EX-13 11 wmtars-1312017.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)
 
2017
 
2016
 
2015
 
2014
 
2013
Operating results
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
485,873

 
$
482,130

 
$
485,651

 
$
476,294

 
$
468,651

Percentage change in total revenues from previous fiscal year
 
0.8
%
 
(0.7
)%
 
2.0
%
 
1.6
 %
 
5.0
%
Net sales
 
$
481,317

 
$
478,614

 
$
482,229

 
$
473,076

 
$
465,604

Percentage change in net sales from previous fiscal year
 
0.6
%
 
(0.7
)%
 
1.9
%
 
1.6
 %
 
5.0
%
Increase (decrease) in calendar comparable sales(1) in the United States
 
1.4
%
 
0.3
 %
 
0.5
%
 
(0.5
)%
 
2.4
%
Walmart U.S.
 
1.6
%
 
1.0
 %
 
0.6
%
 
(0.6
)%
 
2.0
%
Sam's Club
 
0.5
%
 
(3.2
)%
 
0.0
%
 
0.3
 %
 
4.1
%
Gross profit margin
 
24.9
%
 
24.6
 %
 
24.3
%
 
24.3
 %
 
24.3
%
Operating, selling, general and administrative expenses, as a percentage of net sales
 
21.2
%
 
20.3
 %
 
19.4
%
 
19.3
 %
 
19.0
%
Operating income
 
$
22,764

 
$
24,105

 
$
27,147

 
$
26,872

 
$
27,725

Income from continuing operations attributable to Walmart
 
13,643

 
14,694

 
16,182

 
15,918

 
16,963

Net income per common share:
 
 
 
 
 
 
 
 
 
 
Diluted income per common share from continuing operations attributable to Walmart
 
$
4.38

 
$
4.57

 
$
4.99

 
$
4.85

 
$
5.01

Dividends declared per common share
 
2.00

 
1.96

 
1.92

 
1.88

 
1.59

 
 
 
 
 
 
 
 
 
 
 
Financial position
 
 
 
 
 
 
 
 
 
 
Inventories
 
$
43,046

 
$
44,469

 
$
45,141

 
$
44,858

 
$
43,803

Property, equipment, capital lease and financing obligation assets, net
 
114,178

 
116,516

 
116,655

 
117,907

 
116,681

Total assets
 
198,825

 
199,581

 
203,490

 
204,541

 
202,910

Long-term debt and long-term capital lease and financing obligations (excluding amounts due within one year)
 
42,018

 
44,030

 
43,495

 
44,368

 
41,240

Total Walmart shareholders' equity
 
77,798

 
80,546

 
81,394

 
76,255

 
76,343

 
 
 
 
 
 
 
 
 
 
 
Unit counts(2)
 
 
 
 
 
 
 
 
 
 
Walmart U.S. segment
 
4,672

 
4,574

 
4,516

 
4,203

 
4,005

Walmart International segment
 
6,363

 
6,299

 
6,290

 
6,107

 
5,783

Sam's Club segment
 
660

 
655

 
647

 
632

 
620

Total units
 
11,695

 
11,528

 
11,453

 
10,942

 
10,408


(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)
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, 2017



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 and saves time for our customers. 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 over 260 million customers who visit our 11,695 stores under 59 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 our 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. primarily 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.
The following examples illustrate the pursuit of our strategy to create a customer-centric experience that seamlessly integrates digital and physical shopping: 
In September 2016, we completed the acquisition of Jet.com, Inc. ("jet.com"), a U.S. based e-commerce company. The total purchase price for the acquisition was $2.4 billion, net of cash acquired. The preliminary allocation of the purchase price includes $1.7 billion in goodwill and $0.6 billion in intangible assets. As part of the transaction consideration, we will pay additional amounts accounted for as compensation of approximately $0.8 billion over a five year period, including approximately $0.5 billion in cash and approximately $0.3 billion in equity. The impact on fiscal 2017 net sales and operating income as a result of the acquisition was not significant. The acquisition of jet.com is in line with the Company's strategic framework of accelerating e-commerce growth.
In June 2016, we announced our strategic alliance with JD.com, Inc. ("JD") and the sale to JD of certain assets relating to Yihaodian, our e-commerce operations in China, including the Yihaodian brand, website and application in exchange for approximately 5 percent of JD's outstanding ordinary shares on a fully diluted basis. The sale resulted in the recognition of a $535 million noncash gain in our International segment, which gain is included in membership and other income in the accompanying Consolidated Statements of Income. Subsequently, during fiscal 2017, the Company purchased $1.9 billion of additional JD shares classified as available for sale securities, representing an incremental ownership percentage of approximately five percent, for a total ownership of approximately ten percent of JD's outstanding ordinary shares.
Each of our segments contributes to the Company's operating results differently. Each, however, has generally maintained a consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for the Walmart International segment due to fluctuations in currency exchange rates.
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.

3



This discussion, which presents our results for the fiscal years ended January 31, 2017 ("fiscal 2017"), January 31, 2016 ("fiscal 2016") and January 31, 2015 ("fiscal 2015") 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 websites and 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 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. Additionally, sales related to e-commerce acquisitions are excluded until such acquisitions have been owned for 12 months. 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.
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, 2017, 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, 2017.

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 maintain and strengthen our competitive positions in the countries in which we operate.  For several years, our performance metrics emphasized three financial priorities: growth, expense 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 are focused primarily on growth, balanced by the long-term health of the Company including expense leverage and returns.  Although we will continue to grow through new stores and clubs, our growth going forward will rely more on increasing comparable store and club sales and accelerating e-commerce 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 plan 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, which include the impact of e-commerce 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,
 
 
2017
 
2016
 
2015
(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.
 
