
 
 
 
 
 
 
 
 
 
Diluted income per common share from continuing operations attributable to Walmart
 
$
4.85

 
$
5.01

 
$
4.53

 
$
4.18

 
$
3.72

Dividends declared per common share
 
1.88

 
1.59

 
1.46

 
1.21

 
1.09

 
 
 
 
 
 
 
 
 
 
 
Financial position
 
 
 
 
 
 
 
 
 
 
Inventories
 
$
44,858

 
$
43,803

 
$
40,714

 
$
36,437

 
$
32,713

Property, equipment and capital lease assets, net
 
117,907

 
116,681

 
112,324

 
107,878

 
102,307

Total assets
 
204,751

 
203,105

 
193,406

 
180,782

 
170,407

Long-term debt and long-term capital lease obligations (excluding amounts due within one year)
 
44,559

 
41,417

 
47,079

 
43,842

 
36,401

Total Walmart shareholders' equity
 
76,255

 
76,343

 
71,315

 
68,542

 
70,468

 
 
 
 
 
 
 
 
 
 
 
Unit counts
 
 
 
 
 
 
 
 
 
 
Walmart U.S. segment
 
4,203

 
4,005

 
3,868

 
3,804

 
3,755

Walmart International segment
 
6,107

 
5,783


5,287


4,191


3,739

Sam's Club segment
 
632

 
620

 
611

 
609

 
605

Total units
 
10,942

 
10,408

 
9,766

 
8,604

 
8,099


(1)
Comparable store and club sales include fuel. Comparable sales include sales from stores and clubs open for the previous 12 months, including remodels, relocations and expansions, as well as e-commerce sales.




Wal-Mart Stores, Inc.
Form 10-K
For the Fiscal Year Ended January 31, 2014


Table of Contents

2


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Wal-Mart Stores, Inc. ("Walmart," the "Company" or "we") operates retail and other stores in various formats around the world and is committed to saving people money so they can live better. Our operations consist of three reportable segments: Walmart U.S., Walmart International and Sam's Club.
The Walmart U.S. segment includes the Company's mass merchant concept in the United States ("U.S."), operating under the "Walmart" or "Wal-Mart" brand with various formats, including supercenters, discount stores, Neighborhood Markets and other small stores, as well as walmart.com. Of our three segments, Walmart U.S. is the largest and has historically had the highest gross profit as a percentage of net sales ("gross profit rate"). In addition, Walmart U.S. has historically contributed the greatest amount to the Company's net sales and operating income.
The Walmart International segment consists of the Company's operations outside of the U.S., including various retail websites. Walmart International operates retail, wholesale and other types of units, including restaurants and some banks. The overall gross profit rate for Walmart International is lower than that of Walmart U.S. because of its merchandise mix. Walmart International has generally been our most rapidly growing segment, growing primarily through new stores and acquisitions and, in recent years, has been growing its net sales and operating income at a faster rate than our other segments. However, for fiscal 2014, Walmart International sales growth slowed due to fluctuations in currency exchange rates, as well as no significant acquisitions, and operating income declined as a result of certain operating expenses.
The Sam's Club segment includes the warehouse membership clubs in the U.S., as well as samsclub.com. Sam's Club operates as a membership club warehouse with a lower gross profit rate and lower operating expenses as a percentage of net sales than our other segments.
At Walmart U.S., we earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices ("EDLP"), while fostering a culture that rewards and embraces mutual respect, integrity and diversity. EDLP is our pricing philosophy under which we price items at a low price every day so that our customers trust that our prices will not change under frequent promotional activities. Our focus for Sam's Club is to provide exceptional value on brand name and private label merchandise at "members only" prices for both business and personal use. Internationally, we operate with similar philosophies.
Our fiscal year ends on January 31 for our U.S. and Canadian operations. We consolidate all other operations generally using a one-month lag and on a calendar year basis. Our business is seasonal to a certain extent due to different calendar events and national and religious holidays, as well as different weather patterns. Historically, our highest sales volume and operating income have occurred in the fiscal quarter ending January 31.
This discussion, which presents our results for the fiscal years ended January 31, 2014 ("fiscal 2014"), January 31, 2013 ("fiscal 2013") and January 31, 2012 ("fiscal 2012"), should be read in conjunction with our Consolidated Financial Statements and accompanying notes. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion provides information about the financial results of the various segments of our business to provide a better understanding of how those segments and their results affect the financial condition and results of operations of the Company as a whole.
Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, we discuss segment operating income, comparable store and club sales and other measures. Management measures the results of the Company's segments using, among other measures, each segment's operating income, including certain corporate overhead allocations. From time to time, we revise the measurement of each segment's operating income or other measures, which include certain corporate overhead allocations, as determined by the information regularly reviewed by our chief operating decision maker. When we do so, the previous period amounts and balances are reclassified to conform to the current period's presentation. The amounts disclosed for "Corporate and support" in the leverage discussion of the Company's performance metrics consist of corporate overhead and other items not allocated to any of the Company's segments.

3


Comparable store and club sales is a metric that indicates the performance of our existing U.S. stores and clubs by measuring the change in sales for such stores and clubs, including e-commerce sales, for a particular period from the corresponding period in the previous year. Walmart's definition of comparable store and club sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as e-commerce sales. We measure the e-commerce sales impact by including those sales initiated through our websites and fulfilled through our dedicated e-commerce distribution facilities, as well as an estimate for sales initiated online, but fulfilled through our stores and clubs. Changes in format are excluded from comparable store and club sales when the conversion is accompanied by a relocation or expansion that results in a change in retail square feet of more than five percent. Comparable store and club sales are also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable store and club sales varies across the retail industry. As a result, our calculation of comparable store and club sales is not necessarily comparable to similarly titled measures reported by other companies.
In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates, and the comparable prior year period's currency exchange rates. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. When we refer to constant currency operating results, we are referring to our operating results without the impact of the currency exchange rate fluctuations and without the impact of acquisitions until the acquisitions are included in both comparable periods. The disclosure of constant currency amounts or results permits investors to understand better Walmart's underlying performance without the effects of currency exchange rate fluctuations or acquisitions. Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company and the Walmart International segment in the future.
We made certain reclassifications to prior period amounts or balances to conform to the presentation in the current fiscal year. These reclassifications did not impact the Company's operating income or consolidated net income. Additionally, certain prior period segment asset and expense allocations have been reclassified among segments to be comparable with the current period presentation.
The Retail Industry
We operate in the highly competitive retail industry in all of the countries we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as internet-based retailers and catalog businesses. Many of these competitors are national, regional or international chains. We compete with a number of companies for prime retail site locations, as well as in attracting and retaining quality employees (whom we call "associates"). We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, climate change, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, cost of goods, currency exchange rate fluctuations, customer preferences, deflation, fuel and energy prices, general economic conditions, inflation, insurance costs, interest rates, labor costs, tax rates, unemployment and weather patterns. Further information on the factors that can affect our operating results and on certain risks to our Company and an investment in its securities can be located in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2014, and in the discussion under "Forward-Looking Statements."
Company Performance Metrics
The Company's performance metrics emphasize three priorities for improving shareholder value: growth, leverage and returns. The Company's priority of growth focuses on sales through comparable store and club sales, including e-commerce sales, and unit square feet growth; the priority of leverage encompasses the Company's objective to increase its operating income at a faster rate than the growth in net sales by growing its operating, selling, general and administrative expenses ("operating expenses") at a slower rate than the growth of its net sales; and the priority of returns focuses on how efficiently the Company employs its assets through return on investment and how effectively the Company manages working capital through free cash flow.

4


Growth
Net Sales
 
 
Fiscal Years Ended January 31,
 
 
2014
 
2013
 
2012
(Amounts in millions)
 
Net Sales
 
Percent 
of Total
 
Percent
Change
 
Net Sales
 
Percent 
of Total
 
Percent
Change
 
Net Sales
 
Percent 
of Total
Walmart U.S.
 
$
279,406

 
59.0
%
 
1.8
%
 
$
274,433

 
59.0
%
 
3.9
%
 
$
264,186

 
59.6
%
Walmart International
 
136,513

 
28.9
%
 
1.3
%
 
134,748

 
28.9
%
 
7.4
%
 
125,435

 
28.3
%
Sam's Club
 
57,157

 
12.1
%
 
1.3
%
 
56,423

 
12.1
%
 
4.9
%
 
53,795

 
12.1
%
Net sales
 
$
473,076

 
100.0
%
 
1.6
%
 
$
465,604

 
100.0
%
 
5.0
%
 
$
443,416

 
100.0
%
Our consolidated net sales increased 1.6% and 5.0% for fiscal 2014 and 2013, respectively, when compared to the previous fiscal year. The increase in net sales for fiscal 2014 was primarily due to 3.1% year-over-year growth in retail square feet, higher e-commerce sales, the impact of fiscal 2013 acquisitions, which accounted for $730 million of the net sales increase, and positive comparable club sales at Sam's Club. The positive effect of these items was partially offset by $5.1 billion of negative impact from fluctuations in currency exchange rates and decreases in comparable store sales at Walmart U.S. and in a number of our international operations. The increase in net sales for fiscal 2013 was due to 3.3% growth in retail square feet and positive comparable store and club sales. Additionally, net sales from acquisitions, through their respective anniversary dates, accounted for $4.0 billion of the increase in net sales. The increase in net sales for fiscal 2013 was partially offset by $4.5 billion of negative impact from fluctuations in currency exchange rates. 
Calendar Comparable Store and Club Sales
Comparable store and club sales is a metric that indicates the performance of our existing U.S. stores and clubs by measuring the change in sales for such stores and clubs, including e-commerce sales, for a particular period over the corresponding period in the previous year. The retail industry generally reports comparable store and club sales using the retail calendar (also known as the 4-5-4 calendar) and, to be consistent with the retail industry, we provide comparable store and club sales using the retail calendar in our quarterly earnings releases. However, when we discuss our comparable store and club sales below, we are referring to our calendar comparable store and club sales calculated using our fiscal calendar. As our fiscal calendar differs from the retail calendar, our calendar comparable store and club sales also differ from the retail calendar comparable store and club sales provided in our quarterly earnings releases. Calendar comparable store and club sales, as well as the impact of fuel, for fiscal 2014 and 2013, were as follows:
 
 
With Fuel
 
Fuel Impact
 
 
Fiscal Years Ended January 31,
 
Fiscal Years Ended January 31,
 
 
2014
 
2013
 
2014
 
2013
Walmart U.S.
 
(0.6
)%
 
2.0
%
 
0.0
 %
 
0.0
%
Sam's Club
 
0.3
 %
 
4.1
%
 
(0.3
)%
 
0.3
%
Total U.S.
 
