EX-13 12 wmtars-1312016.htm PORTIONS OF OUR ANNUAL REPORT TO SHAREHOLDERS Exhibit
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)
 
2016
 
2015
 
2014
 
2013
 
2012
Operating results
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
482,130

 
$
485,651

 
$
476,294

 
$
468,651

 
$
446,509

Percentage change in total revenues from previous fiscal year
 
(0.7
)%
 
2.0
%
 
1.6
 %
 
5.0
%
 
6.0
%
Net sales
 
$
478,614

 
$
482,229

 
$
473,076

 
$
465,604

 
$
443,416

Percentage change in net sales from previous fiscal year
 
(0.7
)%
 
1.9
%
 
1.6
 %
 
5.0
%
 
6.0
%
Increase (decrease) in calendar comparable sales(1) in the United States
 
0.3
 %
 
0.5
%
 
(0.5
)%
 
2.4
%
 
1.6
%
Walmart U.S.
 
1.0
 %
 
0.6
%
 
(0.6
)%
 
2.0
%
 
0.3
%
Sam's Club
 
(3.2
)%
 
0.0
%
 
0.3
 %
 
4.1
%
 
8.4
%
Gross profit margin
 
24.6
 %
 
24.3
%
 
24.3
 %
 
24.3
%
 
24.5
%
Operating, selling, general and administrative expenses, as a percentage of net sales
 
20.3
 %
 
19.4
%
 
19.3
 %
 
19.0
%
 
19.2
%
Operating income
 
$
24,105

 
$
27,147

 
$
26,872

 
$
27,725

 
$
26,491

Income from continuing operations attributable to Walmart
 
14,694

 
16,182

 
15,918

 
16,963

 
15,734

Net income per common share:
 

 

 

 

 

Diluted income per common share from continuing operations attributable to Walmart
 
$
4.57

 
$
4.99

 
$
4.85

 
$
5.01

 
$
4.53

Dividends declared per common share
 
1.96

 
1.92

 
1.88

 
1.59

 
1.46

 
 
 
 
 
 
 
 
 
 
 
Financial position
 
 
 
 
 
 
 
 
 
 
Inventories
 
$
44,469

 
$
45,141

 
$
44,858

 
$
43,803

 
$
40,714

Property, equipment, capital lease and financing obligation assets, net
 
116,516

 
116,655

 
117,907

 
116,681

 
112,324

Total assets(2)
 
199,581

 
203,490

 
204,541

 
202,910

 
193,120

Long-term debt(2) and long-term capital lease and financing obligations (excluding amounts due within one year)
 
44,030

 
43,495

 
44,368

 
41,240

 
46,818

Total Walmart shareholders' equity
 
80,546

 
81,394

 
76,255

 
76,343

 
71,315

 
 
 
 
 
 
 
 
 
 
 
Unit counts(3)
 
 
 
 
 
 
 
 
 
 
Walmart U.S. segment
 
4,574

 
4,516

 
4,203

 
4,005

 
3,868

Walmart International segment
 
6,299

 
6,290

 
6,107

 
5,783

 
5,287

Sam's Club segment
 
655

 
647

 
632

 
620

 
611

Total units
 
11,528

 
11,453

 
10,942

 
10,408

 
9,766


(1)
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. Comparable store and club sales include fuel.
(2)
Total assets and long-term debt were adjusted to reflect the adoption of ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost, for all periods.
(3)
Unit counts related to discontinued operations have been removed from all relevant periods.




Wal-Mart Stores, Inc.
Form 10-K
For the Fiscal Year Ended January 31, 2016



Table of Contents





Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Wal-Mart Stores, Inc. ("Walmart," the "Company" or "we") is engaged in retail and wholesale operations in various formats around the world. Through our operations, we help people around the world save money and live better – anytime and anywhere – in retail stores or through our e-commerce and mobile capabilities. Through innovation, we are striving to create a customer-centric experience that seamlessly integrates digital and physical shopping. Physical retail encompasses our brick and mortar presence in each of the markets in which we operate. Digital retail is comprised of our e-commerce websites and mobile commerce applications. Each week, we serve nearly 260 million customers who visit our over 11,500 stores under 63 banners in 28 countries and e-commerce websites in 11 countries. Our strategy is to lead on price, invest to differentiate on access, be competitive on assortment and deliver a great experience. By leading on price we earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices ("EDLP"). EDLP is our pricing philosophy under which we price items at a low price every day so our customers trust that our prices will not change under frequent promotional activity. Price leadership is core to who we are. Everyday low cost ("EDLC") is our commitment to control expenses so those cost savings can be passed along to our customers. Our digital and physical presence, which we are investing in to integrate, provides customers access to our broad assortment anytime and anywhere. We strive to give our customers and members a great digital and physical shopping experience.
Our operations consist of three reportable segments: Walmart U.S., Walmart International and Sam's Club.
Walmart U.S. is our largest segment with three primary store formats, as well as digital retail. Of our three reportable segments, Walmart U.S. has historically had the highest gross profit as a percentage of net sales ("gross profit rate"). In addition, it has historically contributed the greatest amount to the Company's net sales and operating income.
Walmart International consists of our operations outside of the U.S. and includes retail, wholesale and other businesses. These businesses consist of numerous formats, including supercenters, supermarkets, hypermarkets, warehouse clubs, including Sam's Clubs, cash & carry, home improvement, specialty electronics, apparel stores, drug stores and convenience stores, as well as digital retail. The overall gross profit rate for Walmart International is lower than that of Walmart U.S. because of its merchandise mix. Walmart International is our second largest segment and has grown through acquisitions, as well as by adding retail, wholesale and other units, and expanding digital retail.
Sam's Club consists of membership-only warehouse clubs as well as digital retail. As a membership-only warehouse club, membership income is a significant component of the segment's operating income. Sam's Club operates with a lower gross profit rate and lower operating expenses as a percentage of net sales than our other segments.
Each of our segments contributes to the Company's operating results differently, but each has generally maintained a consistent contribution rate to the Company's net sales and operating income in recent years.
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 calendar events and national and religious holidays, as well as 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 periods occurring in the fiscal years ended January 31, 2016 ("fiscal 2016"), January 31, 2015 ("fiscal 2015") and January 31, 2014 ("fiscal 2014") should be read in conjunction with our Consolidated Financial Statements and the 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 three segments of our business to provide a better understanding of how each of those segments and its results of operations 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 each segment's operating income, including certain corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income, including certain corporate overhead allocations, and other measures 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.
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 our mobile commerce applications and fulfilled through our e-commerce distribution facilities, as well as an estimate for sales initiated online and on our mobile commerce applications, but fulfilled through our stores and clubs. Sales of a store that has changed in format are excluded from

3



comparable store and club sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's 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, we use the term "currency exchange rates" to refer 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 into U.S. dollars for financial reporting purposes. We calculate the effect of changes in currency exchange rates from the prior period to the current period as the difference between current period activity translated using the current period's currency exchange rates, and current period activity translated using 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. 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.
The Retail Industry
We operate in the highly competitive retail industry in all of the markets we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as e-commerce and catalog businesses. Many of these competitors are national, regional or international chains or have a national or international online presence. 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, weather, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, cost of goods, currency exchange rate fluctuations, customer preferences, deflation, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor costs, tax rates, cybersecurity attacks and unemployment. 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 found under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2016, and in the discussion under "Cautionary Statement Regarding Forward-Looking Statements and Information" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2016.