$
307,833

 
64.0
%
 
3.2
 %
 
$
298,378

 
62.3
%
 
3.6
 %
 
$
288,049

 
59.8
%
Walmart International
 
116,119

 
24.1
%
 
(5.9
)%
 
123,408

 
25.8
%
 
(9.4
)%
 
136,160

 
28.2
%
Sam's Club
 
57,365

 
11.9
%
 
0.9
 %
 
56,828

 
11.9
%
 
(2.1
)%
 
58,020

 
12.0
%
Net sales
 
$
481,317

 
100.0
%
 
0.6
 %
 
$
478,614

 
100.0
%
 
(0.7
)%
 
$
482,229

 
100.0
%
Our consolidated net sales increased $2.7 billion or 0.6% for fiscal 2017 and decreased $3.6 billion or 0.7% for fiscal 2016, when compared to the previous fiscal year. Net sales for fiscal 2017 were positively impacted by overall positive comparable sales and e-commerce sales and the 1.3% year-over-year growth in consolidated retail square feet. The positive effect of such factors was partially offset by a negative impact of $11.0 billion or 2.3% as a result of fluctuations in currency exchange rates and a $0.4 billion decrease in fuel sales from lower fuel prices at the Sam's Club segment. 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 from lower fuel prices at the Sam's Club segment. The negative effect of such factors was partially 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.
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 2017 and 2016, were as follows:
 
 
Fiscal Years Ended January 31,
 
 
2017
 
2016
 
2017
 
2016
 
 
With Fuel
 
Fuel Impact
Walmart U.S.
 
1.6%
 
1.0%
 
0.0%
 
0.0%
Sam's Club
 
0.5%
 
(3.2)%
 
(0.9)%
 
(3.4)%
Total U.S.
 
1.4%
 
0.3%
 
(0.1)%
 
(0.6)%


5



Comparable store and club sales in the U.S., including fuel, increased 1.4% and 0.3% in fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. The fiscal 2017 total U.S. comparable store and club sales were positively impacted by continued traffic improvement and higher e-commerce sales at the Walmart U.S. segment, partially offset 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 0.4% and 0.7% for Walmart U.S. and Sam's Club, respectively, for fiscal 2017. The fiscal 2016 total U.S. comparable store and club sales were positively impacted 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 from 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.
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 0.7% and 0.8% in fiscal 2017 and 2016, 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.

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.
We include Return on Assets ("ROA"), the most directly comparable measure based on our financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), and Return on Investment ("ROI") as metrics to assess returns on assets.
Return on Assets and Return on Investment
Management believes 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. We consider ROA to be the financial measure computed in accordance with GAAP that is the most directly comparable financial measure to our calculation of ROI.
ROA was 7.2% and 7.5% for the fiscal years ended January 31, 2017 and 2016, respectively. ROI was 15.2% and 15.5% for the fiscal years ended January 31, 2017 and 2016, respectively. The declines in ROA and ROI were primarily due to our decrease in operating income over these periods.
We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the fiscal year or trailing 12 months 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 or trailing 12 months multiplied by a factor of eight. When we have discontinued operations, we exclude the impact of the discontinued operations.
Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable financial measure calculated and presented in accordance with 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. As mentioned above, we consider 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 net income for the period divided by average total assets for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; adjusts total assets 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 ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP financial measure, is as follows:
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2017
 
2016
CALCULATION OF RETURN ON ASSETS
Numerator
 
 
 
 
Income from continuing operations
 
$
14,293

 
$
15,080

Denominator
 
 
 
 
Average total assets of continuing operations(1)
 
$
199,203

 
$
201,536

Return on assets (ROA)
 
7.2
%
 
7.5
%
 
 
 
 
 
CALCULATION OF RETURN ON INVESTMENT
Numerator
 
 
 
 
Operating income
 
$
22,764

 
$
24,105

+ Interest income
 
100

 
81

+ Depreciation and amortization
 
10,080

 
9,454

+ Rent
 
2,612

 
2,532

= Adjusted operating income
 
$
35,556

 
$
36,172

 
 
 
 
 
Denominator
 
 
 
 
Average total assets of continuing operations(1)
 
$
199,203

 
$
201,536

+ Average accumulated depreciation and amortization(1)
 
74,245

 
68,759

- Average accounts payable(1)
 
39,960

 
38,449

- Average accrued liabilities(1)
 
20,131

 
19,380

+ Rent x 8
 
20,896

 
20,256

= Average invested capital
 
$
234,253

 
$
232,722

Return on investment (ROI)
 
15.2
%
 
15.5
%
 
 
 
As of January 31,
 
 
2017
 
2016
 
2015
Certain Balance Sheet Data
 
 
 
 
 
 
Total assets of continuing operations
 
$
198,825

 
$
199,581

 
$
203,490

Accumulated depreciation and amortization
 
76,951

 
71,538

 
65,979

Accounts payable
 
41,433

 
38,487

 
38,410

Accrued liabilities
 
20,654

 
19,607

 
19,152

 
(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.