(0.5
)%
 
2.4
%
 
(0.1
)%
 
0.1
%

Comparable store and club sales in the U.S., including fuel, decreased 0.5% in fiscal 2014 and increased 2.4% in fiscal 2013, when compared to the previous fiscal year. The total U.S. comparable store and club sales for fiscal 2014 were negatively impacted by lower consumer spending primarily due to the slow recovery in general economic conditions, the 2% increase in the 2013 payroll tax rate, and the reduction in government food benefits and severe winter storms that occurred during the fourth quarter. These factors were partially offset by increased member traffic at Sam's Club primarily coming from Savings Members. Additionally, e-commerce sales positively impacted Walmart U.S. comparable store and Sam's Club comparable club sales percentages by approximately 0.3%. The total U.S. comparable store and club sales for fiscal 2013 increased as a result of improved average ticket and an increase in customer traffic.
As we continue to add new stores and clubs in the U.S., we do so with an understanding that additional stores and clubs may take sales away from existing units. We estimate the negative impact on comparable store and club sales as a result of opening new stores and clubs was approximately 0.8% and 0.7% in fiscal 2014 and 2013, respectively. Our estimate is calculated primarily by comparing the sales trends of the impacted stores and clubs, which are identified based on their proximity to the new stores and clubs, to those of nearby non-impacted stores and clubs, in each case, as measured after the new stores and clubs are opened.

5


Leverage
Operating Income
 
Fiscal Years Ended January 31,
 
2014
 
2013
 
2012
(Amounts in millions)
Operating Income
 
Percent 
of Total
 
Percent
Change
 
Operating Income
 
Percent 
of Total
 
Percent
Change
 
Operating Income
 
Percent 
of Total
Walmart U.S.
$
22,351

 
83.2
 %
 
4.0
 %
 
$
21,491

 
77.5
 %
 
5.4
%
 
$
20,381

 
76.9
 %
Walmart International
5,454

 
20.3
 %
 
(17.6
)%
 
6,617

 
23.9
 %
 
8.2
%
 
6,113

 
23.1
 %
Sam's Club
1,975

 
7.3
 %
 
0.8
 %
 
1,960

 
7.1
 %
 
6.3
%
 
1,844

 
7.0
 %
Corporate and support
(2,908
)
 
(10.8
)%
 
24.1
 %
 
(2,343
)
 
(8.5
)%
 
26.9
%
 
(1,847
)
 
(7.0
)%
Operating income
$
26,872

 
100.0
 %
 
(3.1
)%
 
$
27,725

 
100.0
 %
 
4.7
%
 
$
26,491

 
100.0
 %
We believe comparing both the growth of our operating expenses and our operating income to the growth of our net sales are meaningful measures as they indicate how effectively we manage costs and leverage operating expenses. Our objective for a fiscal year is to grow operating expenses at a slower rate than net sales and to grow operating income at a faster rate than net sales. On occasion, we may make strategic growth investments that may, at times, cause our operating expenses to grow at a faster rate than net sales and that may result in our operating income growing at a slower rate than net sales.
Operating Expenses
For fiscal 2014, we did not meet our objective of growing operating expenses at a slower rate than net sales as operating expenses as a percentage of net sales increased 27 basis points. Overall, lower than anticipated net sales, higher investment in key areas, such as global leverage and e-commerce initiatives, and nearly $1.0 billion of increased expenses for various matters described in the Walmart International segment discussion, were the primary causes for the increase in operating expenses as a percentage of net sales. Additional expenses related to the Foreign Corrupt Practices Act ("FCPA") inquiries and investigations, as well as our global compliance program and related organizational enhancements, also contributed to the increase in operating expenses as a percentage of net sales. The negative leverage impact of these items was partially offset by lower incentive expenses for fiscal 2014. For fiscal 2013, we met our objective of growing operating expenses at a slower rate than net sales as operating expenses as a percentage of net sales decreased 14 basis points. The fiscal 2013 decrease in operating expenses as a percentage of net sales was primarily due to productivity improvements and expense management.
Expenses incurred for the FCPA inquiries and investigations, as well as our global compliance program and related organizational enhancements, were $282 million and $157 million for fiscal 2014 and 2013, respectively.
Operating Income
For fiscal 2014, we did not meet our objective of growing operating income at a faster rate than net sales as operating income decreased 3.1% while net sales increased 1.6%, when compared to the previous fiscal year. This was primarily due to the factors we discussed for not leveraging operating expenses, partially offset by increases in membership and other income of 5.6%. For fiscal 2013, we also did not meet our objective of growing operating income at a faster rate than net sales as operating income increased 4.7% while net sales increased 5.0%, when compared to the previous fiscal year. The primary causes for operating income growing slower than net sales in fiscal 2013 were our increased investments in e-commerce initiatives, increased expenses related to the FCPA inquiries and investigations, as well as our global compliance program and related organizational enhancements, and investments in price, which reduced gross margin.

6


Returns
Return on Investment
Management believes return on investment ("ROI") is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term potential strategic initiatives with possible short-term impacts. ROI was 17.0% and 18.1% for fiscal 2014 and 2013, respectively. The decline in ROI was primarily due to a decline in operating income, investments in property and equipment and the impact of acquisitions.
ROI is considered a non-GAAP financial measure. We consider return on assets ("ROA") to be the financial measure computed in accordance with generally accepted accounting principles ("GAAP") that is the most directly comparable financial measure to our calculation of ROI. ROA was 8.1% and 8.9% for fiscal 2014 and 2013, respectively.
We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing twelve months or fiscal year divided by average invested capital during that period. We consider average invested capital to be the average of our beginning and ending total assets of continuing operations, plus average accumulated depreciation and amortization less average accounts payable and average accrued liabilities for that period, plus a rent factor equal to the rent for the fiscal year or trailing twelve months multiplied by a factor of eight. When we have discontinued operations, we exclude the impact of the discontinued operations.
Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable GAAP financial measure. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. In addition, we include a factor of eight for rent expense that estimates the hypothetical capitalization of our operating leases. ROI differs from ROA (which is consolidated income from continuing operations for the period divided by average total assets of continuing operations for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; adjusts total assets of continuing operations for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities; and incorporates a factor of rent to arrive at total invested capital.
Although ROI is a standard financial metric, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI. We urge you to understand the methods used by other companies to calculate their ROI before comparing our ROI to that of such other companies.

7


The calculation of ROI, along with a reconciliation to the calculation of ROA, the most comparable GAAP financial measure, is as follows:
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2014
 
2013
CALCULATION OF RETURN ON INVESTMENT
Numerator
 
 
 
 
Operating income
 
$
26,872

 
$
27,725

+ Interest income
 
119

 
186

+ Depreciation and amortization
 
8,870

 
8,478

+ Rent
 
2,828

 
2,581

= Adjusted operating income
 
$
38,689

 
$
38,970

 
 
 
 
 
Denominator
 
 
 
 
Average total assets of continuing operations(1)
 
$
203,680

 
$
198,193

+ Average accumulated depreciation and amortization(1)
 
57,907

 
51,829

- Average accounts payable(1)
 
37,748

 
37,344

- Average accrued liabilities(1)
 
18,802

 
18,481

+ Rent x 8
 
22,624

 
20,648

= Average invested capital
 
$
227,661

 
$
214,845

Return on investment (ROI)
 
17.0
%
 
18.1
%
 
 
 
 
 
CALCULATION OF RETURN ON ASSETS
Numerator
 
 
 
 
Income from continuing operations
 
$
16,551

 
$
17,704

Denominator
 
 
 
 
Average total assets of continuing operations(1)
 
$
203,680

 
$
198,193

Return on assets (ROA)
 
8.1
%
 
8.9
%

 
 
As of January 31,
 
 
2014
 
2013
 
2012
Certain Balance Sheet Data
 
 
 
 
 
 
Total assets of continuing operations(2)
 
$
204,291

 
$
203,068

 
$
193,317

Accumulated depreciation and amortization
 
60,771

 
55,043

 
48,614

Accounts payable
 
37,415

 
38,080

 
36,608

Accrued liabilities
 
18,793

 
18,808

 
18,154

 
(1)
The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2.
(2)
Total assets of continuing operations as of January 31, 2014, 2013 and 2012 in the table exclude assets of discontinued operations that are reflected in the Company's Consolidated Balance Sheets of $460 million, $37 million and $89 million, respectively.

8


Free Cash Flow
We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. We generated free cash flow of $10.1 billion, $12.7 billion and $10.7 billion for fiscal 2014, 2013 and 2012, respectively. The decline in free cash flow for fiscal 2014, when compared to the previous fiscal year, was primarily due to the timing of income tax payments, as well as lower income from continuing operations and slightly higher capital expenditures. The fiscal 2013 increase in free cash flow was primarily due to higher income from continuing operations positively impacting net cash generated from operating activities and lower capital expenditures.
Free cash flow is considered a non-GAAP financial measure. We consider net cash provided by operating activities to be the GAAP financial measure most directly comparable to free cash flow. Management believes that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated income from continuing operations as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.
Additionally, our definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures as the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows.
Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by our management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow. We urge you to understand the methods used by other companies to calculate their free cash flow before comparing our free cash flow to that of such other companies.
The following table sets forth a reconciliation of free cash flow to net cash provided by operating activities, as well as information regarding net cash used in investing activities and net cash used in financing activities.
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2014
 
2013
 
2012
Net cash provided by operating activities
 
$
23,257

 
$
25,591

 
$
24,255

Payments for property and equipment
 
(13,115
)
 
(12,898
)
 
(13,510
)
Free cash flow
 
$
10,142

 
$
12,693

 
$
10,745

 
 
 
 
 
 
 
Net cash used in investing activities(1)
 
$
(12,298
)
 
$
(12,611
)
 
$
(16,609
)
Net cash used in financing activities
 
(11,017
)
 
(11,972
)
 
(8,458
)
(1)
"Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.