4



Company Performance Metrics
We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs.  At times, we adjust our business strategies to ensure we maintain our strong leadership position around the world and in the countries in which we operate.  For several years, our performance metrics emphasized three financial priorities: growth, leverage and returns.  We are currently making strategic investments in our associates and in the integration of digital and physical retail.  These investments support long-term growth while we maintain our heritage of everyday low prices which are supported by everyday low cost.  During this time of increased investments, we have shifted our financial priorities to focus primarily on growth, balanced by the long-term health of the Company including returns.  We will continue to grow through new stores and clubs, and through increasing comparable store and club sales, which include our e-commerce sales.  While leverage remains important to everyday low cost, during this time of increased investments, operating expenses may grow at a rate that is greater than or equal to the rate of our net sales growth, and operating income may grow at a rate that is equal to or less than the rate of our net sales growth.
Our objective of balancing growth with returns means that we are focused on efficiently employing assets for return on investment and more effectively managing working capital to deliver strong free cash flow. We will also continue to provide returns to our shareholders through share repurchases and dividends.
Growth
We measure our growth primarily by the amount of the period-over-period growth in our net sales and our comparable store and club sales. We also review the progress of our digital retail investments by measuring the impact e-commerce sales have on our comparable store and club sales. At times, we make strategic investments which are focused on the long-term growth of the Company. These strategic investments may not benefit net sales and comparable store and club sales in the near term.
Net Sales
 
 
Fiscal Years Ended January 31,
 
 
2016
 
2015
 
2014
(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.
 
$
298,378

 
62.3
%
 
3.6
 %
 
$
288,049

 
59.8
%
 
3.1
 %
 
$
279,406

 
59.0
%
Walmart International
 
123,408

 
25.8
%
 
(9.4
)%
 
136,160

 
28.2
%
 
(0.3
)%
 
136,513

 
28.9
%
Sam's Club
 
56,828

 
11.9
%
 
(2.1
)%
 
58,020

 
12.0
%
 
1.5
 %
 
57,157

 
12.1
%
Net sales
 
$
478,614

 
100.0
%
 
(0.7
)%
 
$
482,229

 
100.0
%
 
1.9
 %
 
$
473,076

 
100.0
%
Our consolidated net sales decreased $3.6 billion or 0.7% for fiscal 2016 and increased $9.2 billion or 1.9% for fiscal 2015, when compared to the previous fiscal year. Net sales for fiscal 2016 were negatively impacted by $17.1 billion or 3.5% as a result of fluctuations in currency exchange rates and a $1.9 billion decrease in fuel sales primarily due to the lower selling prices of fuel at our Sam's Club segment. The negative effect of such factors was offset by 1.3% year-over-year growth in retail square feet, positive comparable sales in the Walmart U.S. segment and higher e-commerce sales across the Company. The increase in net sales for fiscal 2015 was primarily due to 3.0% year-over-year growth in retail square feet, positive comparable sales in the U.S. and higher e-commerce sales across the Company. The increase was partially offset by $5.3 billion of negative impact from fluctuations in currency exchange rates for fiscal 2015.
Calendar Comparable Store and Club Sales
Comparable store and club sales is a metric which 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). 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 fiscal 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 2016 and 2015, were as follows:
 
 
Fiscal Years Ended January 31,
 
 
2016
 
2015
 
2016
 
2015
 
 
With Fuel
 
Fuel Impact
Walmart U.S.
 
1.0%
 
0.6%
 
0.0%
 
0.0%
Sam's Club
 
(3.2)%
 
0.0%
 
(3.4)%
 
(0.6)%
Total U.S.
 
0.3%
 
0.5%
 
(0.6)%
 
(0.1)%

Comparable store and club sales in the U.S., including fuel, increased 0.3% and 0.5% in fiscal 2016 and 2015, respectively, when compared to the previous fiscal year. The fiscal 2016 total U.S. comparable store and club sales were positively impacted

5



by continued traffic improvement and higher e-commerce sales at the Walmart U.S. segment, offset to a significant degree by the negative impact of lower fuel sales primarily due to lower fuel prices at the Sam's Club segment. E-commerce sales positively impacted comparable sales approximately 0.2% and 0.6% for Walmart U.S. and Sam's Club, respectively, for fiscal 2016. The fiscal 2015 total U.S. comparable store and club sales were positively impacted by higher traffic during the end of the fiscal year. E-commerce sales positively impacted comparable sales approximately 0.3% and 0.2% for Walmart U.S. and Sam's Club, respectively, for fiscal 2015.
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 0.9% in fiscal 2016 and 2015, 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.
Strategic Growth Investments
During fiscal 2016, we made capital investments globally of $11.5 billion. These capital investments primarily consisted of payments to add new stores and clubs, remodel existing stores and clubs, construct distribution centers and invest in technology. In addition, we made an incremental operational investment of $296 million in e-commerce in fiscal 2016 as compared to fiscal 2015. We also made operational investments of approximately $1.2 billion in fiscal 2016 in connection with the new associate wage structure and comprehensive associate training and educational programs announced in first quarter of fiscal 2016. These operational investments will continue into the year ending January 31, 2017 ("fiscal 2017").

6



Returns
While we are focused primarily on growth, we also place a priority on generating returns to ensure our approach is appropriately balanced. We generate returns by efficiently deploying assets and effectively managing working capital. We monitor these efforts through our return on investment and free cash flow metrics, which we discuss below. In addition, we are focused on providing returns to our shareholders in the form of share repurchases and dividends, which are discussed in the Liquidity and Capital Resources section.
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 15.5% and 16.9% for the fiscal years ended January 31, 2016 and 2015, respectively. The decline in ROI was primarily due to our decrease in operating income, as well as continued capital investments.
We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the 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, plus average accumulated depreciation and average accumulated amortization, less average accounts payable and average accrued liabilities for that period, plus a rent factor equal to the rent for the fiscal year 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 financial measure calculated and presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"). 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. We consider return on assets ("ROA") to be the financial measure computed in accordance with GAAP that is the most directly comparable financial measure to our calculation of ROI. 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. Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA.
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.

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)
 
2016
 
2015
CALCULATION OF RETURN ON INVESTMENT
Numerator
 
 
 
 
Operating income
 
$
24,105

 
$
27,147

+ Interest income
 
81

 
113

+ Depreciation and amortization
 
9,454

 
9,173

+ Rent
 
2,532

 
2,777

= Adjusted operating income
 
$
36,172

 
$
39,210

 
 
 
 
 
Denominator
 
 
 
 
Average total assets of continuing operations(1)
 
$
201,536

 
$
203,786

+ Average accumulated depreciation and amortization(1)
 
68,759

 
63,375

- Average accounts payable(1)
 
38,449

 
37,913

- Average accrued liabilities(1)
 
19,380

 
18,973

+ Rent x 8
 
20,256

 
22,216

= Average invested capital
 
$
232,722

 
$
232,491

Return on investment (ROI)
 
15.5
%
 
16.9
%
 
 
 
 
 
CALCULATION OF RETURN ON ASSETS
Numerator
 
 
 
 
Income from continuing operations
 
$
15,080

 
$
16,814

Denominator
 
 
 
 
Average total assets of continuing operations(1)
 
$
201,536

 
$
203,786

Return on assets (ROA)
 
7.5
%
 
8.2
%
 
 
 
As of January 31,
 
 
2016
 
2015
 
2014
Certain Balance Sheet Data
 
 
 
 
 
 
Total assets of continuing operations(2)
 
$
199,581

 
$
203,490

 
$
204,081

Accumulated depreciation and amortization
 
71,538

 
65,979

 
60,771

Accounts payable
 
38,487

 
38,410

 
37,415

Accrued liabilities
 
19,607

 
19,152

 
18,793

 
(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 were adjusted to reflect the adoption of ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost, for all periods.