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 net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See Liquidity and Capital Resources for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities.
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 had net cash provided by operating activities of $31.5 billion, $27.4 billion and $28.6 billion for fiscal 2017, 2016 and 2015, respectively. We generated free cash flow of $20.9 billion, $15.9 billion and $16.4 billion for fiscal 2017, 2016 and 2015, respectively. The increase in net cash provided by operating activities and free cash flow in fiscal 2017 from fiscal 2016 was primarily due to improved working capital management. Additionally, we benefited from the application of new tax regulations related to the accelerated deduction of remodels and related expenses. The decrease in net cash provided by operating activities and 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)
 
2017
 
2016
 
2015
Net cash provided by operating activities
 
$
31,530

 
$
27,389

 
$
28,564

Payments for property and equipment
 
(10,619
)
 
(11,477
)
 
(12,174
)
Free cash flow
 
$
20,911

 
$
15,912

 
$
16,390

 
 
 
 
 
 
 
Net cash used in investing activities(1)
 
$
(13,987
)
 
$
(10,675
)
 
$
(11,125
)
Net cash used in financing activities
 
(18,929
)
 
(16,122
)
 
(15,071
)
(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)
 
2017
 
2016
 
2015
Total revenues
 
$
485,873

 
$
482,130

 
$
485,651

Percentage change from comparable period
 
0.8
%
 
(0.7
)%
 
2.0
%
Net sales
 
$
481,317

 
$
478,614

 
$
482,229

Percentage change from comparable period
 
0.6
%
 
(0.7
)%
 
1.9
%
Total U.S. calendar comparable store and club sales increase (decrease)
 
1.4
%
 
0.3
 %
 
0.5
%
Gross profit rate
 
24.9
%
 
24.6
 %
 
24.3
%
Operating income
 
$
22,764

 
$
24,105

 
$
27,147

Operating income as a percentage of net sales
 
4.7
%
 
5.0
 %
 
5.6
%
Income from continuing operations
 
$
14,293

 
$
15,080

 
$
16,814

Unit counts at period end
 
11,695

 
11,528

 
11,453

Retail square feet at period end
 
1,164

 
1,149

 
1,135

Our total revenues, which are mostly comprised of net sales, but also include membership and other income, increased $3.7 billion or 0.8% for fiscal 2017 and decreased $3.5 billion or 0.7% for fiscal 2016 when compared to the previous fiscal year. Net sales increased $2.7 billion or 0.6% for fiscal 2017 and decreased $3.6 billion or 0.7% for fiscal 2016 when compared to the previous fiscal year. For fiscal 2017, net sales were positively impacted by overall positive comparable sales and e-commerce sales and the 1.3% year-over-year growth in consolidated retail square feet. The positive effect of such factors on our consolidated net sales for fiscal 2017 was partially offset by a negative impact of $11.0 billion or 2.3% as a result of fluctuations in currency exchange rates and a $0.4 billion decrease in fuel sales from lower fuel prices at the Sam's Club segment. For fiscal 2016, net sales 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 from lower fuel prices at the 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.
Gross profit rate increased 36 and 29 basis points for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. For fiscal 2017, the increase in gross profit rate was primarily due to improved margin in food and consumables, including the impact of savings in procuring merchandise and lower transportation expense from lower fuel costs in the Walmart U.S. segment. Additionally, improvement in certain markets' inventory management and cost analytics programs in the Walmart International segment also positively impacted our gross profit rate for fiscal 2017. For fiscal 2016, the increase in gross profit rate was primarily due to improved margins in food, general merchandise, and consumables in the Walmart U.S. segment. 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 fiscal 2016 gross profit rate, while pharmacy reimbursement pressure at the Walmart U.S. segment negatively impacted our fiscal 2016 gross profit rate.
Operating expenses as a percentage of net sales increased 88 and 91 basis points for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. For fiscal 2017, 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. and Sam's Club segments resulting from the continued investment in associate wage structure; a $370 million charge related to discontinued domestic real estate projects and severance; and our continued investments in digital retail and information technology. The increase in operating expenses as a percentage of net sales for fiscal 2017 was partially offset by the impact of store closures in the fourth quarter of fiscal 2016. For fiscal 2016, the increase in operating expenses as a percentage of net sales was 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 investments in digital retail and information technology.
Membership and other income increased $1.0 billion for fiscal 2017 and was relatively flat for fiscal 2016, respectively, when compared to the same periods in the previous fiscal year. For fiscal 2017, the increase in membership and other income was primarily due the recognition of a $535 million gain in the second quarter of fiscal 2017 from the sale of certain assets relating to Yihaodian, our e-commerce operations in China, including the Yihaodian brand, website and application, to JD, and a $194 million gain from the sale of shopping malls in Chile.
Our effective income tax rate was 30.3% for both fiscal 2017 and 2016, and 32.2% for fiscal 2015, 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 2017, 2016 and 2015 is presented in Note 9 in the "Notes to Consolidated Financial Statements."

10



As a result of the factors discussed above, we reported $14.3 billion, $15.1 billion and $16.8 billion of consolidated income from continuing operations for fiscal 2017, 2016 and 2015, respectively; a decrease of $0.8 billion and $1.7 billion for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. Diluted income per common share from continuing operations attributable to Walmart was $4.38, $4.57 and $4.99 for fiscal 2017, 2016 and 2015, respectively.