9


Results of Operations
Consolidated Results of Operations
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2014
 
2013
 
2012
Total revenues
 
$
476,294

 
$
468,651

 
$
446,509

Percentage change in total revenues from previous fiscal year
 
1.6
 %
 
5.0
%
 
6.0
%
Net sales
 
$
473,076

 
$
465,604

 
$
443,416

Percentage change in net sales from previous fiscal year
 
1.6
 %
 
5.0
%
 
5.9
%
Total U.S. calendar comparable store and club sales
 
(0.5
)%
 
2.4
%
 
1.6
%
Gross profit margin as a percentage of net sales
 
24.3
 %
 
24.3
%
 
24.5
%
Operating income
 
$
26,872

 
$
27,725

 
$
26,491

Operating income as a percentage of net sales
 
5.7
 %
 
6.0
%
 
6.0
%
Income from continuing operations
 
$
16,551

 
$
17,704

 
$
16,408

Unit counts at period end
 
10,942

 
10,408

 
9,766

Retail square feet at period end
 
1,101

 
1,070

 
1,035

Our total revenues, which are mostly comprised of net sales, but also include membership and other income, increased 1.6% and 5.0% for fiscal 2014 and 2013, respectively, when compared to the previous fiscal year. The increase in total revenues was primarily a result of increases in our net sales, which also increased 1.6% and 5.0% for fiscal 2014 and 2013, respectively. The increase in net sales for fiscal 2014 was primarily due to 3.1% year-over-year growth in retail square feet, higher e-commerce sales, the impact of fiscal 2013 acquisitions, which accounted for $730 million of the net sales increase, and positive comparable club sales at Sam's Club. The positive effect of these items was partially offset by $5.1 billion of negative impact from fluctuations in currency exchange rates and decreases in comparable store sales at Walmart U.S. and in a number of our international operations. The increase in net sales for fiscal 2013 was due to 3.3% growth in retail square feet and positive comparable store and club sales. Additionally, net sales from acquisitions, through their respective anniversary dates, accounted for $4.0 billion of the increase in net sales. The increase in net sales for fiscal 2013 was partially offset by $4.5 billion of negative impact from fluctuations in currency exchange rates.  Increases in membership and other income of 5.6%, primarily due to higher membership and other income at Sam's Club, also contributed to the increase in total revenues for fiscal 2014 and 2013.
Our gross profit rate decreased 3 basis points for fiscal 2014, when compared to the previous fiscal year, primarily due to our ongoing investment in price, as well as merchandise mix. For fiscal 2013, gross profit rate decreased 12 basis points, when compared to the previous fiscal year, primarily due to the Walmart U.S. segment's strategic focus on price investment and low price leadership.
For fiscal 2014, we did not meet our objective of growing operating expenses at a slower rate than net sales as operating expenses as a percentage of net sales increased 27 basis points. Overall, lower than anticipated net sales, higher investment in key areas, such as global leverage and e-commerce initiatives, and nearly $1.0 billion of increased expenses for various matters described in the Walmart International segment discussion, were the primary cause for the increase in operating expenses as a percentage of net sales. Additional expenses related to the FCPA inquiries and investigations, as well as our global compliance program and related organizational enhancements also contributed to the increase in operating expenses as a percentage of net sales. The negative leverage impact of these items was partially offset by lower incentive expenses for fiscal 2014. For fiscal 2013, we met our objective of growing operating expenses at a slower rate than net sales as operating expenses as a percentage of net sales decreased 14 basis points. The fiscal 2013 decrease in operating expenses as a percentage of net sales was primarily due to productivity improvements and expense management.
For fiscal 2014, we did not meet our objective of growing operating income at a faster rate than net sales as operating income decreased 3.1% while net sales increased 1.6%, when compared to the previous fiscal year. This was primarily due to the factors we discussed for not leveraging operating expenses, partially offset by increases in membership and other income. For fiscal 2013, we also did not meet our objective of growing operating income at a faster rate than net sales as operating income increased 4.7% while net sales increased 5.0%, when compared to the previous fiscal year. The primary causes for operating income growing slower than net sales in fiscal 2013 were investments in e-commerce initiatives, increased expenses related to the FCPA inquiries and investigations, as well as our global compliance program and related organizational enhancements, and investments in price, which reduced gross margin.

10


Our effective income tax rates were 32.9%, 31.0% and 32.6% for fiscal 2014, 2013 and 2012, respectively. The reconciliation from the U.S. statutory rate to the effective income tax rates for fiscal 2014, 2013 and 2012 is presented in Note 9 in the "Notes to Consolidated Financial Statements." Our effective income tax rate for fiscal 2014 was higher than in fiscal 2013 primarily due to the tax impacts attributable to repatriated international earnings during fiscal 2014. Our fiscal 2013 effective income tax rate was lower than in fiscal 2012 primarily because the fiscal 2013 rate benefited from a number of discrete tax items, including the positive impact from fiscal 2013 legislative changes arising at the end of the fiscal 2012 year, most notably the American Taxpayer Relief Act of 2012. Our effective income tax rate may fluctuate from period to period as a result of factors including changes in our assessment of certain tax contingencies, increases or decreases in valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix of earnings among our U.S. and international operations where the statutory rates are generally lower than the U.S. statutory rate.
As a result of the factors discussed above, we reported $16.6 billion, $17.7 billion and $16.4 billion of consolidated income from continuing operations for fiscal 2014, 2013 and 2012, respectively, a decrease of $1.1 billion for fiscal 2014 and an increase of $1.3 billion for fiscal 2013, when compared to the previous fiscal year. Diluted income per common share from continuing operations attributable to Walmart ("EPS") was $4.85, $5.01 and $4.53 for fiscal 2014, 2013 and 2012, respectively.
Walmart U.S. Segment
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2014
 
2013
 
2012
Net sales
 
$
279,406

 
$
274,433

 
$
264,186

Percentage change from previous fiscal year
 
1.8
 %
 
3.9
%
 
1.5
%
Calendar comparable store sales
 
(0.6
)%
 
2.0
%
 
0.3
%
Operating income
 
$
22,351

 
$
21,491

 
$
20,381

Operating income as a percentage of net sales
 
8.0
 %
 
7.8
%
 
7.7
%
Unit counts at period end
 
4,203

 
4,005

 
3,868

Retail square feet at period end
 
659

 
641

 
627

Net sales for the Walmart U.S. segment increased 1.8% and 3.9% for fiscal 2014 and 2013, respectively, when compared to the previous fiscal year. For fiscal 2014, the increase in net sales was due to year-over-year growth in retail square feet of 2.9%, partially offset by a decline in comparable store sales of (0.6)%. Our comparable store sales were negatively impacted by lower consumer spending primarily due to the slow recovery in general economic conditions, the 2% increase in the 2013 payroll tax rate, and the reduction in government food benefits and severe winter storms that occurred in the fourth quarter. For fiscal 2013, the increase in net sales was due to a 2.0% increase in comparable store sales as a result of higher average ticket and an increase in customer traffic, combined with a 2.2% increase in retail square feet. 
The fiscal 2014 gross profit rate declined slightly when compared to the previous fiscal year primarily due to our commitment to low price leadership, especially during fiscal 2014's highly competitive holiday sales season, partially offset by cost of goods savings initiatives and supply chain productivity. Gross profit rate declined 16 basis points for fiscal 2013, when compared to the previous fiscal year, primarily due to our strategic focus on price investment and low price leadership.
Walmart U.S. leveraged operating expenses for fiscal 2014 and 2013, as operating expenses as a percentage of segment net sales declined 18 and 27 basis points, respectively, compared to the previous fiscal year. The decrease in operating expenses as a percentage of segment net sales was driven by productivity initiatives in both years, as well as lower incentive expenses in fiscal 2014.
As a result of the factors discussed above, segment operating income was $22.4 billion, $21.5 billion and $20.4 billion during fiscal 2014, 2013 and 2012, respectively, and Walmart U.S. grew operating income faster than sales during fiscal 2014 and 2013.

11


Walmart International Segment
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2014
 
2013
 
2012
Net sales
 
$
136,513

 
$
134,748

 
$
125,435

Percentage change from previous fiscal year
 
1.3
%
 
7.4
%
 
15.3
%
Operating income
 
$
5,454

 
$
6,617

 
$
6,113

Operating income as a percentage of net sales
 
4.0
%
 
4.9
%
 
4.9
%
Unit counts at period end
 
6,107

 
5,783

 
5,287

Retail square feet at period end
 
358

 
346

 
326

Net sales for the Walmart International segment increased 1.3% and 7.4% for fiscal 2014 and 2013, respectively, when compared to the previous fiscal year. For fiscal 2014, the increase in net sales was due to year-over-year growth in retail square feet of 3.6% and the impact of fiscal 2013 acquisitions, which accounted for $730 million of the net sales increase. In addition, higher e-commerce sales in each country with e-commerce operations, particularly in the United Kingdom, Brazil and China, contributed to the increase in net sales. The increase in net sales was partially offset by $5.1 billion of negative impact from fluctuations in currency exchange rates. For fiscal 2013, the increase in net sales was due to year-over-year growth in retail square feet of 5.9% and positive comparable sales. In addition, net sales from fiscal 2012 acquisitions accounted for $4.0 billion of the increase in net sales. The increase in net sales was partially offset by $4.5 billion of negative impact from fluctuations in currency exchange rates. 
Gross profit rate decreased 10 basis points for fiscal 2014 and was flat for fiscal 2013, when compared to the previous fiscal year. The fiscal 2014 decrease in gross profit rate was primarily due to price investments in certain countries, including Brazil, Canada and Mexico.
Walmart International did not leverage operating expenses for fiscal 2014 as operating expenses as a percentage of segment net sales increased 80 basis points, when compared to the previous fiscal year. Operating expenses as a percentage of segment net sales were impacted by lower than anticipated net sales, increased wages and strategic investments, including investments in e-commerce initiatives. In addition, we incurred nearly $1.0 billion of aggregated expenses for the following matters that contributed to the increase in our operating expenses as a percentage of segment net sales:
Charges for contingencies for non-income taxes and employment claims in Brazil;
Charges for the closure of 29 units in China and 25 units in Brazil due to poor performance;
Store lease expenses in China and Mexico to correct a historical accounting practice that did not conform to our global accounting policies; and
Expenses for the termination of the joint venture, franchise and supply agreements related to our former partner's retail store operations in India.
Operating expenses as a percentage of segment net sales decreased 22 basis points in fiscal 2013, when compared to the previous fiscal year. Walmart International leveraged operating expenses in fiscal 2013 primarily due to expense management. While each country is focused on leveraging operating expenses, the countries that generated the most leverage included Brazil, Chile and the United Kingdom in fiscal 2013.
As a result of the factors discussed above, segment operating income was $5.5 billion, $6.6 billion and $6.1 billion for fiscal 2014, 2013 and 2012, respectively. Fluctuations in currency exchange rates negatively impacted operating income $26 million and $111 million in fiscal 2014 and fiscal 2013, respectively, and positively impacted operating income $105 million in fiscal 2012. Walmart International did not grow operating income faster than net sales in fiscal 2014, but grew operating income faster than net sales in fiscal 2013.