8



Free Cash Flow
Free cash flow is considered a non-GAAP financial measure. Management believes, however, 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.
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 $15.9 billion, $16.4 billion and $10.1 billion for fiscal 2016, 2015 and 2014, respectively. The decrease in free cash flow in fiscal 2016 from fiscal 2015 was primarily due to lower income from continuing operations, partially offset by lower capital spending and improved working capital management.
Walmart's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that 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 Walmart's management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.
The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, 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)
 
2016
 
2015
 
2014
Net cash provided by operating activities
 
$
27,389

 
$
28,564

 
$
23,257

Payments for property and equipment
 
(11,477
)
 
(12,174
)
 
(13,115
)
Free cash flow
 
$
15,912

 
$
16,390

 
$
10,142

 
 
 
 
 
 
 
Net cash used in investing activities(1)
 
$
(10,675
)
 
$
(11,125
)
 
$
(12,526
)
Net cash used in financing activities
 
(16,122
)
 
(15,071
)
 
(10,789
)
(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)
 
2016
 
2015
 
2014
Total revenues
 
$
482,130

 
$
485,651

 
$
476,294

Percentage change from comparable period
 
(0.7
)%
 
2.0
%
 
1.6
 %
Net sales
 
$
478,614

 
$
482,229

 
$
473,076

Percentage change from comparable period
 
(0.7
)%
 
1.9
%
 
1.6
 %
Total U.S. calendar comparable store and club sales increase (decrease)
 
0.3
 %
 
0.5
%
 
(0.5
)%
Gross profit rate
 
24.6
 %
 
24.3
%
 
24.3
 %
Operating income
 
$
24,105

 
$
27,147

 
$
26,872

Operating income as a percentage of net sales
 
5.0
 %
 
5.6
%
 
5.7
 %
Income from continuing operations
 
$
15,080

 
$
16,814

 
$
16,551

Unit counts at period end
 
11,528

 
11,453

 
10,942

Retail square feet at period end
 
1,149

 
1,135

 
1,101

Our total revenues, which are mostly comprised of net sales, but also include membership and other income, decreased 0.7% for fiscal 2016 and increased 2.0% for fiscal 2015 when compared to the previous fiscal year. Net sales decreased 0.7% for fiscal 2016 and increased 1.9% for fiscal 2015 when compared to the previous fiscal year. For fiscal 2016, net sales were negatively impacted by $17.1 billion as a result of fluctuations in currency exchange rates and a decrease of $1.9 billion in fuel sales that resulted primarily from lower selling prices for fuel at our Sam's Club segment. The negative effect of such factors on our consolidated net sales was partially offset by the 1.3% year-over-year growth in retail square feet, positive comparable sales in the Walmart U.S. segment and higher e-commerce sales across the Company. For fiscal 2015, the increase in net sales was primarily due to 3.0% year-over-year growth in retail square feet, positive comparable sales in the U.S. and higher e-commerce sales across the Company. The increase was partially offset by $5.3 billion of negative impact from fluctuations in currency exchange rates for fiscal 2015.
Our gross profit rate increased 29 basis points for fiscal 2016 when compared to fiscal 2015. Improved margins in food, general merchandise, and consumables in the Walmart U.S. segment positively impacted our gross profit rate. Changes in the merchandise mix in the Walmart International segment and a reduction in low margin fuel sales in the Sam's Club segment also positively impacted our gross profit rate, while continued pharmacy reimbursement pressure at the Walmart U.S. segment negatively impacted our gross profit rate. Our gross profit rate was relatively flat in fiscal 2015 when compared to fiscal 2014.
Operating expenses as a percentage of net sales increased 91 and 6 basis points for fiscal 2016 and 2015, respectively, when compared to the previous fiscal year. For fiscal 2016, the increase in operating expenses as a percentage of net sales was primarily due to an increase in wage expense at the Walmart U.S. segment due to the new associate wage structure and increased associate hours to improve the overall customer experience, the approximately $0.9 billion charge for the store closures announced in January 2016 and our continued investments in digital retail and information technology. For fiscal 2015, the increase in operating expenses as a percentage of net sales was due to our continued investments in digital retail and higher health-care expenses in the U.S. from increased enrollment in our associate health-care plans and medical cost inflation, the $249 million impact of wage and hour litigation in the U.S., as well as expenses of $148 million related to the closure of approximately 30 underperforming stores in Japan. The impact of these factors in the increase of operating expenses as a percentage of net sales for fiscal 2015 was partially offset by nearly $1.0 billion of aggregated expenses incurred in fiscal 2014.
Our effective income tax rate was 30.3%, 32.2% and 32.9% for fiscal 2016, 2015 and 2014, respectively. Our effective tax rate fluctuates from period to period and may be impacted by a number of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in laws, outcomes of administrative audits, the impacts of discrete items and the mix of earnings among our U.S. and international operations. The reconciliation from the U.S. statutory rate to the effective income tax rates for fiscal 2016, 2015 and 2014 is presented in Note 9 in the "Notes to Consolidated Financial Statements."
As a result of the factors discussed above, we reported $15.1 billion, $16.8 billion and $16.6 billion of consolidated income from continuing operations for fiscal 2016, 2015 and 2014, respectively; a decrease of $1.7 billion for fiscal 2016 and an increase of $263 million for fiscal 2015 when compared to the previous fiscal year. Diluted income from continuing operations per common share attributable to Walmart ("EPS") was $4.57, $4.99 and $4.85 for fiscal 2016, 2015 and 2014, respectively.

10



Walmart U.S. Segment
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2016
 
2015
 
2014
Net sales
 
$
298,378

 
$
288,049

 
$
279,406

Percentage change from comparable period
 
3.6
%

3.1
%
 
1.8
 %
Calendar comparable store sales increase
 
1.0
%
 
0.6
%
 
(0.6
)%
Operating income
 
$
19,087

 
$
21,336

 
$
21,787

Operating income as a percentage of net sales
 
6.4
%
 
7.4
%
 
7.8
 %
Unit counts at period end
 
4,574


4,516

 
4,203

Retail square feet at period end
 
690


680

 
659

Net sales for the Walmart U.S. segment increased 3.6% and 3.1% for fiscal 2016 and 2015, respectively, when compared to the previous fiscal year. The increases in net sales were primarily due to year-over-year growth in retail square feet of 1.4% and 3.2% for fiscal 2016 and 2015, respectively, as well as increases in comparable store sales of 1.0% and 0.6% for fiscal 2016 and 2015, respectively. Positive customer traffic and higher e-commerce sales contributed to the increases in comparable store sales in both periods.
The fiscal 2016 gross profit rate increased 12 basis points compared to the previous fiscal year, primarily due to improved margin in food, general merchandise, and consumables, partially offset by continued pharmacy reimbursement pressure. The fiscal 2015 gross profit rate decreased 12 basis points when compared to the previous fiscal year, primarily due to the result of the segment's strategic focus on price investment, pharmacy cost inflation, reductions in third-party reimbursement rates and changes in merchandise mix.
Operating expenses as a percentage of segment net sales increased 113 and 24 basis points for fiscal 2016 and 2015, respectively, when compared to the previous fiscal year. For fiscal 2016, the increase was primarily driven by an increase in wage expense due to the new associate wage structure and increased associate hours. Enhancements to the customer-facing areas of the store to improve the overall customer experience drove the increase in associate hours as well as increased maintenance expenses. In addition, the approximately $700 million charge for the closures of 150 stores announced in January 2016, an increase in store associate incentive expense and our continued investments in digital retail and information technology contributed to the fiscal 2016 increase in operating expenses as a percentage of segment net sales. For fiscal 2015, the increase in operating expenses as a percentage of segment net sales was primarily driven by higher health-care expenses from increased enrollment in our associate health-care plans and medical cost inflation. In addition, expenses from severe winter storms early in fiscal 2015 contributed to the increase in operating expenses as a percentage of segment net sales. 
As a result of the factors discussed above, segment operating income was $19.1 billion, $21.3 billion and $21.8 billion during fiscal 2016, 2015 and 2014, respectively.