11



Walmart U.S. Segment
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2017
 
2016
 
2015
Net sales
 
$
307,833

 
$
298,378

 
$
288,049

Percentage change from comparable period
 
3.2
%

3.6
%
 
3.1
%
Calendar comparable store sales increase
 
1.6
%
 
1.0
%
 
0.6
%
Operating income
 
$
17,745

 
$
19,087

 
$
21,336

Operating income as a percentage of net sales
 
5.8
%
 
6.4
%
 
7.4
%
Unit counts at period end
 
4,672


4,574

 
4,516

Retail square feet at period end
 
699


690

 
680

Net sales for the Walmart U.S. segment increased $9.5 billion or 3.2% and $10.3 billion or 3.6% for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. The increases in net sales were primarily due to increases in comparable store sales of 1.6% and 1.0% for fiscal 2017 and 2016, respectively, driven primarily by positive customer traffic, as well as year-over-year growth in retail square feet of 1.4% for both fiscal 2017 and 2016. Additionally, e-commerce sales contributed 0.4% and 0.2% to comparable store sales for fiscal 2017 and 2016, respectively.
Gross profit rate increased 24 and 12 basis points for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. For fiscal 2017, the increase in gross profit rate was primarily due to improved margin in food and consumables, including the impact of savings in procuring merchandise and lower transportation expense from lower fuel costs. For fiscal 2016, the increase in gross profit rate was primarily due to improved margin in food, general merchandise and consumables, partially offset by pharmacy reimbursement pressure.
Operating expenses as a percentage of segment net sales increased 101 and 113 basis points for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. For fiscal 2017, the increase was primarily driven by an increase in wage expense due to the continued investment in the associate wage structure; a $249 million charge related to discontinued real estate projects; and our continued investments in digital retail and information technology. The increase in operating expenses as a percentage of segment net sales for fiscal 2017 was partially offset by the impact of store closures in the fourth quarter of fiscal 2016. 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 $670 million charge to operating expenses for the closures of 150 stores announced in January 2016, an increase in store associate incentive expense and our investments in digital retail and information technology contributed to the fiscal 2016 increase in operating expenses as a percentage of segment net sales.
As a result of the factors discussed above, segment operating income was $17.7 billion, $19.1 billion and $21.3 billion during fiscal 2017, 2016 and 2015, respectively.

12



Walmart International Segment
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except unit counts)
 
2017
 
2016
 
2015
Net sales
 
$
116,119

 
$
123,408

 
$
136,160

Percentage change from comparable period
 
(5.9
)%
 
(9.4
)%
 
(0.3
)%
Operating income
 
$
5,758

 
$
5,346

 
$
6,171

Operating income as a percentage of net sales
 
5.0
 %
 
4.3
 %
 
4.5
 %
Unit counts at period end
 
6,363


6,299

 
6,290

Retail square feet at period end
 
377


372

 
368

Net sales for the Walmart International segment decreased $7.3 billion or 5.9% and $12.8 billion or 9.4% for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. For fiscal 2017, the decrease in net sales was due to the $11.0 billion of negative impact from fluctuations in currency exchange rates. Additionally, net sales for fiscal 2017 were impacted by positive comparable store sales in all of our markets, except in the United Kingdom, and year-over-year growth in retail square feet of 1.2%. For fiscal 2016, the decrease in net sales was due to the $17.1 billion of negative impact from fluctuations in currency exchange rates. Additionally, net sales for fiscal 2016 were impacted by year-over-year growth in retail square feet of 1.2% and positive comparable sales in Mexico and Canada, partially offset by negative comparable sales in the U.K. and China.
Gross profit rate increased 46 and 23 basis points for fiscal 2017 and 2016, respectively, when compared to the same periods in the previous fiscal year. For fiscal 2017, the increase in gross profit rate was primarily due to improvement in certain markets' inventory management and cost analytics programs. For fiscal 2016, the increase in gross profit rate was primarily due to changes in the merchandise mix in certain markets.
Operating expenses as a percentage of segment net sales increased 58 and 44 basis points for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. The increase in operating expenses as a percentage of segment net sales for fiscal 2017 was primarily due to declining sales on relatively flat fixed costs in the United Kingdom as well as adjustments to useful lives of certain assets and impairment charges in certain markets. 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 investments in digital retail and information technology.
Membership and other income increased $0.8 billion for fiscal 2017 and was relatively flat for fiscal 2016 when compared to the previous fiscal year. For fiscal 2017, the increase in membership and other income was primarily due the recognition of a $535 million gain in the second quarter of fiscal 2017 from the sale of certain assets relating to Yihaodian, our e-commerce operations in China, including the Yihaodian brand, website and application, to JD, and a $194 million gain from the sale of shopping malls in Chile.
As a result of the factors discussed above, segment operating income was $5.8 billion, $5.3 billion and $6.2 billion for fiscal 2017, 2016 and 2015, respectively. Fluctuations in currency exchange rates negatively impacted operating income by $642 million, $765 million and $225 million in fiscal 2017, 2016 and 2015, respectively.


13



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)
 
2017
 
2016
 
2015
Including Fuel
 
 
 
 
 
 
Net sales
 
$
57,365

 
$
56,828

 
$
58,020

Percentage change from comparable period
 
0.9
%
 
(2.1
)%
 
1.5
%
Calendar comparable club sales increase (decrease)
 
0.5
%
 
(3.2
)%
 
0.0
%
Operating income
 
$
1,671

 
$
1,820

 
$
1,976

Operating income as a percentage of net sales
 
2.9
%
 
3.2
 %
 
3.4
%
Unit counts at period end
 
660


655

 
647

Retail square feet at period end
 
88


88

 
87

 
 
 
 
 
 
 
Excluding Fuel
 
 
 
 
 
 
Net sales
 
$
53,289

 
$
52,330

 
$
51,630

Percentage change from comparable period
 
1.8
%
 
1.4
 %
 
2.1
%
Operating income
 
$
1,619

 
$
1,746

 
$
1,854

Operating income as a percentage of net sales
 
3.0
%
 
3.3
 %
 
3.6
%
Net sales for the Sam's Club segment increased $0.5 billion or 0.9% for fiscal 2017 and decreased $1.2 billion or 2.1% for fiscal 2016 when compared to the previous fiscal year. The fiscal 2017 increase in net sales was primarily due to an increase in comparable club sales without fuel driven by higher e-commerce sales, and a year-over-year increase in retail square feet of 0.9%, partially offset by a decrease of $0.4 billion in fuel sales primarily from lower fuel prices. 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 fuel prices. 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.
Gross profit rate increased 39 and 30 basis points for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. For fiscal 2017, the increase was primarily due to margin rate improvement in home and apparel, health and wellness, and grocery, partially offset by changes in merchandise mix and the growth of the Cash Rewards program. 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.
Membership and other income decreased 6.5% for fiscal 2017 and increased 5.3% for fiscal 2016, respectively, when compared to the previous fiscal year. For fiscal 2017, the decrease was primarily due to a reduction in other income partially offset by an increase of 2.3% in membership income as a result of increased Plus Member renewals. For fiscal 2016, the increase was primarily the result of increased membership upgrades and Plus Member renewals.
Operating expenses as a percentage of segment net sales increased 49 and 67 basis points for fiscal 2017 and 2016 when compared to the previous fiscal year. For fiscal 2017, the increase in operating expenses as a percentage of segment net sales was primarily due to an increase in wage, benefit and incentive expenses from the continued investment in the associate wage structure; our continued investments in digital retail and information technology; and an increase in advertising expense. 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 investments in new clubs, digital retail and information technology, and the approximately $60 million charge for club closures announced in January 2016.
As a result of the factors discussed above, segment operating income was $1.7 billion, $1.8 billion and $2.0 billion for fiscal 2017, 2016 and 2015, respectively.