12


Sam's Club Segment
We believe the information in the following table under the caption "Excluding Fuel" is useful to investors because it permits investors to understand the effect of the Sam's Club segment's fuel sales on its results of operations, which are impacted by the volatility of fuel prices. Volatility in fuel prices may continue to impact the operating results of the Sam's Club segment in the future. 
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2014
 
2013
 
2012
Including Fuel
 
 
 
 
 
 
Net sales
 
$
57,157

 
$
56,423

 
$
53,795

Percentage change from comparable period
 
1.3
%
 
4.9
%
 
8.8
%
Calendar comparable club sales increase
 
0.3
%
 
4.1
%
 
8.4
%
Operating income
 
$
1,975

 
$
1,960

 
$
1,844

Operating income as a percentage of net sales
 
3.5
%
 
3.5
%
 
3.4
%
Unit counts at period end
 
632

 
620

 
611

Retail square feet at period end
 
84

 
83

 
82

 
 
 
 
 
 
 
Excluding Fuel
 
 
 
 
 
 
Net sales
 
$
50,574

 
$
49,789

 
$
47,616

Percentage change from previous fiscal year
 
1.6
%
 
4.6
%
 
5.4
%
Operating income
 
$
1,949

 
$
1,913

 
$
1,805

Operating income as a percentage of net sales
 
3.9
%
 
3.8
%
 
3.8
%
Net sales for the Sam's Club segment increased 1.3% and 4.9% for fiscal 2014 and 2013, respectively, when compared to the previous fiscal year. The fiscal 2014 increase in net sales was due to year-over-year growth in retail square feet of 2.1%, driven by the addition of 12 new clubs, as well as positive comparable club sales of 0.3%. Our positive comparable club sales were the result of increased member traffic primarily coming from our Savings Members, partially offset by severe winter storms that occurred in the fourth quarter. The net sales increase in fiscal 2013 was primarily due to positive comparable club sales, driven by an increase in customer traffic and average ticket. The addition of nine new clubs in fiscal 2013 also helped increase net sales.
Gross profit rate was flat for fiscal 2014 and 2013, when compared to the previous fiscal year. For fiscal 2014, our gross profit was negatively impacted by $39 million from an adjustment to our product warranty liabilities, which was offset by a favorable impact from merchandise mix.
Membership and other income increased 14.1% and 3.0% for fiscal 2014 and 2013, respectively, when compared to the previous fiscal year. The fiscal 2014 increase was primarily due to the improved contract terms relating to the profit sharing arrangement with our credit card provider, increased membership fees that were introduced on May 15, 2013, $24 million of income from the sale of two real estate properties and an increase in members from the opening of 12 new clubs. The fiscal 2013 increase was primarily due to an increase in total members aided by the opening of nine new clubs.
Sam's Club did not leverage expenses for fiscal 2014 as operating expenses as a percentage of segment net sales increased 26 basis points, when compared to the previous fiscal year. The increase in operating expenses as a percentage of segment net sales was primarily due to a $59 million charge for the implementation of a new in-club staffing structure and the pending closure of one club, as well as a state excise tax refund credit we received in the previous fiscal year. Sam's Club leveraged expenses for fiscal 2013 as operating expenses as a percentage of segment net sales decreased 9 basis points, when compared to the previous fiscal year. The fiscal 2013 decrease was due to improved wage management, a state excise tax refund credit we received and lower expenses in connection with club remodels.
As a result of the factors discussed above, operating income was $2.0 billion, $2.0 billion and $1.8 billion for fiscal 2014, 2013 and 2012, respectively. Sam's Club did not grow operating income faster than net sales in fiscal 2014, but did grow operating income faster than sales in fiscal 2013.

13


Liquidity and Capital Resources
Liquidity
Cash flows provided by operating activities have historically supplied us with a significant source of liquidity. We use these cash flows, supplemented with long-term debt and short-term borrowings, to fund our operations and global expansion activities. Generally, some or all of the remaining available cash flow funds all or part of the dividends on our common stock and share repurchases.
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2014
 
2013
 
2012
Net cash provided by operating activities
 
$
23,257

 
$
25,591

 
$
24,255

Payments for property and equipment
 
(13,115
)
 
(12,898
)
 
(13,510
)
Free cash flow
 
$
10,142

 
$
12,693

 
$
10,745

 
 
 
 
 
 
 
Net cash used in investing activities(1)
 
$
(12,298
)
 
$
(12,611
)
 
$
(16,609
)
Net cash used in financing activities
 
(11,017
)
 
(11,972
)
 
(8,458
)
(1)
"Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.
Cash Flows Provided by Operating Activities
Cash flows provided by operating activities were $23.3 billion, $25.6 billion and $24.3 billion for fiscal 2014, 2013 and 2012, respectively. The decrease in cash flows provided by operating activities for fiscal 2014, when compared to the previous fiscal year, was primarily due to the timing of income tax payments, as well as lower income from continuing operations. The increase in cash flows provided by operating activities in fiscal 2013, when compared to the previous fiscal year, was primarily due to higher income for continuing operations.
Cash Equivalents and Working Capital
Cash and cash equivalents were $7.3 billion and $7.8 billion at January 31, 2014 and 2013, respectively. Our working capital deficits were $8.2 billion and $11.9 billion at January 31, 2014 and 2013, respectively. The decrease in our working capital deficit was primarily attributable to a decrease in long-term debt due within one year and an increase in our inventory levels due to lower than anticipated sales across the Company. Timing differences also contributed to the decrease in our working capital deficit. We generally operate with a working capital deficit due to our efficient use of cash in funding operations and in providing returns to our shareholders in the form of share repurchases and payments of cash dividends.
We employ financing strategies (e.g., global funding structures) in an effort to ensure cash can be made available in the country in which it is needed with the minimum cost possible. We do not believe it will be necessary to repatriate cash and cash equivalents held outside of the U.S. and anticipate our domestic liquidity needs will be met through other funding sources (ongoing cash flows generated from operations, external borrowings or both). Accordingly, we intend, with only certain exceptions, to continue to indefinitely reinvest our cash and cash equivalents held outside of the U.S. in our foreign operations. When the income earned (either from operations or through global funding structures) and indefinitely reinvested outside of the U.S. is taxed at local country tax rates, which are generally lower than the U.S. statutory rate, we realize an effective tax rate benefit. If our intentions with respect to reinvestment were to change, most of the amounts held within our foreign operations could be repatriated to the U.S., although any repatriation under current U.S. tax laws would be subject to U.S. federal income taxes, less applicable foreign tax credits. As of January 31, 2014 and 2013, cash and cash equivalents of approximately $1.9 billion may not be freely transferable to the U.S. due to local laws or other restrictions. We do not expect local laws, other limitations or potential taxes on anticipated future repatriations of cash amounts held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.

14


Cash Flows Used in Investing Activities
Cash flows used in investing activities generally consist of payments for property and equipment and investments and business acquisitions. Payments for property and equipment were $13.1 billion, $12.9 billion and $13.5 billion for fiscal 2014, 2013 and 2012, respectively. The fiscal 2014 increase was primarily for additional Neighborhood Markets and other small formats in the Walmart U.S. segment. The fiscal 2013 decrease was primarily the result of lowering the average cost for remodels. Payments for investments and business acquisitions, net of cash acquired, were $15 million, $316 million and $3.5 billion for fiscal 2014, 2013 and 2012, respectively.
Pending Transaction
As discussed in Note 13 to our Consolidated Financial Statements, we currently anticipate completing the following transaction that will impact our future cash flows from investing activities:
Vips Restaurant Business in Mexico
In September 2013, Wal-Mart de México, S.A.B. de C.V. ("Walmex"), a majority-owned subsidiary of the Company, entered into a definitive agreement with Alsea S.A.B. de C.V. to dispose of Walmex's Vips restaurant business ("Vips") in Mexico for approximately $625 million. Accordingly, the Vips operating results are presented as discontinued operations in the Company's Consolidated Statements of Income for fiscal 2014, 2013 and 2012. Additionally, the Vips assets and liabilities to be disposed of are reported separately in the Company's Consolidated Balance Sheets as of January 31, 2014. The Vips sale is subject to approval by Mexican regulatory authorities and is currently expected to close during the first half of fiscal 2015. Upon completion of this transaction, the Company expects to record a net gain, which will be recorded in discontinued operations in the Company's Consolidated Statements of Income.
Global Expansion Activities
In addition to our growth in retail square feet discussed throughout the "Results of Operations" discussion, we expanded in e-commerce in each of our segments during fiscal 2014, with Walmart U.S. and Sam's Club focused on the e-commerce market in the U.S. and Walmart International focused on the e-commerce markets in countries outside of the U.S., primarily the United Kingdom, China and Brazil. Some of our fiscal 2014 e-commerce accomplishments included developing a new recommendation engine to further personalize search, improving the mobile shopping experience, accelerating the deployment of our global technology platform and increasing assortment offered on our websites. Each of these accomplishments further supports the operations of our segments.
Our fiscal 2015 global expansion plans include continuing to grow our retail square feet, which will include a significant increase in the number of Neighborhood Markets and other small stores. In addition, we plan to continue to expand our e-commerce capabilities. We anticipate financing our global expansion activities through cash flows provided by operating activities and future debt financings. The following table provides our estimated range for fiscal 2015 capital expenditures, as well as our estimated range for growth in retail square feet. Our anticipated e-commerce capital expenditures are included in our estimated range for fiscal 2015 capital expenditures. The amounts in the table do not include capital expenditures or growth in retail square feet from any pending or future acquisitions.
 
 
Fiscal 2015 Projected Capital Expenditures (in billions)
 
Fiscal 2015 Projected Growth in
Retail Square Feet
(in thousands)
Walmart U.S.
 
$
6.4

 
to
 
$
6.9

 
21,000

 
to
 
23,000

Walmart International
 
4.0

 
to
 
4.5

 
12,000

 
to
 
14,000

Sam's Club
 
1.0

 
to
 
1.0

 
2,000

 
to
 
2,000

Corporate and support
 
1.0

 
to
 
1.0

 

 
to
 

Total
 
$
12.4

 
to
 
$
13.4

 
35,000

 
to
 
39,000

The following table represents the allocation of our capital expenditures for property and equipment:
(Amounts in millions)
 
Allocation of Capital Expenditures
Fiscal Years Ending January 31,
Capital Expenditures
 
2014
 
2013
New stores and clubs, including expansions and relocations
 
$
5,083

 
$
4,340

Information systems, distribution, e-commerce and other
 
2,539

 
2,922

Remodels
 
1,030

 
995

Total U.S.
 