11



Walmart International Segment
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2016
 
2015
 
2014
Net sales
 
$
123,408

 
$
136,160

 
$
136,513

Percentage change from comparable period
 
(9.4
)%
 
(0.3
)%
 
1.3
%
Operating income
 
$
5,346

 
$
6,171

 
$
5,153

Operating income as a percentage of net sales
 
4.3
 %
 
4.5
 %
 
3.8
%
Unit counts at period end
 
6,299


6,290

 
6,107

Retail square feet at period end
 
372


368

 
358

Net sales for the Walmart International segment decreased 9.4% and 0.3% for fiscal 2016 and 2015, respectively, when compared to the previous fiscal year. For fiscal 2016, the decrease in net sales was primarily due to the $17.1 billion of negative impact from fluctuations in currency exchange rates and negative comparable sales in the U.K. and China, partially offset by year-over-year growth in retail square feet of 1.2% and positive comparable sales in Mexico and Canada. For fiscal 2015, the decrease in net sales was primarily due to $5.3 billion of negative impact from fluctuations in currency exchange rates, partially offset by year-over-year growth in retail square feet of 2.6% and higher e-commerce sales in each country with e-commerce operations, particularly in the United Kingdom, China and Brazil.
Gross profit rate increased 23 and 12 basis points for fiscal 2016 and 2015, respectively, when compared to the same periods in the previous fiscal year. The fiscal 2016 and 2015 increases in gross profit rate were primarily due to changes in the merchandise mix in certain markets.
Operating expenses as a percentage of segment net sales increased 44 basis points for fiscal 2016, when compared to the previous fiscal year. The increase in operating expenses as a percentage of segment net sales for fiscal 2016 was primarily driven by the approximately $150 million charge for the announced closure of 115 underperforming stores in Brazil and other Latin American markets in January 2016, increased employment claim contingencies and higher utility rates in Brazil and continued investments in digital retail and information technology.
Operating expenses as a percentage of segment net sales decreased 51 basis points for fiscal 2015 when compared to the previous fiscal year due to the nearly $1.0 billion of aggregated expenses incurred in fiscal 2014, including charges for contingencies in Brazil, store closure costs in China and Brazil, store lease expenses in China and Mexico and expenses for the termination of the joint venture in India, partially offset by fiscal 2015 expenses of $148 million related to the closure of approximately 30 underperforming stores in Japan.
As a result of the factors discussed above, segment operating income was $5.3 billion, $6.2 billion and $5.2 billion for fiscal 2016, 2015 and 2014, respectively. Fluctuations in currency exchange rates negatively impacted operating income $765 million, $225 million and $26 million in fiscal 2016, 2015 and 2014, respectively.


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)
 
2016
 
2015
 
2014
Including Fuel
 
 
 
 
 
 
Net sales
 
$
56,828

 
$
58,020

 
$
57,157

Percentage change from comparable period
 
(2.1
)%
 
1.5
%
 
1.3
%
Calendar comparable club sales increase (decrease)
 
(3.2
)%
 
0.0
%
 
0.3
%
Operating income
 
$
1,820

 
$
1,976

 
$
1,843

Operating income as a percentage of net sales
 
3.2
 %
 
3.4
%
 
3.2
%
Unit counts at period end
 
655


647

 
632

Retail square feet at period end
 
88


87

 
84

 
 
 
 
 
 
 
Excluding Fuel
 
 
 
 
 
 
Net sales
 
$
52,330

 
$
51,630

 
$
50,574

Percentage change from comparable period
 
1.4
 %
 
2.1
%
 
1.6
%
Operating income
 
$
1,746

 
$
1,854

 
$
1,817

Operating income as a percentage of net sales
 
3.3
 %
 
3.6
%
 
3.6
%
Net sales for the Sam's Club segment decreased 2.1% for fiscal 2016 and increased 1.5% for fiscal 2015 when compared to the previous fiscal year. The fiscal 2016 decrease in net sales was primarily due to declines in comparable club sales, which were driven by a decrease of $1.9 billion in fuel sales that resulted primarily from lower selling prices for fuel. The decrease in net sales was partially offset by year-over-year growth in retail square feet of 1.2% and higher e-commerce sales at samsclub.com. The fiscal 2015 increase in net sales was primarily due to year-over-year growth in retail square feet of 2.5%, driven by the addition of 15 new clubs, partially offset by a decrease in fuel sales from lower fuel prices. Comparable club sales were flat for fiscal 2015.
Gross profit rate increased 30 basis points for fiscal 2016 and decreased 12 basis points for fiscal 2015, when compared to the previous fiscal year. For fiscal 2016, the increase was primarily due to the reduction in low margin fuel sales and lower merchandise acquisition costs, partially offset by the segment's continued investment in the Cash Rewards program. For fiscal 2015, the gross profit rate decreased primarily due to the segment's investment in the Cash Rewards program, changes in merchandise mix, and commodity cost inflation, partially offset by an increased gross profit rate on fuel sales.
Membership and other income increased 5.3% and 7.7% for fiscal 2016 and 2015, respectively, when compared to the previous fiscal year. For fiscal 2016, the increase was primarily the result of increased membership upgrades and Plus Member renewals. For fiscal 2015, the increase was primarily the result of increased membership upgrades, Plus Member renewals and an increase in members from the opening of 15 new clubs.
Operating expenses as a percentage of segment net sales increased 67 basis points for fiscal 2016 and decreased 16 basis points for fiscal 2015, when compared to the previous fiscal year. For fiscal 2016, the increase in operating expenses as a percentage of segment net sales was primarily due to lower fuel sales, an increase in wage expense due to the new associate wage structure, our continued investments in new clubs, digital retail and information technology, and the approximately $60 million charge for club closures announced in January 2016. For fiscal 2015, the decrease in operating expenses as a percentage of segment net sales was primarily due to better expense management in a number of areas, including the optimization of the new in-club staffing structure announced in fiscal 2014, which resulted in decreases in wage expense and payroll taxes.
As a result of the factors discussed above, segment operating income was $1.8 billion, $2.0 billion and $1.8 billion for fiscal 2016, 2015 and 2014, respectively.

13



Liquidity and Capital Resources
Liquidity
The strength and stability of our operations have historically supplied us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. Generally, some or all of the remaining available cash flow has been used to fund the dividends on our common stock and share repurchases. We believe our sources of liquidity will continue to be adequate to fund operations, finance our global expansion activities, pay dividends and fund our share repurchases for the foreseeable future.
Net Cash Provided by Operating Activities
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2016
 
2015
 
2014
Net cash provided by operating activities
 
$
27,389

 
$
28,564

 
$
23,257

Net cash provided by operating activities was $27.4 billion, $28.6 billion and $23.3 billion for fiscal 2016, 2015 and 2014, respectively. The decrease in net cash provided by operating activities for fiscal 2016, when compared to the previous fiscal year, was primarily due to lower income from continuing operations, partially offset by improved working capital management. The increase in net cash provided by operating activities for fiscal 2015, when compared to the previous fiscal year, was primarily due to the timing of payments for accounts payable and accrued liabilities, as well as the timing of income tax payments.
In fiscal 2017, the Company will move forward with the second year of our new associate wage structure combined with comprehensive associate training and educational programs which was announced in fiscal 2016. We anticipate cash flows provided by operating activities will be sufficient to fund these programs in fiscal 2017 and future years.
Cash Equivalents and Working Capital
Cash and cash equivalents were $8.7 billion and $9.1 billion at January 31, 2016 and 2015, respectively. Our working capital deficit was $4.4 billion and $2.0 billion at January 31, 2016 and 2015, respectively. The increase in our working capital deficit reflects the Company's efficient leverage achieved through improved working capital management, in addition to the timing of payments. We generally operate with a working capital deficit due to our efficient use of cash in funding operations, consistent access to the capital markets and in providing returns to our shareholders in the form of payments of cash dividends and share repurchases.
We use intercompany financing arrangements 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 earnings held outside of the U.S. and anticipate our domestic liquidity needs will be met through cash flows provided by operating activities, supplemented with long-term debt and short-term borrowings. Accordingly, we intend, with only certain exceptions, to continue to indefinitely reinvest our earnings held outside of the U.S. in our foreign operations. When the income earned, either from operations or through intercompany financing arrangements, 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. We do not expect local laws, other limitations or potential taxes on anticipated future repatriations of earnings held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.
As of January 31, 2016 and January 31, 2015, cash and cash equivalents of approximately $1.1 billion and $1.7 billion, respectively, may not be freely transferable to the U.S. due to local laws or other restrictions.