14



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)
 
2017
 
2016
 
2015
Net cash provided by operating activities
 
$
31,530

 
$
27,389

 
$
28,564

Net cash provided by operating activities was $31.5 billion, $27.4 billion and $28.6 billion for fiscal 2017, 2016 and 2015, respectively. The increase in net cash provided by operating activities for fiscal 2017, when compared to the previous fiscal year, was primarily due to improved working capital management. Additionally, we benefited from the application of new tax regulations related to the accelerated deduction of remodels and related expenses. 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.
Cash Equivalents and Working Capital
Cash and cash equivalents were $6.9 billion and $8.7 billion at January 31, 2017 and 2016, respectively. Our working capital deficit was $9.2 billion and $4.4 billion at January 31, 2017 and 2016, respectively. The increase in our working capital deficit reflects the Company's leverage achieved through savings from procuring merchandise and improved inventory management. 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 domestic 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. Although there can be no assurance of the impact on the Company of potential federal tax reform in the U.S., we do not expect current local laws, other existing limitations or potential taxes on anticipated future repatriations of cash amounts held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.
As of January 31, 2017 and 2016, cash and cash equivalents of $1.0 billion and $1.1 billion, respectively, may not be freely transferable to the U.S. due to local laws or other restrictions.
Net Cash Used in Investing Activities
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2017
 
2016
 
2015
Net cash used in investing activities
 
$
(13,987
)
 
$
(10,675
)
 
$
(11,125
)
Net cash used in investing activities was $14.0 billion, $10.7 billion and $11.1 billion for fiscal 2017, 2016 and 2015, 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 companies and technologies. For fiscal 2017, we opened 292 new stores and clubs. Net cash used in investing activities increased $3.3 billion for fiscal 2017, when compared to the previous fiscal year, primarily due to our acquisition of jet.com and investment in JD, partially offset by $0.7 billion in cash received from the sales of shopping malls in Chile. Refer to Note 13 to our Consolidated Financial Statements for further details on our acquisition of jet.com and

15



investment in JD. For fiscal 2016, net cash used in investing activities decreased $0.5 billion when compared to the previous fiscal year, primarily due to lower capital expenditures. The following table provides additional capital expenditure detail:
(Amounts in millions)
 
Allocation of Capital Expenditures
Fiscal Years Ending January 31,
Capital Expenditures
 
2017
 
2016
New stores and clubs, including expansions and relocations
 
$
2,171

 
$
3,194

Information systems, distribution, digital retail and other
 
4,162

 
3,963

Remodels
 
1,589

 
1,390

Total U.S.
 
7,922

 
8,547

Walmart International
 
2,697

 
2,930

Total capital expenditures
 
$
10,619

 
$
11,477

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 2017. Our fiscal 2017 accomplishments in this area include continuing to roll out our new web platform in the U.S. and open new e-commerce dedicated fulfillment centers, as well as growing "Online Grocery" to over 600 pickup locations in over 100 U.S. markets.
Growth Activities
For the fiscal year ended January 31, 2018 ("fiscal 2018"), we plan to add between 249 and 279 new stores and clubs, which reflects a slowing of new store openings in the U.S. compared to recent fiscal years while increasing investments in e-commerce, technology, store remodels and other customer initiatives. We anticipate financing these growth activities through cash flows provided by operating activities and future debt financings.
The following table provides our projected fiscal 2018 capital expenditures by segment, and includes our anticipated digital retail expenditures. The amounts in the table do not include capital expenditures or growth in retail square feet from any pending or future acquisitions.
(Amounts in billions)
 
Approximate Fiscal 2018 Projected Capital Expenditures
Walmart U.S.
 
$
6.1

Walmart International
 
3.0

Sam's Club
 
0.7

Corporate and support
 
1.2

Total
 
$
11.0

Net Cash Used in Financing Activities
 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2017
 
2016
 
2015
Net cash used in financing activities
 
$
(18,929
)
 
$
(16,122
)
 
$
(15,071
)
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 $2.8 billion and $1.1 billion for fiscal 2017 and 2016, respectively, when compared to the same period in the previous fiscal year.
Short-term Borrowings
Net cash flows provided by short-term borrowings decreased $1.7 billion and increased $1.2 billion in fiscal 2017 and 2016, respectively, 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 2017, the decrease in net cash flows provided by short-term borrowings was due to improved cash flows from operations driven by working capital improvements and changes to tax regulations. 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.
The following table includes additional information related to the Company's short-term borrowings for fiscal 2017, 2016 and 2015:

16



 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2017
 
2016
 
2015
Maximum amount outstanding at any month-end
 
$
9,493

 
$
10,551

 
$
11,581

Average daily short-term borrowings
 
5,691

 
4,536

 
7,009

Annual weighted-average interest rate
 
1.8
%
 
1.5
%
 
0.5
%
In addition to our short-term borrowings, we also have various undrawn committed lines of credit that provide $12.5 billion of additional liquidity, if needed.
Long-term Debt
The following table provides the changes in our long-term debt for fiscal 2017:
(Amounts in millions)
 