8,652

 
8,257

Walmart International
 
4,463

 
4,641

Total capital expenditures
 
$
13,115

 
$
12,898


15


Cash Flows Used in Financing Activities
Cash flows used in financing activities generally consist of transactions related to our short-term and long-term debt, as well as dividends paid and the repurchase of Company stock. Transactions with noncontrolling interest shareholders are also classified as cash flows from financing activities.
Short-term Borrowings
Short-term borrowings increased $911 million for fiscal 2014, compared to an increase of $2.8 billion for the previous fiscal year. Favorable interest rates available to us have allowed us to continue to utilize the liquidity under our short-term borrowing programs to provide funding used for our operations, dividend payments, share repurchases, capital expenditures and for other cash requirements and corporate purposes as needed.
Long-term Debt
Information on significant long-term debt issued during fiscal 2014, is as follows: 
(Amounts in millions)
 
 
 
 
 
 
Issue Date
 
Maturity Date
 
Interest Rate
 
Principal Amount
April 11, 2013
 
April 11, 2016
 
0.600%
 
$
1,000

April 11, 2013
 
April 11, 2018
 
1.125%
 
1,250

April 11, 2013
 
April 11, 2023
 
2.550%
 
1,750

April 11, 2013
 
April 11, 2043
 
4.000%
 
1,000

October 2, 2013
 
December 15, 2018
 
1.950%
 
1,000

October 2, 2013
 
October 2, 2043
 
4.750%
 
750

Total
 
 
 
 
 
$
6,750

The aggregate net proceeds from these long-term debt issuances were approximately $6.7 billion, which were used to pay down and refinance existing debt and for other general corporate purposes. We also received additional aggregate net proceeds of approximately $0.4 billion from other, smaller long-term debt issuances in several of our international operations, which were used primarily to refinance existing debt.
Dividends
Our total dividend payments were $6.1 billion, $5.4 billion, and $5.0 billion for fiscal 2014, 2013 and 2012, respectively. On February 20, 2014, the Board of Directors approved the fiscal 2015 annual dividend at $1.92 per share, an increase compared to the fiscal 2014 dividend of $1.88 per share. For fiscal 2015, the annual dividend will be paid in four quarterly installments of $0.48 per share, according to the following record and payable dates:
Record Date
  
Payable Date
March 11, 2014
  
April 1, 2014
May 9, 2014
  
June 2, 2014
August 8, 2014
  
September 3, 2014
December 5, 2014
  
January 5, 2015

16


Company Share Repurchase Program
From time to time, the Company repurchases shares of its common stock under share repurchase programs authorized by the Board of Directors. On June 6, 2013, the Company's Board of Directors replaced the previous $15.0 billion share repurchase program, which had approximately $712 million of remaining authorization for share repurchases as of that date, with a new $15.0 billion share repurchase program, which was announced on June 7, 2013. As was the case with the replaced share repurchase program, the current share repurchase program has no expiration date or other restrictions limiting the period over which the Company can make share repurchases. At January 31, 2014, authorization for $11.3 billion of share repurchases remained under the current share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status.
The Company considers several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings and the market price of its common stock. The following table provides, on a settlement date basis, the number of shares repurchased, average price paid per share and total cash paid for share repurchases for fiscal 2014, 2013 and 2012:
 
 
Fiscal Years Ended January 31,
(Amounts in millions, expect per share data)
 
2014
 
2013
 
2012
Total number of shares repurchased
 
89.1

 
113.2

 
115.3

Average price paid per share
 
$
74.99

 
$
67.15

 
$
54.64

Total cash paid for share repurchases
 
$
6,683

 
$
7,600

 
$
6,298

Transactions with Noncontrolling Interest Holders
As discussed in Note 13 to our Consolidated Financial Statements, we have completed or anticipate completing the following transactions with noncontrolling interest shareholders that have impacted our cash flows from financing activities or that will impact our cash flows from financing activities in the future:
India Operations
During fiscal 2014, the Company acquired, for $100 million, the remaining ownership interest in Bharti Walmart Private Limited, previously a joint venture between Bharti Ventures Limited ("Bharti") and the Company established in 2007, which operated the Company's wholesale cash & carry business in India. Upon completion of the transaction, the Company became the sole owner of the cash & carry business in India. In addition, the Company also terminated its joint venture, franchise and supply agreements with Bharti Retail Limited ("Bharti Retail"), which operates Bharti's retail business in India, and transferred its investment in that business to Bharti. In connection with the agreements related to the Bharti retail business, the Company paid and forgave indebtedness of approximately $234 million. The amounts paid to complete these transactions are included in the other investing and other financing categories in the Company's Consolidated Statements of Cash Flows for fiscal 2014.
Walmart Chile
In September 2013, certain redeemable noncontrolling interest shareholders exercised put options that required the Company to purchase a portion of their shares in Walmart Chile at the mutually agreed upon redemption value to be determined after exercise of the put options. In fiscal 2014, the Company recorded an increase to redeemable noncontrolling interest of $1.0 billion, with a corresponding decrease to capital in excess of par value, to reflect the estimated redemption value of the redeemable noncontrolling interest at $1.5 billion. Subsequent to the initial exercise, the Company negotiated with the redeemable noncontrolling interest shareholders to acquire all of their redeemable noncontrolling interest shares. The Company completed this transaction in February 2014, after period end, using its existing cash and bringing its ownership interest in Walmart Chile to approximately 99.7 percent. The Company has since initiated a tender offer for the remaining 0.3 percent noncontrolling interest held by the public in Chile at the same value per share as was paid to the redeemable noncontrolling interest shareholders. The tender offer will expire in the first quarter of fiscal 2015.

17


Capital Resources
We believe cash flows from continuing operations, our current cash position and access to debt and capital markets will continue to be sufficient to meet our anticipated operating cash needs, including seasonal buildups in merchandise inventories, and complete our capital expenditures, dividend payments and share repurchases.
We have strong commercial and long-term debt ratings that have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in debt capital markets. At January 31, 2014, the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows:
Rating agency
  
Commercial paper
  
Long-term debt
Standard & Poor's
  
A-1+
  
AA
Moody's Investors Service
  
P-1
  
Aa2
Fitch Ratings
  
F1+
  
AA
Credit rating agencies review their ratings periodically and, therefore, the credit ratings assigned to us by each agency may be subject to revision at any time. Accordingly, we are not able to predict whether our current credit ratings will remain consistent over time. Factors that could affect our credit ratings include changes in our operating performance, the general economic environment, conditions in the retail industry, our financial position, including our total debt and capitalization, and changes in our business strategy. Any downgrade of our credit ratings by a credit rating agency could increase our future borrowing costs or impair our ability to access capital and credit markets on terms commercially acceptable to us. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper markets with the same flexibility that we have experienced historically, potentially requiring us to rely more heavily on more expensive types of debt financing. The credit rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies.
To monitor our credit rating and our capacity for long-term financing, we consider various qualitative and quantitative factors. We monitor the ratio of our debt-to-total capitalization as support for our long-term financing decisions.  At January 31, 2014 and 2013, the ratio of our debt-to-total capitalization was 42.6% and 41.5%, respectively. For the purpose of this calculation, debt is defined as the sum of short-term borrowings, long-term debt due within one year, obligations under capital leases due within one year, long-term debt and long-term obligations under capital leases. Total capitalization is defined as debt plus total Walmart shareholders' equity. The increase in our debt-to-total capitalization ratio was primarily driven by changes in working capital and higher long-term debt balances.

18


Contractual Obligations and Other Commercial Commitments

The following table sets forth certain information concerning our obligations and commitments to make contractual future payments, such as debt and lease agreements, and certain contingent commitments:

 
 
 
 
Payments Due During Fiscal Years Ending January 31,
(Amounts in millions)
 
Total
 
2015
 
2016-2017
 
2018-2019
 
Thereafter
Recorded contractual obligations:
 
 
 
 
 
 
 
 
 
 
Long-term debt(1)
 
$
45,874

 
$
4,103

 
$
6,876

 
$
4,638

 
$
30,257

Short-term borrowings
 
7,670

 
7,670

 

 

 

Capital lease obligations(2)
 
6,291

 
586

 
1,077

 
917

 
3,711

Unrecorded contractual obligations:
 
 
 
 
 
 
 
 
 
 
Non-cancelable operating leases
 
17,170

 
1,734

 
3,094

 
2,506

 
9,836

Estimated interest on long-term debt
 
34,034

 
1,921

 
3,692

 
3,459

 
24,962

Trade letters of credit
 
2,843

 
2,843

 

 

 

Purchase obligations
 
5,032

 
4,383

 
621

 
20

 
8

Total commercial commitments
 
$
118,914

 
$
23,240

 
$
15,360

 
$
11,540

 
$
68,774

(1)
"Long-term debt" includes the fair value of our derivatives classified as fair value hedges.
(2)
"Capital lease obligations" includes executory costs and imputed interest related to capital lease obligations that are not yet recorded. Refer to Note 11 for more information.
Additionally, the Company has approximately $15.4 billion in undrawn lines of credit and standby letter of credit facilities which, if drawn upon, would be included in the liabilities section of the Company's Consolidated Balance Sheets.
Estimated interest payments are based on our principal amounts and expected maturities of all debt outstanding at January 31, 2014, and management's forecasted market rates for our variable rate debt.
Purchase obligations include legally binding contracts such as firm commitments for inventory and utility purchases, as well as commitments to make capital expenditures, software acquisition and license commitments and legally binding service contracts. Purchase orders for inventory and other services are not included in the table above. Purchase orders represent authorizations to purchase rather than binding agreements. For the purposes of this table, contractual obligations for the purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current inventory needs and are fulfilled by our suppliers within short time periods. We also enter into contracts for outsourced services; however, the obligations under these contracts are not significant and the contracts generally contain clauses allowing for cancellation without significant penalty.
The expected timing for payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid with respect to some unrecorded contractual commitments may be different depending on the timing of receipt of goods or services or changes to agreed-upon amounts for some obligations.
In addition to the amounts shown in the table above, $763 million of unrecognized tax benefits are considered uncertain tax positions and have been recorded as liabilities. The timing of the payment, if any, associated with these liabilities is uncertain. Refer to Note 9 in the "Notes to Consolidated Financial Statements" for additional discussion of unrecognized tax benefits.
Off Balance Sheet Arrangements
In addition to the unrecorded contractual obligations presented above, we have entered into certain arrangements, as discussed below, for which the timing of payment, if any, is unknown.
The Company has future lease commitments for land and buildings for approximately 317 future locations. These lease commitments have lease terms ranging from 4 to 40 years and provide for certain minimum rentals. If executed, payments under operating leases would increase by $49 million for fiscal 2015, based on current estimates.
In connection with certain long-term debt issuances, we could be liable for early termination payments if certain unlikely events were to occur. At January 31, 2014, the aggregate termination payment would have been $74 million. The arrangement pursuant to which this payment could be made will expire in fiscal 2019.