Net Cash Used in Investing Activities
 
 
As of January 31,
(Amounts in millions)
 
2016
 
2015
 
2014
Net cash used in investing activities
 
$
(10,675
)
 
$
(11,125
)
 
$
(12,526
)
Net cash used in investing activities was $10.7 billion, $11.1 billion and $12.5 billion for fiscal 2016, 2015 and 2014, respectively, and generally consisted of payments to add stores and clubs, remodel existing stores and clubs, expand our digital retail capabilities and invest in other technologies. For fiscal 2016, we opened 423 new stores and clubs. Net cash used in investing activities decreased $450 million and $1.4 billion for fiscal 2016 and 2015, respectively, when compared to the previous fiscal year, primarily due to lower capital expenditures. The following table provides additional capital expenditure detail:

14




(Amounts in millions)
 
Allocation of Capital Expenditures
Fiscal Years Ending January 31,
Capital Expenditures
 
2016
 
2015
New stores and clubs, including expansions and relocations
 
$
3,194

 
$
4,128

Information systems, distribution, digital retail and other
 
3,963

 
3,288

Remodels
 
1,390

 
822

Total U.S.
 
8,547

 
8,238

Walmart International
 
2,930

 
3,936

Total capital expenditures
 
$
11,477

 
$
12,174

Cash proceeds of $671 million received from the sale of the Vips restaurant business in Mexico ("Vips") on May 12, 2014, which is further described in Note 13 to our Consolidated Financial Statements, also reduced net cash used in investing activities in fiscal 2015.
We continued to focus on seamlessly integrating the digital and physical shopping experience for our customers and expanding in digital retail in each of our segments during fiscal 2016. Some of our fiscal 2016 accomplishments in this area were to successfully launch "Walmart Pay," grow integrated mobile applications and services including "Online Grocery" and "Pickup Today," continue to roll out our new web platform in the U.S. and open new e-commerce dedicated fulfillment centers.
Growth Activities
In fiscal 2017, we plan to add between 342 and 405 new stores and clubs, which will include a continued investment in Neighborhood Markets and a moderation of Supercenter growth in the U.S. compared to recent fiscal years. In addition, we plan to continue the growth of our digital retail capabilities by investing approximately $1.1 billion in e-commerce websites and mobile commerce applications that will include technology, infrastructure and other elements of our e-commerce operations to better serve our customers and support our stores and clubs. We anticipate financing these growth activities through cash flows provided by operating activities and future debt financings.
The following table provides our projected fiscal 2017 capital expenditures. Our anticipated digital retail expenditures are included in our projected fiscal 2017 capital expenditures. The amounts in the table do not include capital expenditures or growth in retail square feet from any pending or future acquisitions.
 
 
Approximate Fiscal 2017 Projected Capital Expenditures (in billions)
Walmart U.S.
 
$
6.2

Walmart International
 
3.0

Sam's Club
 
0.8

Corporate and support
 
1.0

Total
 
$
11.0



Net Cash Used in Financing Activities
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2016
 
2015
 
2014
Net cash used in financing activities
 
$
(16,122
)
 
$
(15,071
)
 
$
(10,789
)
Net cash flows used in financing activities generally consist of transactions related to our short-term and long-term debt, financing obligations, dividends paid and the repurchase of Company stock. Transactions with noncontrolling interest shareholders are also classified as cash flows from financing activities. Net cash used in financing activities increased $1.1 billion and $4.3 billion for fiscal 2016 and fiscal 2015, respectively, when compared to the same period in the previous fiscal year.
Short-term Borrowings
Net cash flows provided by short-term borrowings increased $1.2 billion in fiscal 2016 and decreased $6.3 billion in fiscal 2015, when compared to the balance at the end of the previous fiscal year. We generally utilize the liquidity provided by short-term borrowings to provide funding for our operations, dividend payments, share repurchases, capital expenditures and other cash requirements. For fiscal 2016, the increase in net cash flows provided by short-term borrowings partially offset a larger $2.0 billion decrease in long-term debt due within one year. For fiscal 2015, more cash provided from operating activities combined with less cash used for share repurchases and capital expenditures during fiscal 2015 allowed us to minimize our

15



short-term borrowings as of January 31, 2015. In addition to our short-term borrowings, we also have various undrawn committed lines of credit that provide $15.0 billion of additional liquidity, if needed.
Long-term Debt
The following table provides the changes in our long-term debt for fiscal 2016:
(Amounts in millions)
 
Long-term debt due within one year
 
Long-term debt
 
Total
Balances as of February 1, 2015
 
$
4,791

 
$
40,889

 
$
45,680

Proceeds from issuance of long-term debt
 

 
39

 
39

Payments of long-term debt
 
(4,432
)
 

 
(4,432
)
Reclassifications of long-term debt
 
2,000

 
(2,000
)
 

Other
 
386

 
(714
)
 
(328
)
Balances as of January 31, 2016
 
$
2,745

 
$
38,214

 
$
40,959

Our total outstanding long-term debt balance decreased $4.7 billion for the twelve months ended January 31, 2016, primarily due to no significant new long-term debt issuances in the current year offset by maturities of existing long-term debt.
Dividends
Our total dividend payments were $6.3 billion, $6.2 billion and $6.1 billion for fiscal 2016, 2015 and 2014, respectively. On February 18, 2016, the Board of Directors approved the fiscal 2017 annual dividend of $2.00 per share, an increase over the fiscal 2016 annual dividend of $1.96 per share. For fiscal 2017, the annual dividend will be paid in four quarterly installments of $0.50 per share, according to the following record and payable dates:
Record Date
  
Payable Date
March 11, 2016
  
April 4, 2016
May 13, 2016
  
June 6, 2016
August 12, 2016
  
September 6, 2016
December 9, 2016
  
January 3, 2017
Company Share Repurchase Program
From time to time, we repurchase shares of our common stock under share repurchase programs authorized by the Company's Board of Directors. On October 13, 2015, the Board of Directors replaced the previous $15.0 billion share repurchase program, which had $8.6 billion of remaining authorization for share repurchases as of that date, with a new $20.0 billion share repurchase program. As was the case with the replaced share repurchase program, the new share repurchase program has no expiration date or other restrictions limiting the period over which we can make share repurchases. At January 31, 2016, authorization for $17.5 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 intends to utilize the current share repurchase authorization through the fiscal year ending January 31, 2018.
We regularly review share repurchase activity and consider several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings, our results of operations and the market price of our common stock. We anticipate that a significant majority of the ongoing share repurchase program will be funded through the Company's free cash flows. The following table provides, on a settlement date basis, the number of shares repurchased, average price paid per share and total amount paid for share repurchases for fiscal 2016, 2015 and 2014:
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except per share data)
 
2016
 
2015
 
2014
Total number of shares repurchased
 
62.4

 
13.4

 
89.1

Average price paid per share
 
$
65.90

 
$
75.82

 
$
74.99

Total amount paid for share repurchases
 
$
4,112

 
$
1,015

 
$
6,683

Share repurchases increased $3.1 billion for fiscal 2016 and decreased $5.7 billion for fiscal 2015, respectively, when compared to the previous fiscal year. For fiscal 2016, the increase in share repurchases resulted from our intention to utilize the current share repurchase authorization over the next two years. For fiscal 2015, the decrease was a result of cash needs, reduced leverage and increased cash used in transactions with noncontrolling interests described further below.