Long-term debt due within one year
 
Long-term debt
 
Total
Balances as of February 1, 2016
 
$
2,745

 
$
38,214

 
$
40,959

Proceeds from issuance of long-term debt
 

 
137

 
137

Payments of long-term debt
 
(2,055
)
 

 
(2,055
)
Reclassifications of long-term debt
 
1,500

 
(1,500
)
 

Other
 
66

 
(836
)
 
(770
)
Balances as of January 31, 2017
 
$
2,256

 
$
36,015

 
$
38,271

Our total outstanding long-term debt balance decreased $2.7 billion for fiscal 2017, primarily due to maturities of existing long-term debt.
Dividends
Our total dividend payments were $6.2 billion, $6.3 billion and $6.2 billion for fiscal 2017, 2016 and 2015, respectively. On February 21, 2017, the Board of Directors approved the fiscal 2018 annual dividend of $2.04 per share, an increase over the fiscal 2017 annual dividend of $2.00 per share. For fiscal 2018, the annual dividend will be paid in four quarterly installments of $0.51 per share, according to the following record and payable dates:
Record Date
  
Payable Date
March 10, 2017
  
April 3, 2017
May 12, 2017
  
June 5, 2017
August 11, 2017
  
September 5, 2017
December 8, 2017
  
January 2, 2018
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. The current $20.0 billion share repurchase program has no expiration date or other restrictions limiting the period over which we can make share repurchases. At January 31, 2017, authorization for $9.2 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 2017, 2016 and 2015:
 
 
Fiscal Years Ended January 31,
(Amounts in millions, except per share data)
 
2017
 
2016
 
2015
Total number of shares repurchased
 
119.9

 
62.4

 
13.4

Average price paid per share
 
$
69.18

 
$
65.90

 
$
75.82

Total amount paid for share repurchases
 
$
8,298

 
$
4,112

 
$
1,015


17



Share repurchases increased $4.2 billion and $3.1 billion for fiscal 2017 and 2016, respectively, when compared to the previous fiscal year.
Significant Transactions with Noncontrolling Interests
In fiscal 2016, as described in Note 13 to our Consolidated Financial Statements, 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. Additionally, 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, 2017, 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.

18



Contractual Obligations and Other Commercial Commitments
The following table sets forth certain information concerning our obligations and commitments to make contractual future payments, such as debt and lease agreements, and certain contingent commitments as of January 31, 2017:
 

 

Payments Due During Fiscal Years Ending January 31,
(Amounts in millions)

Total

2018

2019-2020

2021-2022

Thereafter
Recorded contractual obligations:










Long-term debt(1)

$
38,271


$
2,256


$
4,039


$
4,394


$
27,582

Short-term borrowings

1,099


1,099







Capital lease and financing obligations(2)

8,909


894


1,624


1,395


4,996

Unrecorded contractual obligations:










Non-cancelable operating leases(3)

18,139


2,270


3,466


2,866


9,537

Estimated interest on long-term debt

28,373


1,749


3,250


2,987


20,387

Trade and stand-by letters of credit

3,582


3,582







Purchase obligations

19,622


9,048


8,324


1,032


1,218

Total commercial commitments

$
117,995


$
20,898


$
20,703


$
12,674


$
63,720

(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 Consolidated Financial Statements" for more information.
(3)
Represents minimum contractual obligation for non-cancelable leases with initial or remaining terms greater than 12 months as of January 31, 2017.
Additionally, the Company has $12.5 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, 2017, and assumes interest rates remain at current levels 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, $1.1 billion 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
As of January 31, 2017, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

19



Market Risk
In addition to the risks inherent in our operations, we are exposed to certain market risks, including changes in interest rates and fluctuations in currency exchange rates.
The analysis presented below for each of our market risk sensitive instruments is based on a hypothetical scenario used to calibrate potential risk and does not represent our view of future market changes. The effect of a change in a particular assumption is calculated without adjusting any other assumption. In reality, however, a change in one factor could cause a change in another, which may magnify or negate other sensitivities.
Interest Rate Risk
We are exposed to changes in interest rates as a result of our short-term borrowings and long-term debt issuances. We hedge a portion of our interest rate risk by managing the mix of fixed and variable rate debt and by entering into interest rate swaps. For fiscal 2017, the net fair value of our interest rate swaps decreased approximately $177 million primarily due to 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, 2017.
 
 
Expected Maturity Date
(Amounts in millions)
 
Fiscal 2018
 
Fiscal 2019
 
Fiscal 2020
 
Fiscal 2021
 
Fiscal 2022
 
Thereafter
 
Total
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate
 
$
1,099

 
$

 
$

 
$

 
$

 
$

 
$
1,099

Weighted-average interest rate
 
6.2
%
 
%
 
%
 
%
 
%
 
%
 
6.2
%
Long-term debt(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate
 
$
1,523

 
$
3,497

 
$
542

 
$
3,311

 
$
1,083

 
$
27,582

 
$
37,538

Weighted-average interest rate
 
4.1
%
 
3.1
%
 
4.8
%
 
3.4
%
 
4.9
%
 
5.1
%
 
4.7
%
Variable rate
 
$
733

 
$

 
$

 
$

 
$

 
$

 
$
733

Weighted-average interest rate
 
5.0
%
 
%
 
%
 
%
 
%
 
%
 
5.0
%
Interest rate derivatives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed to variable
 
$

 
$

 
$

 
$
1,500

 
$
250

 
$
3,250

 
$
5,000

Weighted-average pay rate
 
%
 
%
 
%
 
2.4
%
 
3.2
%
 
1.8
%
 
2.0
%
Weighted-average receive rate
 
%
 
%
 
%
 
3.3
%
 
4.3
%
 
2.9
%
 
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, 2017, our variable rate borrowings, including the effect of our commercial paper and interest rate swaps, represented 17% of our total short-term and long-term debt. Based on January 31, 2017 debt levels, a 100 basis point change in prevailing market rates would cause our annual interest costs to change by approximately $63 million.