19


Market Risk
In addition to the risks inherent in our operations, we are exposed to certain market risks, including changes in interest rates and fluctuations in currency exchange rates.
The analysis presented below for each of our market risk sensitive instruments is based on a hypothetical scenario used to calibrate potential risk and does not represent our view of future market changes. The effect of a change in a particular assumption is calculated without adjusting any other assumption. In reality, however, a change in one factor could cause a change in another, which may magnify or negate other sensitivities.
Interest Rate Risk
We are exposed to changes in interest rates as a result of our short-term borrowings and long-term debt issuances. We hedge a portion of our interest rate risk by managing the mix of fixed and variable rate debt. We also enter into interest rate swaps and for fiscal 2014, the net fair value of our derivatives increased approximately $107 million primarily due to fluctuations in market interest rates, which helped reduce the Company's overall exposure to interest rate risk.
The table below provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table represents the principal cash flows and related weighted-average interest rates by expected maturity dates. For interest rate swaps, including forward starting interest rate swaps, the table represents the contractual cash flows and weighted-average interest rates by the contractual maturity date, unless otherwise noted. The notional amounts are used to calculate contractual cash flows to be exchanged under the contracts. The weighted-average variable rates are based upon prevailing market rates at January 31, 2014.
 
 
Expected Maturity Date
(Amounts in millions)
 
Fiscal 2015
 
Fiscal 2016
 
Fiscal 2017
 
Fiscal 2018
 
Fiscal 2019
 
Thereafter
 
Total
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate
 
$
7,670

 
$

 
$

 
$

 
$

 
$

 
$
7,670

Weighted-average interest rate
 
0.1
%
 
%
 
%
 
%
 
%
 
%
 
0.1
%
Long-term debt(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate
 
$
3,309

 
$
4,084

 
$
2,000

 
$
1,000

 
$
3,500

 
$
30,223

 
$
44,116

Weighted-average interest rate
 
2.3
%
 
2.4
%
 
1.7
%
 
5.4
%
 
3.0
%
 
5.1
%
 
4.3
%
Variable rate
 
$
665

 
$
292

 
$

 
$

 
$

 
$

 
$
957

Weighted-average interest rate
 
4.3
%
 
0.6
%
 
%
 
%
 
%
 
%
 
3.2
%
Interest rate derivatives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable to fixed(2)
 
$
2,665

 
$
292

 
$

 
$

 
$

 
$

 
$
2,957

Weighted-average pay rate
 
2.7
%
 
0.9
%
 
%
 
%
 
%
 
%
 
2.5
%
Weighted-average receive rate
 
0.3
%
 
0.6
%
 
%
 
%
 
%
 
%
 
0.3
%
Fixed to variable
 
$
1,000

 
$

 
$

 
$

 
$

 
$

 
$
1,000

Weighted-average pay rate
 
0.3
%
 
%
 
%
 
%
 
%
 
%
 
0.3
%
Weighted-average receive rate
 
3.1
%
 
%
 
%
 
%
 
%
 
%
 
3.1
%
(1)
The long-term debt amounts in the table exclude the Company's derivatives classified as fair value hedges.
(2)
Forward starting interest rate swaps have been included in the fiscal 2015 maturity category based on when the related hedged forecasted debt issuances, and corresponding swap terminations, are expected to occur.
As of January 31, 2014, our variable rate borrowings, including the effect of our commercial paper and interest rate swaps, represented 18% of our total short-term and long-term debt. Based on January 31, 2014 debt levels, a 100 basis point change in prevailing market rates would cause our annual interest costs to change by approximately $78 million.

20


Foreign Currency Risk
We are exposed to fluctuations in foreign currency exchange rates as a result of our net investments and operations in countries other than the United States. For fiscal 2014, movements in currency exchange rates and the related impact on the translation of the balance sheets of the Company's subsidiaries in Japan, Canada, Brazil and Africa were the primary cause of a $2.8 billion net loss in the currency translation and other category of accumulated other comprehensive income (loss). We hedge a portion of our foreign currency risk by entering into currency swaps and designating certain foreign-currency-denominated long-term debt as net investment hedges.
We hold currency swaps to hedge the currency exchange component of our net investments and also to hedge the currency exchange rate fluctuation exposure associated with the forecasted payments of principal and interest of non-U.S. denominated debt. The aggregate fair value of these swaps was in an asset position of $550 million and $453 million at January 31, 2014 and 2013, respectively. A hypothetical 10% increase or decrease in the currency exchange rates underlying these swaps from the market rate at January 31, 2014 would have resulted in a loss or gain in the value of the swaps of $274 million. A hypothetical 10% change in interest rates underlying these swaps from the market rates in effect at January 31, 2014 would have resulted in a loss or gain in value of the swaps of $7 million.
In addition to currency swaps, we have designated foreign-currency-denominated long-term debt as nonderivative hedges of net investments of certain of our foreign operations. At January 31, 2014 and 2013, we had £2.5 billion of outstanding long-term debt designated as a hedge of our net investment in the United Kingdom. At January 31, 2014, a hypothetical 10% increase or decrease in the value of the U.S. dollar relative to the British pound would have resulted in a gain or loss in the value of the debt of $375 million. In addition, we had outstanding long-term debt of ¥200 billion at January 31, 2014 and ¥275 billion at January 31, 2013, that was designated as a hedge of our net investment in Japan. At January 31, 2014, a hypothetical 10% increase or decrease in value of the U.S. dollar relative to the Japanese yen would have resulted in a gain or loss in the value of the debt of $177 million.
Other Matters
We discuss our existing FCPA investigation and related matters in the Annual Report on Form 10-K for fiscal 2014, including certain risks arising therefrom, in Part I, Item 1A of the Form 10-K under the caption "Risk Factors" and in Note 10 to our Consolidated Financial Statements, which is captioned "Contingencies," under the sub-caption "FCPA Investigation and Related Matters." We also discuss various legal proceedings related to the FCPA investigation in Item 3 of the Form 10-K under the caption "Item 3. Legal Proceedings," under the sub-caption "II. Certain Other Proceedings."

Summary of Critical Accounting Estimates
Management strives to report our financial results in a clear and understandable manner, although in some cases accounting and disclosure rules are complex and require us to use technical terminology. In preparing the Company's Consolidated Financial Statements, we follow accounting principles generally accepted in the United States. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations as reflected in our financial statements. These judgments and estimates are based on past events and expectations of future outcomes. Actual results may differ from our estimates.
Management continually reviews our accounting policies, how they are applied and how they are reported and disclosed in our financial statements. Following is a summary of our critical accounting estimates and how they are applied in preparation of the financial statements.
Inventories
We value inventories at the lower of cost or market as determined primarily by the retail method of accounting, using the last-in, first-out ("LIFO") method for substantially all of the Walmart U.S. segment's merchandise inventories. The retail method of accounting results in inventory being valued at the lower of cost or market since permanent markdowns are currently taken as a reduction of the retail value of inventory. The Sam's Club segment's merchandise is valued based on the weighted-average cost using the LIFO method. Inventories for the Walmart International segment are primarily valued by the retail method of accounting and are stated using the first-in, first-out ("FIFO") method.
Under the retail method of accounting, inventory is stated at cost, which is determined by applying a cost-to-retail ratio to each merchandise grouping's retail value. The FIFO cost-to-retail ratio is generally based on the fiscal year purchase activity. The cost-to-retail ratio for measuring any LIFO provision is based on the initial margin of the fiscal year purchase activity less the impact of any permanent markdowns. The retail method of accounting requires management to make certain judgments and estimates that may significantly impact the ending inventory valuation at cost, as well as the amount of gross profit recognized. Judgments made include recording markdowns used to sell inventory and shrinkage. When management determines the ability to sell inventory has diminished, markdowns for clearance activity and the related cost impact are recorded. Factors considered in the determination of markdowns include current and anticipated demand, customer preferences and age of merchandise, as

21


well as seasonal and fashion trends. Changes in weather patterns and customer preferences could cause material changes in the amount and timing of markdowns from year to year.
When necessary, we record a LIFO provision for the estimated annual effect of inflation, and these estimates are adjusted to actual results determined at year-end. Our LIFO provision is calculated based on inventory levels, markup rates and internally generated retail price indices. At January 31, 2014 and 2013, our inventories valued at LIFO approximated those inventories as if they were valued at FIFO.
We provide for estimated inventory losses, or shrinkage, between physical inventory counts on the basis of a percentage of sales. Following annual inventory counts, the provision is adjusted to reflect updated historical results.
Impairment of Assets
We evaluate long-lived assets other than goodwill and assets with indefinite lives for indicators of impairment whenever events or changes in circumstances indicate their carrying amounts may not be recoverable. Management's judgments regarding the existence of impairment indicators are based on market conditions and operational performance, such as operating income and cash flows. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally at the individual store level or, in certain markets, at the market group level. The variability of these factors depends on a number of conditions, including uncertainty about future events and changes in demographics. Thus, our accounting estimates may change from period to period. These factors could cause management to conclude that indicators of impairment exist and require impairment tests be performed, which could result in management determining the value of long-lived assets is impaired, resulting in a write-down of the related long-lived assets.
Goodwill and other indefinite-lived acquired intangible assets are not amortized, but are evaluated for impairment annually or whenever events or changes in circumstances indicate that the value of a certain asset may be impaired. Generally, this evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary. If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed. The quantitative test for impairment requires management to make judgments relating to future cash flows, growth rates and economic and market conditions. These evaluations are based on determining the fair value of a reporting unit or asset using a valuation method such as discounted cash flow or a relative, market-based approach. Historically, our reporting units have generated sufficient returns to recover the cost of goodwill and other indefinite-lived acquired intangible assets. Because of the nature of the factors used in these tests, if different conditions occur in future periods, future operating results could be materially impacted.
Income Taxes
Income taxes have a significant effect on our net earnings. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Accordingly, the determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. Our effective income tax rate is affected by many factors, including changes in our assessment of certain tax contingencies, increases and decreases in valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix of earnings among our U.S. and international operations where the statutory rates are generally lower than the U.S. statutory rate, and may fluctuate as a result.
Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions. The benefits of uncertain tax positions are recorded in our financial statements only after determining a more likely than not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, we reassess these probabilities and record any changes in the financial statements as appropriate. We account for uncertain tax positions by determining the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. This determination requires the use of significant judgment in evaluating our tax positions and assessing the timing and amounts of deductible and taxable items.
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent that a portion is not more likely than not to be realized. Many factors are considered when assessing whether it is more likely than not that the deferred tax assets will be realized, including recent cumulative earnings, expectations of future taxable income, carryforward periods and other relevant quantitative and qualitative factors. The recoverability of the deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. This evaluation relies heavily on estimates.