16



Significant Transactions with Noncontrolling Interests
As described in Note 13 to our Consolidated Financial Statements, in July 2015, we completed the purchase of all of the remaining noncontrolling interest in Yihaodian, our e-commerce operations in China, for approximately $760 million, using existing cash to complete this transaction and during fiscal 2015, we completed the purchase of substantially all of the remaining noncontrolling interest in Walmart Chile for approximately $1.5 billion, using existing cash to complete this transaction.
Capital Resources
We believe cash flows from continuing operations, our current cash position and access to capital markets will continue to be sufficient to meet our anticipated operating cash needs, which include funding seasonal buildups in merchandise inventories and funding our capital expenditures, dividend payments and share repurchases.
We have strong commercial paper 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 capital markets. At January 31, 2016, 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.

17



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

2017

2018-2019

2020-2021

Thereafter
Recorded contractual obligations:










Long-term debt(1)

$
40,959


$
2,745

 
$
5,016

 
$
3,850

 
$
29,348

Short-term borrowings

2,708


2,708







Capital lease and financing obligations(2)

8,655

 
815

 
1,468

 
1,279

 
5,093

Unrecorded contractual obligations:

 
 
 
 
 
 
 
 
 
Non-cancelable operating leases

21,505

 
2,057

 
3,783

 
3,227

 
12,438

Estimated interest on long-term debt

30,391


1,806


3,445


3,129


22,011

Trade letters of credit

2,709


2,709










Stand-by letters of credit
 
1,813

 
1,813

 

 

 

Purchase obligations

14,099


6,830


5,527


1,549


193

Total commercial commitments

$
122,839


$
21,483


$
19,239


$
13,034


$
69,083

(1)
"Long-term debt" includes the fair value of our derivatives classified as fair value hedges.
(2)
"Capital lease and financing obligations" includes executory costs and imputed interest related to capital lease and financing obligations that are not yet recorded. Refer to Note 11 in the "Notes to the Consolidated Financial Statements" for more information.
Additionally, the Company has $15.0 billion in undrawn committed lines of credit which, if drawn upon, would be included in the current 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, 2016, 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, $607 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 215 future locations. These lease commitments have lease terms ranging from 10 to 30 years and provide for certain minimum rentals. If leases for all of those future locations had been executed as of February 1, 2016, payments under operating leases would increase by $34 million for fiscal 2017, 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, 2016, the aggregate termination payment would have been $44 million. The arrangement pursuant to which this payment could be made will expire in fiscal 2019.

18



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 and by entering into interest rate swaps. For fiscal 2016, the net fair value of our interest rate swaps increased approximately $162 million primarily due to additional interest rate swaps acquired in fiscal 2016 and fluctuations in market interest rates.
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, 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, 2016.
 
 
Expected Maturity Date
(Amounts in millions)
 
Fiscal 2017
 
Fiscal 2018
 
Fiscal 2019
 
Fiscal 2020
 
Fiscal 2021
 
Thereafter
 
Total
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate
 
$
2,708

 
$

 
$

 
$

 
$

 
$

 
$
2,708

Weighted-average interest rate
 
1.5
%
 
%
 
%
 
%
 
%
 
%
 
1.5
%
Long-term debt(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate
 
$
2,032

 
$
1,518

 
$
3,502

 
$
484

 
$
3,351

 
$
29,353

 
$
40,240

Weighted-average interest rate
 
1.9
%
 
4.1
%
 
3.1
%
 
4.3
%
 
3.4
%
 
5.0
%
 
4.5
%
Variable rate
 
719

 

 

 

 

 

 
$
719

Weighted-average interest rate
 
5.2
%
 
%
 
%
 
%
 
%
 
%
 
5.2
%
Interest rate derivatives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed to variable
 
$

 
$

 
$

 
$

 
$
1,500

 
$
3,500

 
$
5,000

Weighted-average pay rate
 
%
 
%
 
%
 
%
 
2.0
%
 
1.5
%
 
1.6
%
Weighted-average receive rate
 
%
 
%
 
%
 
%
 
3.3
%
 
3.0
%
 
3.1
%
(1)
The long-term debt amounts in the table exclude the Company's derivatives classified as fair value hedges.
As of January 31, 2016, our variable rate borrowings, including the effect of our commercial paper and interest rate swaps, represented 19% of our total short-term and long-term debt. Based on January 31, 2016 debt levels, a 100 basis point change in prevailing market rates would cause our annual interest costs to change by approximately $79 million.

19



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 U.S. For fiscal 2016, movements in currency exchange rates and the related impact on the translation of the balance sheets of the Company's subsidiaries in Canada, the United Kingdom, Japan, Mexico and Chile were the primary cause of the $4.7 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 a liability position of $290 million at January 31, 2016 and in a liability position of $110 million at January 31, 2015. The change in the fair value of these swaps was due to fluctuations in currency exchange rates, primarily the strengthening of the U.S. dollar relative to other currencies in fiscal 2016. A hypothetical 10% increase or decrease in the currency exchange rates underlying these swaps from the market rate at January 31, 2016 would have resulted in a loss or gain in the value of the swaps of $445 million. A hypothetical 10% change in interest rates underlying these swaps from the market rates in effect at January 31, 2016 would have resulted in a loss or gain in value of the swaps of $14 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, 2016 and 2015, 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, 2016, 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 $324 million. In addition, we had outstanding long-term debt of ¥10 billion at January 31, 2016 and ¥100 billion at January 31, 2015, that was designated as a hedge of our net investment in Japan. At January 31, 2016, 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 $8 million.
In certain countries, we also enter into immaterial foreign currency forward contracts to hedge the purchase and payment of purchase commitments denominated in non-functional currencies.
Other Matters
We discuss our existing FCPA investigation and related matters in the Annual Report on Form 10-K for fiscal 2016, including certain risks arising therefrom, in Part I, Item 1A of the Form 10-K under the caption "Risk Factors" and under the sub-caption "FCPA Investigation and Related Matters" in Note 10 to our Consolidated Financial Statements, which is captioned "Contingencies," and appears elsewhere herein. We also discuss various legal proceedings related to the FCPA investigation in Item 3 of the Form 10-K under the caption "Part I, Item 3. Legal Proceedings," under the sub-caption "II. Certain Other Proceedings." We discuss the "equal value" claims against our United Kingdom subsidiary, ASDA Stores, Ltd., in the Annual Report on Form 10-K for fiscal 2016, including certain risks arising therefrom, in Part I, Item 1A of the Form 10-K under the caption "Risk Factors" and under the sub-caption "Legal Proceedings" in Note 10 to our Consolidated Financial Statements, which is captioned "Contingencies," and appears elsewhere herein.

20



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 U.S. 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 inventories. The inventory at the Walmart International segment is valued primarily by the retail inventory method of accounting, using the first-in, first-out ("FIFO") method. The retail method of accounting results in inventory being valued at the lower of cost or market since permanent markdowns are immediately recorded as a reduction of the retail value of inventory. The inventory at the Sam's Club segment is valued based on the weighted-average cost using the LIFO method.
Under the retail method of accounting, inventory is valued at the lower of cost or market, 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 well as seasonal and fashion trends. Changes in weather 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, 2016 and 2015, 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 historical 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.