20



Foreign Currency Risk
We are exposed to fluctuations in foreign currency exchange rates as a result of our net investments and operations in countries other than the U.S. For fiscal 2017, movements in currency exchange rates and the related impact on the translation of the balance sheets of the Company's subsidiaries in the United Kingdom and Mexico were the primary cause of the $2.7 billion loss in the currency translation and other category of accumulated other comprehensive 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 $147 million and $290 million at January 31, 2017 and 2016, respectively. 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 2017. A hypothetical 10% increase or decrease in the currency exchange rates underlying these swaps from the market rate at January 31, 2017 would have resulted in a loss or gain in the value of the swaps of $521 million. A hypothetical 10% change in interest rates underlying these swaps from the market rates in effect at January 31, 2017 would have resulted in a loss or gain in value of the swaps of $11 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, 2017 and 2016, 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, 2017, 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 $284 million. In addition, we had outstanding long-term debt of ¥10 billion at January 31, 2017 and 2016, that was designated as a hedge of our net investment in Japan. At January 31, 2017, 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 2017, 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. 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 2017, 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.

21



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 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, 2017 and 2016, 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.

22



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.

23



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;
the number of new stores and clubs we plan to add in the U.S. and in our foreign markets;
our plans to increase investments in e-commerce, technology, store remodels and other customer initiatives;
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 remain," "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.

24



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 Factors
economic, geo-political, capital markets and business conditions, trends and events around the world and in the markets in which Walmart operates;
currency exchange rate fluctuations;
changes in market rates of interest;
changes in market levels of wages;
changes in the size of various markets, including e-commerce markets;
unemployment levels;
inflation or deflation, generally and in certain product categories;
transportation, energy and utility costs;
commodity prices, including the prices of oil and natural gas;
consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels, and demand for certain merchandise;
trends in consumer shopping habits around the world and in the markets in which Walmart operates;
new methods for delivery of merchandise purchased to customers;
consumer enrollment in health and drug insurance programs and such programs' reimbursement rates and drug formularies; and
initiatives of competitors, competitors' entry into and expansion in Walmart's markets, and competitive pressures;
Operating Factors
the amount of Walmart's net sales and operating expenses denominated in U.S. dollar and various foreign currencies;
the financial performance of Walmart and each of its segments, including the amounts of Walmart's cash flow during various periods;
Walmart's need to repatriate earnings held outside of the U.S.;
customer traffic and average ticket in Walmart's stores and clubs and on its e-commerce websites;
the mix of merchandise Walmart sells;
the availability of goods from suppliers and the cost of goods acquired from suppliers;
the effectiveness of the implementation and operation of Walmart's strategies, plans, programs and initiatives;
Walmart's ability to successfully integrate acquired businesses, including Jet.com, Inc.;
the amount of shrinkage Walmart experiences;
consumer acceptance of and response to Walmart's stores and clubs, e-commerce websites, mobile apps, programs and merchandise offerings, including the Walmart U.S. segment's Grocery Pickup program;
Walmart's gross profit margins, including pharmacy margins and margins of other product categories;
the selling prices of gasoline and diesel fuel;
disruption of seasonal buying patterns in Walmart's markets;
Walmart's expenditures for FCPA and other compliance-related matters;
disruptions in Walmart's supply chain;
cybersecurity events affecting Walmart and related costs and impact of any disruption in business;
Walmart's labor costs, including healthcare and other benefit costs;
Walmart's casualty and accident-related costs and insurance costs;
the size of and turnover in Walmart's workforce and the number of associates at various pay levels within that workforce;
unexpected changes in Walmart's objectives and plans;
the availability of necessary personnel to staff Walmart's stores, clubs and other facilities;
the availability of skilled labor in areas in which new units are to be constructed or existing units are to be relocated, expanded or remodeled;
delays in the opening of new, expanded or relocated units;
developments in, and the outcome of, legal and regulatory proceedings and investigations to which Walmart is a party or is subject, and the liabilities, obligations and expenses, if any, that Walmart may incur in connection therewith;
changes in the credit ratings assigned to Walmart's commercial paper and debt securities by credit rating agencies;
Walmart's effective tax rate; and
unanticipated changes in accounting judgments and estimates;

25



Regulatory and Other Factors
changes in existing tax, labor and other laws and changes in tax rates, including the enactment of laws and the adoption and interpretation of administrative rules and regulations;
governmental policies, programs, initiatives and actions in the markets in which Walmart operates and elsewhere;
the possibility of imposition of new taxes on imports and new tariffs and trade restrictions and changes in existing tariff rates and trade restrictions;
changes in currency control laws;
the level of public assistance payments;
the timing of federal income tax refunds;
natural disasters, public health emergencies, civil disturbances, and terrorist attacks; and
changes in generally accepted accounting principles in the United States.
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.
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, 2017, with the SEC on March 31, 2017. 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.