22


Forward-Looking Statements
This Annual Report contains statements that Walmart believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Those statements are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. Those forward-looking statements include statements in Management's Discussion and Analysis of Financial Condition and Results of Operations: under the caption "Overview" with respect to the volatility of currency exchange rates possibly affecting the results, including net sales and operating income, of Walmart and its Walmart International segment in the future; under the captions "Company Performance Metrics" and "Company Performance Metrics-Leverage-Operating Income" with respect to Walmart's objectives of growing net sales at a faster rate than operating expenses and growing operating income at a faster rate than net sales and that strategic growth investments may cause Walmart's operating expenses to grow at a faster rate than net sales and resulting in Walmart's operating income growing at a slower rate than net sales; under the caption "Results of Operations-Consolidated Results of Operations" regarding the possible fluctuation of our effective tax rate over future periods; under the caption "Results of Operations-Sam's Club Segment" with respect to the volatility of fuel prices possibly continuing to affect the operating results of Walmart's Sam's Club segment in the future; under the caption "Liquidity and Capital Resources-Cash Flows Provided by Operating Activities-Cash Equivalents and Working Capital," as well as in Note 1 to our Consolidated Financial Statements, regarding our ability to meet our liquidity needs through sources other than the cash we hold outside of the United States, our intention to permanently reinvest cash held outside of the United States, and our ability to repatriate cash held outside of the United States; under the caption "Liquidity and Capital Resources-Cash Flows Used in Investing Activities-Global Expansion Activities" and also in the letter of Walmart's President and CEO to our shareholders, associates and customers contained in this Annual Report (the "CEO Letter") with respect to Walmart's fiscal 2015 global expansion plans, including a significant increase in the number of Neighborhood Markets and other small format stores, growing our retail square feet and expanding our e-commerce capabilities and our plans to finance that expansion primarily through cash flows and future debt financings, with respect to Walmart's estimated range of capital expenditures (including e-commerce capital expenditures) in fiscal 2015 for the Walmart U.S. segment, the Walmart International segment, the Sam's Club segment, in the "other unallocated" category and in total, with respect to the estimated/projected growth in retail square feet in total and by reportable segment in fiscal 2015; under the caption "Liquidity and Capital Resources - Cash Flows Used in Investing Activities - Pending Transactions" regarding the expectation that the Company will record a net gain on the sale of the Vips restaurant operations by Walmex; under the caption "Liquidity and Capital Resources-Cash Flows Used in Financing Activities-Dividends," as well as in Note 15 to our Consolidated Financial Statements and elsewhere in this Annual Report under the caption "Dividends payable per share," regarding the payment of the dividend on our shares of common stock in fiscal 2015, the expected payment of certain installments of the dividend on our shares of common stock on certain dates in fiscal 2015 and the expected total amount of the dividend per share to be paid in fiscal 2015; under the caption "Liquidity and Capital Resources-Transactions with Noncontrolling Interest Holders" with respect to certain transactions having an impact on Walmart's cash flows from financing activities in the future; under the caption "Liquidity and Capital Resources-Capital Resources" with respect to Walmart's cash flows from continuing operations, current cash position and access to debt and capital markets continuing to be sufficient to meet operating cash needs, including for seasonal build-ups in inventories, completing capital expenditures and funding dividend payments and shares repurchases, the factors that influence Walmart's credit ratings, any downgrade of Walmart's credit ratings potentially increasing future borrowing costs and impairing Walmart's ability to access capital and credit markets on terms acceptable to Walmart and downgrades in Walmart's current short-term credit ratings impairing its ability to access the commercial paper markets with the same flexibility as Walmart has experienced historically, potentially requiring Walmart to rely more heavily on more expensive types of debt financing; and under the caption "Liquidity and Capital Resources-Off Balance Sheet Arrangements" with respect to the amount of increases in payments under operating leases if certain leases are executed.
These forward-looking statements also include statements in: Note 3 to our Consolidated Financial Statements regarding the weighted-average periods over which certain compensation cost is expected to be recognized; Note 8 to our Consolidated Financial Statements regarding the portion of any net investment and cash flow instruments of the Company that is ineffective as a hedge being insignificant and the amounts related to the our derivatives expected to be reclassified from accumulated other comprehensive income (loss) to net income during the next 12 months being insignificant; Note 9 to our Consolidated Financial Statements regarding the realization of certain net deferred tax assets, the possibility that tax audit resolutions over the twelve months ending January 31, 2015, could reduce unrecognized tax benefits by an amount within a certain range or beyond that range and the reasons for that reduction, the expectation that any change will not have a significant impact on the Company's Consolidated Financial Statements and the possibility that the resolution of a group of related matters might result in a material liability to Walmart; Note 10 to our Consolidated Financial Statements regarding an adverse decision in, or settlement of, certain litigation to which Walmart is a party possibly resulting in material liability to Walmart and respecting management's expectations that the certain matters relating to an FCPA investigation will not have a material adverse effect on its business; and Note 11 to our Consolidated Financial Statements regarding the amount of the increase in payments under operating leases if certain leases for real property were executed. The CEO's Letter also includes forward looking statements regarding Walmart continuing to invest in training and development of its associates and increasing investment in e-commerce as e-commerce opportunities present themselves. The section of this Annual Report

23


captioned "Walmart U.S." includes forward-looking statements regarding management's expectation for the Walmart U.S. segment to purchase an additional $250 billion of merchandise from U.S. manufacturers over the next 10 years and to continue to grow its supercenter fleet and for the Walmart U.S. segment to open new Neighborhood Markets and Walmart Express units within a certain range and to add retail square feet within a certain range and to open a number of new units within a certain range in fiscal 2015. The section of this Annual Report captioned "Walmart International" contains forward-looking statements regarding the Walmart International segment continuing to be a growth vehicle for Walmart and having a goal of funding price investment by being the lowest cost operator in every market. The section of this Annual Report captioned "Sam's Club" includes forward-looking statements that relates to management's expectation for the Sam's Club segment opening a certain number of new clubs and launching new membership enhancements in fiscal 2015. The forward-looking statements described above are identified by the use in such statements of one or more of the words or phrases "aim," "anticipate," "anticipated," "could be," "could impair," "could increase," "could potentially be," "could reduce," "estimated," "expansion," "expect," "goal," "grow," "intend," "is expected," "may cause," "may continue," "may fluctuate," "may impact," "may not be," "may result," "objective," "objectives," "plan," "plans," "projected," "should continue," "will be," "will be met," "will be paid," "will continue," "will depend," "will have," "will impact," "will increase," "would be," and "would increase," and other similar words or phrases. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. These statements discuss, among other things, expected growth, future revenues, future cash flows, future capital expenditures, future performance, future initiatives and the anticipation and expectations of Walmart and its management as to future occurrences and trends.
The forward-looking statements included in this Annual Report and that we make elsewhere are subject to certain factors, in the United States and internationally, that could materially affect our financial performance, our results of operations, including our sales, earnings per share or comparable store sales or comparable club sales and our effective income tax rate for any period and our business operations, business strategy, plans, goals or objectives. These factors include, but are not limited to: general economic conditions, including changes in the economy of the United States or other specific markets in which we operate, economic instability, changes in the monetary policies of the United States, the Board of Governors of the Federal Reserve System, other governments or central banks, economic crises and disruptions in the financial markets, including as a result of sovereign debt crises, governmental budget deficits, unemployment and partial employment levels, employment conditions within our markets, credit availability to consumers and businesses, levels of consumer disposable income, consumer confidence, consumer credit availability, consumer spending patterns, consumer debt levels, consumer preferences, including consumer demand for the merchandise we offer for sale, consumer acceptance of our e-commerce websites and merchandise offerings on those websites, inflation, deflation, commodity prices, the cost of the goods we sell, competitive pressures, unanticipated expenses and needs for capital expenditures that affect our cash flows, the seasonality of our business, seasonal buying patterns in the United States and our other markets, anticipated store or club closures, labor costs, transportation costs, the cost of diesel fuel, gasoline, natural gas and electricity, the selling prices of fuel, the cost of healthcare and other benefits, accident costs, our casualty and other insurance costs, information security costs, the cost of construction materials, availability and the cost of acceptable building sites for new stores, clubs and other units, availability of qualified labor pools in the specific markets in which we operate, including the availability of persons with the skills and abilities necessary to meet Walmart's needs for managing and staffing its new units and conducting their operations, real estate, zoning, land use and other laws, ordinances, legal restrictions and initiatives that may prevent Walmart from building, or that impose limitations on Walmart's ability to build, new units in certain locations or relocate or expand existing units, availability of necessary utilities for new units; availability of skilled labor and labor, material and other construction costs in areas in which new or relocated units are proposed to be constructed or existing units are proposed to be expanded or remodeled, competitive pressures and the initiatives of our competitors, accident-related costs, weather conditions patterns and events, climate change, catastrophic events and natural disasters, as well as storm and other damage to our stores, clubs, distribution centers and other facilities and store closings and other limitations on our customers' access to our stores and clubs resulting from such events and disasters, disruption in the availability of our online shopping sites on the internet, cyberattacks on our information systems, disruption in our supply chain, including availability and transport of goods from domestic and foreign suppliers, trade restrictions, changes in tariff and freight rates, adoption of or changes in tax, labor and other laws and regulations that affect our business, including changes in corporate and personal tax rates and the imposition of new taxes and surcharges, costs of compliance with laws and regulations, the mix of our earnings from our United States and foreign operations, changes in our assessment of certain tax contingencies, increases or decreases in valuation allowances, outcome of administrative audits, the impact of discrete items on our effective tax rate, the resolution of other tax matters, developments in and the outcome of legal and regulatory proceedings to which we are a party or are subject and the expenses associated therewith, the requirements for expenditures in connection with the FCPA-related matters, including enhancements to Walmart's compliance program and ongoing investigations, changes in the rating of any of our indebtedness; currency exchange rate fluctuations and volatility, fluctuations in market rates of interest, and other conditions and events affecting domestic and global financial and capital markets, public health emergencies, economic and geo-political conditions and events, including civil unrest and disturbances and terrorist attacks, unanticipated changes in generally accepted accounting principles or in the interpretations or applicability thereof, unanticipated changes in accounting estimates and judgments, and unanticipated restructurings and the related expenses. Moreover, we typically earn a disproportionate part of our annual operating income in the fourth quarter as a result of the seasonal buying patterns. Those buying patterns are difficult to