21



As of January 31, 2016, the fair value of certain indefinite-lived intangible assets held in our International segment exceeded its carrying value of $398 million by approximately 5%. Management will continue to monitor the fair value of these assets in future periods.
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



Cautionary Statement Regarding Forward-Looking Statements
This Annual Report to Shareholders contains statements that we believe are "forward-looking statements" entitled to the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995, as amended.
The forward-looking statements made in this Annual Report to Shareholders are not statements of historical facts, but instead express our estimates or expectations for our consolidated, or one of our segment's, economic performance or results of operations for future periods or as of future dates or events or developments that may occur in the future or discuss our plans, objectives or goals. These forward-looking statements relate to:
the growth of our business or change in our competitive position in the future or in or over particular periods;
the amount, number, growth or increase, in or over certain periods, of or in certain financial items or measures or operating measures, including net sales, comparable store and club sales, liabilities, expenses of certain categories, returns, capital and operating investments or expenditures of particular types, new store openings, or investments in particular formats;
investments we will make and how certain of those investments are expected to be financed;
volatility in currency exchange rates and fuel prices affecting our or one of our segments' results of operations;
the Company continuing to provide returns to shareholders through share repurchases and dividends, the use of share repurchase authorization over a certain period or the source of funding of a certain portion of our share repurchases;
our sources of liquidity, including our cash, continuing to be adequate or sufficient to fund and finance our operations, expansion activities, dividends and share repurchases, to meet our cash needs and to fund our domestic operations without repatriating earnings we hold outside of the U.S.;
our intention to reinvest the earnings we hold outside of the U.S. in our foreign operations and certain laws, other limitations and potential taxes on anticipated future repatriations of such earnings not materially affecting our liquidity, financial condition or results of operations;
the insignificance of ineffective hedges and reclassification of amounts related to our derivatives;
the realization of certain net deferred tax assets and the effects of resolutions of tax-related matters;
the effect of adverse decisions in, or settlement of, litigation to which we are subject and the effect of an FCPA-investigation on our business; or
the effect on the Company's results of operations or financial condition of the Company's adoption of certain new, or amendments to existing, accounting standards.
Statement of our plans, objectives and goals in this Annual Report to Shareholders, including our priority of the growth of the Company being balanced by the long-term health of the Company, including returns, are also forward-looking statements.
The forward-looking statements described above are identified by the use in such statements of words or phrases such as "aim," "anticipate," "could be," "could increase," "estimated," "expansion," "expect," "expected to be," "focus," "goal," "grow," "intend," "invest," "is expected," "may continue," "may fluctuate," "may grow," "may impact," "may result," "objective," "plan," "priority," "project," "strategy," "to be," "to win," "we'll," "we will," "will add," "will allow," "will be," "will benefit," "will continue," "will decrease," "will have," "will impact," "will include," "will increase," "will open," "will result," "will strengthen," "will win," "would be," "would decrease" and "would increase," variations of such words and phrases and other words or phrases of similar import.

23



Risks, Factors and Uncertainties Affecting Our Business
Our business operations are subject to numerous risks, factors and uncertainties, domestically and internationally, outside of our control. One, or a combination, of these risks, factors and uncertainties could materially affect any of those matters as to which we have made forward-looking statements in this Annual Report to Shareholders and cause our actual results or an actual event or occurrence to differ materially from those results or an event or occurrence described in any such forward- looking statement. These factors include, but are not limited to:
economic, geo-political, financial markets and business conditions, trends, changes, and events, economic crises, including sovereign debt crises, and disruptions in the financial markets;
monetary policies of the various governments, governmental entities, and central banks;
currency exchange rate fluctuations and volatility and changes in market rates of interest;
inflation and deflation, generally and in certain product categories, including gasoline and diesel fuel;
consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels, demand for certain merchandise and receipt of income tax refunds and public assistance payments;
consumer acceptance of our stores and clubs, e-commerce websites, mobile commerce applications, initiatives, programs and merchandise offerings and customer traffic and average ticket in our stores and clubs and on our retail websites and mobile commerce applications;
commodity and energy prices and selling prices of commodity items, such as gasoline and diesel fuel;
our historical results of operations, cash flows, financial condition and liquidity;
the amounts of sales and earnings from our United States and foreign operations and our cost of goods sold;
competitive initiatives, and changes in the operations, of other retailers, and warehouse club operators and e-commerce retailers, arrival of new competitors and other competitive pressures;
the seasonality of business, seasonal buying patterns and the disruption of such patterns;
unanticipated store or club closures, unanticipated restructurings and the related expenses;
the size of and turnover in our hourly workforce and our labor costs, including health-care and other benefit costs;
costs of transportation and other essential services, such as medical care;
casualty- and accident-related costs and our casualty and other insurance costs;
cyberattacks on and incidents relating to our information systems, related costs and liabilities and information security costs;
availability and cost of acceptable building sites and necessary utilities for new and relocated units;
availability and cost of skilled construction labor and materials and other construction costs;
availability of qualified labor pools for existing, new or expanded units and to meet seasonal hiring needs;
real estate, zoning, land use and other laws, ordinances, legal restrictions and initiatives affecting our ability to build new units in certain locations or relocate or expand existing units;
weather conditions, patterns and events, climate change, catastrophic events and disasters, public health emergencies, civil disturbances and terrorist attacks, resulting damage to our units and store and club closings and limitations on our customers' access to our stores and clubs resulting from such events;
disruptions in the availability of our e-commerce websites and mobile commerce applications;
trade restrictions, changes in tariff and freight rates and disruptions in our supply chain;
costs of compliance with laws and regulations and effects of new or changed tax, labor and other laws and regulations, including those changing tax rates and imposing new taxes and surcharges;
changes in our assessment of certain tax contingencies, changes in valuation allowances, outcome of administrative audits, impact of discrete items on our effective tax rate and resolution of tax matters;
developments in and the outcome of our legal and regulatory proceedings and our FCPA-related matters, and associated costs and expenses;
changes in the rating of any of our indebtedness and our access to the capital markets; and
unanticipated changes in generally accepted accounting principles or their interpretations or applicability and in accounting estimates and judgments.
We typically earn a disproportionate part of our annual operating income in the fourth quarter as a result of seasonal buying patterns, which patterns are difficult to forecast with certainty and can be affected by many factors.

24



Other Risk Factors; No Duty to Update
We discuss certain of these factors more fully, as well as certain other risk factors that may affect the results and other matters discussed in the forward-looking statements identified above, in our filings with the Securities and Exchange Commission (the "SEC"), including in 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, 2016, with the SEC on March 30, 2016. The forward-looking statements described above are made based on knowledge of our business and our operating environment and assumptions we believed to be reasonable when such forward-looking statements were made. As a consequence of the risks, factors and uncertainties we discuss above, and in the Annual Report on Form 10-K and other reports we may file with the SEC, other risks not known to us at this time, changes in facts, assumptions not being realized or other circumstances, our actual results may differ materially from those results discussed in or implied or contemplated by such forward-looking statements.
This cautionary statement qualifies all of the forward-looking statements made in this Annual Report to Shareholders. We cannot assure you that the results, events or developments expected or anticipated by us will be realized or, even if substantially realized, that those results, events or developments will result in the expected consequences for us or affect us, our business or our operations in the way or to the extent we expect. You are urged to consider all of these risks, factors and uncertainties carefully in evaluating the forward-looking statements made in this Annual Report to Shareholders 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 Annual Report to Shareholders, and we undertake no obligation to update any of these forward-looking statements to reflect subsequent events or circumstances, except to the extent 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)
 
2016
 
2015
 
2014
Revenues:
 
 
 
 
 
 
Net sales
 
$
478,614

 
$
482,229

 
$
473,076

Membership and other income
 
3,516

 
3,422

 
3,218

Total revenues
 
482,130

 
485,651

 
476,294

Costs and expenses:
 
 
 
 
 
 
Cost of sales
 
360,984

 
365,086

 
358,069

Operating, selling, general and administrative expenses
 
97,041

 
93,418

 
91,353

Operating income
 
24,105

 
27,147

 
26,872

Interest:
 
 
 
 
 
 
Debt
 
2,027

 
2,161

 
2,072

Capital lease and financing obligations
 
521

 
300

 
263

Interest income
 
(81
)
 
(113
)
 
(119
)
Interest, net
 
2,467

 
2,348

 
2,216

Income from continuing operations before income taxes
 
21,638

 
24,799

 
24,656

Provision for income taxes:
 
 
 
 
 
 
Current
 
7,584

 
8,504

 
8,619

Deferred
 
(1,026
)
 