24


forecast with certainty.
The foregoing list of factors that may affect our business operations and financial performance is not exclusive. Other factors and unanticipated events could adversely affect our business operations and financial performance. We discuss certain of these matters more fully, as well as certain risk factors that may affect our business operations, financial condition, results of operations and liquidity in other of our filings with the Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-K under the heading "Item 1A. Risk Factors." We filed our Annual Report on Form 10-K for the fiscal year ended January 31, 2014, with the SEC on March 21, 2014. The forward-looking statements described above are made based on knowledge of our business and the environment in which we operate and assumptions that we believe to be reasonable at the time such forward-looking statements are made. However, because of the factors described and listed above, as well as other factors, or as a result of changes in facts, assumptions not being realized or other circumstances, actual results may materially differ from anticipated results described or implied in these forward-looking statements. We cannot assure the reader that the results or developments expected or anticipated by us will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. You are urged to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements and not to place undue reliance on such forward-looking statements. The forward-looking statements included in this Annual Report speak only as of the date of this report, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances, except as may be required by applicable law.

25


Wal-Mart Stores, Inc.
Consolidated Statements of Income
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except per share data)
 
2014
 
2013
 
2012
Revenues:
 
 
 
 
 
 
Net sales
 
$
473,076

 
$
465,604

 
$
443,416

Membership and other income
 
3,218

 
3,047

 
3,093

Total revenues
 
476,294

 
468,651

 
446,509

Costs and expenses:
 
 
 

 
 
Cost of sales
 
358,069

 
352,297

 
334,993

Operating, selling, general and administrative expenses
 
91,353

 
88,629

 
85,025

Operating income
 
26,872

 
27,725

 
26,491

Interest:
 
 
 
 
 
 
Debt
 
2,072

 
1,977

 
2,034

Capital leases
 
263

 
272

 
286

Interest income
 
(119
)
 
(186
)
 
(161
)
Interest, net
 
2,216

 
2,063

 
2,159

Income from continuing operations before income taxes
 
24,656

 
25,662

 
24,332

Provision for income taxes:
 
 
 
 
 
 
Current
 
8,619

 
7,976

 
6,722

Deferred
 
(514
)
 
(18
)
 
1,202

Total provision for income taxes
 
8,105

 
7,958

 
7,924

Income from continuing operations
 
16,551

 
17,704

 
16,408

Income (loss) from discontinued operations, net of income taxes
 
144

 
52

 
(21
)
Consolidated net income
 
16,695

 
17,756

 
16,387

Less consolidated net income attributable to noncontrolling interest
 
(673
)
 
(757
)
 
(688
)
Consolidated net income attributable to Walmart
 
$
16,022

 
$
16,999

 
$
15,699

 
 
 
 
 
 
 
Basic net income per common share:
 
 
 
 
 
 
Basic income per common share from continuing operations attributable to Walmart
 
$
4.87

 
$
5.03

 
$
4.55

Basic income (loss) per common share from discontinued operations attributable to Walmart
 
0.03

 
0.01
 
(0.01
)
Basic net income per common share attributable to Walmart
 
$
4.90

 
$
5.04

 
$
4.54

 
 
 
 
 
 
 
Diluted net income per common share:
 
 
 
 
 
 
Diluted income per common share from continuing operations attributable to Walmart
 
$
4.85

 
$
5.01

 
$
4.53

Diluted income (loss) per common share from discontinued operations attributable to Walmart
 
0.03

 
0.01

 
(0.01
)
Diluted net income per common share attributable to Walmart
 
$
4.88

 
$
5.02

 
$
4.52

 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
Basic
 
3,269

 
3,374

 
3,460

Diluted
 
3,283

 
3,389

 
3,474

Dividends declared per common share
 
$
1.88

 
$
1.59

 
$
1.46

See accompanying notes.

26


Wal-Mart Stores, Inc.
Consolidated Statements of Comprehensive Income
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2014
 
2013
 
2012
Consolidated net income
 
$
16,695

 
$
17,756

 
$
16,387

Less consolidated net income attributable to nonredeemable noncontrolling interest
 
(606
)
 
(684
)
 
(627
)
Less consolidated net income attributable to redeemable noncontrolling interest
 
(67
)
 
(73
)
 
(61
)
Consolidated net income attributable to Walmart
 
16,022

 
16,999

 
15,699

 
 
 
 
 
 
 
Other comprehensive income (loss), net of income taxes
 
 
 
 
 
 
Currency translation and other
 
(3,146
)
 
1,042

 
(2,758
)
Derivative instruments
 
207

 
136

 
(67
)
Minimum pension liability
 
153

 
(166
)
 
43

Other comprehensive income (loss), net of income taxes
 
(2,786
)
 
1,012

 
(2,782
)
Less other comprehensive income (loss) attributable to nonredeemable noncontrolling interest
 
311

 
(138
)
 
660

Less other comprehensive income (loss) attributable to redeemable noncontrolling interest
 
66

 
(51
)
 
66

Other comprehensive income (loss) attributable to Walmart
 
(2,409
)
 
823

 
(2,056
)
 
 
 
 
 
 
 
Comprehensive income, net of income taxes
 
13,909

 
18,768

 
13,605

Less comprehensive income (loss) attributable to nonredeemable noncontrolling interest
 
(295
)
 
(822
)
 
33

Less comprehensive income (loss) attributable to redeemable noncontrolling interest
 
(1
)
 
(124
)
 
5

Comprehensive income attributable to Walmart
 
$
13,613

 
$
17,822

 
$
13,643

See accompanying notes.

27


Wal-Mart Stores, Inc.
Consolidated Balance Sheets
 
As of January 31,
(Amounts in millions)
2014
 
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
7,281

 
$
7,781

Receivables, net
6,677

 
6,768

Inventories
44,858

 
43,803

Prepaid expenses and other
1,909

 
1,551

Current assets of discontinued operations
460

 
37

Total current assets
61,185

 
59,940

Property and equipment:
 
 
 
Property and equipment
173,089

 
165,825

Less accumulated depreciation
(57,725
)
 
(51,896
)
Property and equipment, net
115,364

 
113,929

Property under capital leases:
 
 
 
Property under capital leases
5,589

 
5,899

Less accumulated amortization
(3,046
)
 
(3,147
)
Property under capital leases, net
2,543

 
2,752

 
 
 
 
Goodwill
19,510

 
20,497

Other assets and deferred charges
6,149

 
5,987

Total assets
$
204,751

 
$
203,105

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term borrowings
$
7,670

 
$
6,805

Accounts payable
37,415

 
38,080

Accrued liabilities
18,793

 
18,808

Accrued income taxes
966

 
2,211

Long-term debt due within one year
4,103

 
5,587

Obligations under capital leases due within one year
309

 
327

Current liabilities of discontinued operations
89

 

Total current liabilities
69,345

 
71,818

 
 
 
 
Long-term debt
41,771

 
38,394

Long-term obligations under capital leases
2,788

 
3,023

Deferred income taxes and other
8,017

 
7,613

Redeemable noncontrolling interest
1,491

 
519

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Equity:
 
 
 
Common stock
323

 
332

Capital in excess of par value
2,362

 
3,620

Retained earnings
76,566

 
72,978

Accumulated other comprehensive income (loss)
(2,996
)
 
(587
)
Total Walmart shareholders' equity
76,255

 
76,343

Nonredeemable noncontrolling interest
5,084

 
5,395

Total equity
81,339

 
81,738

Total liabilities, redeemable noncontrolling interest and equity
$
204,751

 
$
203,105

See accompanying notes.

28


Wal-Mart Stores, Inc.
Consolidated Statement of Shareholders' Equity
 
 
 
 
 
 
 
 
 
Accumulated
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Capital in
 
 
 
Other
 
Walmart
 
Nonredeemable
 
 
 
 
Redeemable
(Amounts in millions)
Common Stock
 
Excess of
 
Retained
 
Comprehensive
 
Shareholders'
 
Noncontrolling
 
Total
 
 
Noncontrolling
Shares
 
Amount
 
Par Value
 
Earnings
 
Income (Loss)
 
Equity
 
Interest
 
Equity
 
 
Interest
Balances as of February 1, 2011
3,516

 
$
352

 
$
3,577

 
$
63,967

 
$
646

 
$
68,542

 
$
2,705

 
$
71,247

 
 
$
408

Consolidated net income

 

 

 
15,699

 

 
15,699

 
627

 
16,326

 
 
61

Other comprehensive loss, net of income taxes

 

 

 

 
(2,056
)
 
(2,056
)
 
(660
)
 
(2,716
)
 
 
(66
)
Cash dividends declared ($1.46 per share)

 

 

 
(5,048
)
 

 
(5,048
)
 

 
(5,048
)
 
 

Purchase of Company stock
(113
)
 
(11
)
 
(229
)
 
(5,930
)
 

 
(6,170
)
 

 
(6,170
)
 
 

Nonredeemable noncontrolling interest of acquired entity

 

 

 

 

 

 
1,988

 
1,988

 
 

Other
15

 
1

 
344

 
3

 

 
348

 
(214
)
 
134

 
 
1

Balances as of January 31, 2012
3,418

 
342

 
3,692

 
68,691

 
(1,410
)
 
71,315

 
4,446

 
75,761

 
 
404

Consolidated net income

 

 

 
16,999

 

 
16,999

 
684

 
17,683

 
 
73

Other comprehensive income, net of income taxes

 

 

 

 
823

 
823

 
138

 
961

 
 
51

Cash dividends declared ($1.59 per share)

 

 

 
(5,361
)
 

 
(5,361
)
 

 
(5,361
)
 
 

Purchase of Company stock
(115
)
 
(11
)
 
(357
)
 
(7,341
)
 

 
(7,709
)
 

 
(7,709
)
 
 

Nonredeemable noncontrolling interest of acquired entity

 

 

 

 

 

 
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