(519
)
 
(514
)
         Total provision for income taxes
 
6,558

 
7,985

 
8,105

Income from continuing operations
 
15,080

 
16,814

 
16,551

Income from discontinued operations, net of income taxes
 

 
285

 
144

Consolidated net income
 
15,080

 
17,099

 
16,695

Consolidated net income attributable to noncontrolling interest
 
(386
)
 
(736
)
 
(673
)
Consolidated net income attributable to Walmart
 
$
14,694

 
$
16,363

 
$
16,022

 
 
 
 
 
 
 
Basic net income per common share:
 
 
 
 
 
 
Basic income per common share from continuing operations attributable to Walmart
 
$
4.58

 
$
5.01

 
$
4.87

Basic income per common share from discontinued operations attributable to Walmart
 

 
0.06

 
0.03

Basic net income per common share attributable to Walmart
 
$
4.58

 
$
5.07

 
$
4.90

 
 
 
 
 
 
 
Diluted net income per common share:
 
 
 
 
 
 
Diluted income per common share from continuing operations attributable to Walmart
 
$
4.57

 
$
4.99

 
$
4.85

Diluted income per common share from discontinued operations attributable to Walmart
 

 
0.06

 
0.03

Diluted net income per common share attributable to Walmart
 
$
4.57

 
$
5.05

 
$
4.88

 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
Basic
 
3,207

 
3,230

 
3,269

Diluted
 
3,217

 
3,243

 
3,283

 
 
 
 
 
 
 
Dividends declared per common share
 
$
1.96

 
$
1.92

 
$
1.88

See accompanying notes.

26



Wal-Mart Stores, Inc.
Consolidated Statements of Comprehensive Income

 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2016
 
2015
 
2014
Consolidated net income
 
$
15,080

 
$
17,099

 
$
16,695

Less consolidated net income attributable to nonredeemable noncontrolling interest
 
(386
)
 
(736
)
 
(606
)
Less consolidated net income attributable to redeemable noncontrolling interest
 

 

 
(67
)
Consolidated net income attributable to Walmart
 
14,694

 
16,363

 
16,022

 
 
 
 
 
 
 
Other comprehensive income (loss), net of income taxes
 
 
 
 
 
 
Currency translation and other
 
(5,220
)
 
(4,558
)
 
(3,221
)
Net investment hedges
 
366

 
379

 
75

Cash flow hedges
 
(202
)
 
(470
)
 
207

Minimum pension liability
 
86

 
(69
)
 
153

Other comprehensive income (loss), net of income taxes
 
(4,970
)
 
(4,718
)
 
(2,786
)
Less other comprehensive income (loss) attributable to nonredeemable noncontrolling interest
 
541

 
546

 
311

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

 

 
66

Other comprehensive income (loss) attributable to Walmart
 
(4,429
)
 
(4,172
)
 
(2,409
)
 
 
 
 
 
 
 
Comprehensive income, net of income taxes
 
10,110

 
12,381

 
13,909

Less comprehensive income (loss) attributable to nonredeemable noncontrolling interest
 
155

 
(190
)
 
(295
)
Less comprehensive income (loss) attributable to redeemable noncontrolling interest
 

 

 
(1
)
Comprehensive income attributable to Walmart
 
$
10,265

 
$
12,191

 
$
13,613

See accompanying notes.

27



Wal-Mart Stores, Inc.
Consolidated Balance Sheets

 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2016
 
2015
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
8,705

 
$
9,135

Receivables, net
 
5,624

 
6,778

Inventories
 
44,469

 
45,141

Prepaid expenses and other
 
1,441

 
2,224

Total current assets
 
60,239

 
63,278

Property and equipment:
 
 
 
 
Property and equipment
 
176,958

 
177,395

Less accumulated depreciation
 
(66,787
)
 
(63,115
)
Property and equipment, net
 
110,171

 
114,280

Property under capital lease and financing obligations:
 
 
 
 
Property under capital lease and financing obligations
 
11,096

 
5,239

Less accumulated amortization
 
(4,751
)
 
(2,864
)
Property under capital lease and financing obligations, net
 
6,345

 
2,375

 
 
 
 
 
Goodwill
 
16,695

 
18,102

Other assets and deferred charges
 
6,131

 
5,455

Total assets
 
$
199,581

 
$
203,490

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Short-term borrowings
 
$
2,708

 
$
1,592

Accounts payable
 
38,487

 
38,410

Accrued liabilities
 
19,607

 
19,152

Accrued income taxes
 
521

 
1,021

Long-term debt due within one year
 
2,745

 
4,791

Capital lease and financing obligations due within one year
 
551

 
287

Total current liabilities
 
64,619

 
65,253

 
 
 
 
 
Long-term debt
 
38,214

 
40,889

Long-term capital lease and financing obligations
 
5,816

 
2,606

Deferred income taxes and other
 
7,321

 
8,805

 
 
 
 
 
Commitments and contingencies
 

 

 
 
 
 
 
Equity:
 
 
 
 
Common stock
 
317

 
323

Capital in excess of par value
 
1,805

 
2,462

Retained earnings
 
90,021

 
85,777

Accumulated other comprehensive income (loss)
 
(11,597
)
 
(7,168
)
Total Walmart shareholders' equity
 
80,546

 
81,394

Nonredeemable noncontrolling interest
 
3,065

 
4,543

Total equity
 
83,611

 
85,937

Total liabilities and equity
 
$
199,581

 
$
203,490

See accompanying notes.

28



Wal-Mart Stores, Inc.
Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interest

 
 
 
 
 
 
 
 
 
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, 2013
3,314

 
$
332

 
$
3,620

 
$
72,978

 
$
(587
)
 
$
76,343

 
$
5,395

 
$
81,738

 
 
$
519

Consolidated net income

 

 

 
16,022

 

 
16,022

 
595

 
16,617

 
 
78

Other comprehensive income, net of income taxes

 

 

 

 
(2,409
)
 
(2,409
)
 
(311
)
 
(2,720
)
 
 
(66
)
Cash dividends declared ($1.88 per share)

 

 

 
(6,139
)
 

 
(6,139
)
 

 
(6,139
)
 
 

Purchase of Company stock
(87
)
 
(9
)
 
(294
)
 
(6,254
)
 

 
(6,557
)
 

 
(6,557
)
 
 

Redemption value adjustment of redeemable noncontrolling interest

 

 
(1,019
)
 

 

 
(1,019
)
 

 
(1,019
)
 
 
1,019

Other
6

 

 
55

 
(41
)
 

 
14

 
(595
)
 
(581
)
 
 
(59
)
Balances as of January 31, 2014
3,233

 
323

 
2,362

 
76,566

 
(2,996
)
 
76,255

 
5,084

 
81,339

 
 
1,491

Consolidated net income

 

 

 
16,363

 

 
16,363

 
736

 
17,099

 
 

Other comprehensive loss, net of income taxes

 

 

 

 
(4,172
)
 
(4,172
)
 
(546
)
 
(4,718
)
 
 

Cash dividends declared ($1.92 per share)

 

 

 
(6,185
)
 

 
(6,185
)
 

 
(6,185
)
 
 

Purchase of Company stock
(13
)
 
(1
)
 
(29
)
 
(950
)
 

 
(980
)
 

 
(980
)
 
 

Purchase of redeemable noncontrolling interest

 

 

 

 

 

 

 

 
 
(1,491
)
Other
8

 
1

 
129

 
(17
)
 

 
113

 
(731
)
 
(618
)
 
 

Balances as of January 31, 2015
3,228

 
323

 
2,462

 
85,777

 
(7,168
)
 
81,394

 
4,543

 
85,937

 
 

Consolidated net income

 

 

 
14,694

 

 
14,694

 
386

 
15,080

 
 

Other comprehensive income, net of income taxes

 

 

 

 
(4,429
)
 
(4,429
)
 
(541
)
 
(4,970