26



Wal-Mart Stores, Inc.
Consolidated Statements of Income

 
 
Fiscal Years Ended January 31,
(Amounts in millions, except per share data)
 
2017
 
2016
 
2015
Revenues:
 
 
 
 
 
 
Net sales
 
$
481,317

 
$
478,614

 
$
482,229

Membership and other income
 
4,556

 
3,516

 
3,422

Total revenues
 
485,873

 
482,130

 
485,651

Costs and expenses:
 
 
 
 
 
 
Cost of sales
 
361,256

 
360,984

 
365,086

Operating, selling, general and administrative expenses
 
101,853

 
97,041

 
93,418

Operating income
 
22,764

 
24,105

 
27,147

Interest:
 
 
 
 
 
 
Debt
 
2,044

 
2,027

 
2,161

Capital lease and financing obligations
 
323

 
521

 
300

Interest income
 
(100
)
 
(81
)
 
(113
)
Interest, net
 
2,267

 
2,467

 
2,348

Income from continuing operations before income taxes
 
20,497

 
21,638

 
24,799

Provision for income taxes
 
6,204

 
6,558

 
7,985

Income from continuing operations
 
14,293

 
15,080

 
16,814

Income from discontinued operations, net of income taxes
 

 

 
285

Consolidated net income
 
14,293

 
15,080

 
17,099

Consolidated net income attributable to noncontrolling interest
 
(650
)
 
(386
)
 
(736
)
Consolidated net income attributable to Walmart
 
$
13,643

 
$
14,694

 
$
16,363

 
 
 
 
 
 
 
Basic net income per common share:
 
 
 
 
 
 
Basic income per common share from continuing operations attributable to Walmart
 
$
4.40

 
$
4.58

 
$
5.01

Basic income per common share from discontinued operations attributable to Walmart
 

 

 
0.06

Basic net income per common share attributable to Walmart
 
$
4.40

 
$
4.58

 
$
5.07

 
 
 
 
 
 
 
Diluted net income per common share:
 
 
 
 
 
 
Diluted income per common share from continuing operations attributable to Walmart
 
$
4.38

 
$
4.57

 
$
4.99

Diluted income per common share from discontinued operations attributable to Walmart
 

 

 
0.06

Diluted net income per common share attributable to Walmart
 
$
4.38

 
$
4.57

 
$
5.05

 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
Basic
 
3,101

 
3,207

 
3,230

Diluted
 
3,112

 
3,217

 
3,243

 
 
 
 
 
 
 
Dividends declared per common share
 
$
2.00

 
$
1.96

 
$
1.92

See accompanying notes.

27



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

 
 
Fiscal Years Ended January 31,
(Amounts in millions)
 
2017
 
2016
 
2015
Consolidated net income
 
$
14,293

 
$
15,080

 
$
17,099

Less consolidated net income attributable to nonredeemable noncontrolling interest
 
(650
)
 
(386
)
 
(736
)
Consolidated net income attributable to Walmart
 
13,643

 
14,694

 
16,363

 
 
 
 
 
 
 
Other comprehensive income (loss), net of income taxes
 
 
 
 
 
 
Currency translation and other
 
(2,882
)
 
(5,220
)
 
(4,558
)
Net investment hedges
 
413

 
366

 
379

Cash flow hedges
 
21

 
(202
)
 
(470
)
Minimum pension liability
 
(397
)
 
86

 
(69
)
Other comprehensive income (loss), net of income taxes
 
(2,845
)
 
(4,970
)
 
(4,718
)
Less other comprehensive income (loss) attributable to nonredeemable noncontrolling interest
 
210

 
541

 
546

Other comprehensive income (loss) attributable to Walmart
 
(2,635
)
 
(4,429
)
 
(4,172
)
 
 
 
 
 
 
 
Comprehensive income, net of income taxes
 
11,448

 
10,110

 
12,381

Less comprehensive income (loss) attributable to nonredeemable noncontrolling interest
 
(440
)
 
155

 
(190
)
Comprehensive income attributable to Walmart
 
$
11,008

 
$
10,265

 
$
12,191

See accompanying notes.

28



Wal-Mart Stores, Inc.
Consolidated Balance Sheets

 
 
As of January 31,
(Amounts in millions)
 
2017
 
2016
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
6,867

 
$
8,705

Receivables, net
 
5,835

 
5,624

Inventories
 
43,046

 
44,469

Prepaid expenses and other
 
1,941

 
1,441

Total current assets
 
57,689

 
60,239

Property and equipment:
 
 
 
 
Property and equipment
 
179,492

 
176,958

Less accumulated depreciation
 
(71,782
)
 
(66,787
)
Property and equipment, net
 
107,710

 
110,171

Property under capital lease and financing obligations:
 
 
 
 
Property under capital lease and financing obligations
 
11,637

 
11,096

Less accumulated amortization
 
(5,169
)
 
(4,751
)
Property under capital lease and financing obligations, net
 
6,468

 
6,345

 
 
 
 
 
Goodwill
 
17,037

 
16,695

Other assets and deferred charges
 
9,921

 
6,131

Total assets
 
$
198,825

 
$
199,581

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Short-term borrowings
 
$
1,099

 
$
2,708

Accounts payable
 
41,433

 
38,487

Accrued liabilities
 
20,654

 
19,607

Accrued income taxes
 
921

 
521

Long-term debt due within one year
 
2,256

 
2,745

Capital lease and financing obligations due within one year
 
565

 
551

Total current liabilities
 
66,928

 
64,619

 
 
 
 
 
Long-term debt
 
36,015

 
38,214

Long-term capital lease and financing obligations
 
6,003

 
5,816

Deferred income taxes and other
 
9,344

 
7,321

 
 
 
 
 
Commitments and contingencies
 

 

 
 
 
 
 
Equity:
 
 
 
 
Common stock
 
305

 
317

Capital in excess of par value
 
2,371

 
1,805

Retained earnings
 
89,354

 
90,021

Accumulated other comprehensive loss
 
(14,232
)
 
(11,597
)
Total Walmart shareholders' equity
 
77,798

 
80,546

Nonredeemable noncontrolling interest
 
2,737

 
3,065

Total equity
 
80,535

 
83,611

Total liabilities and equity
 
$
198,825

 
$
199,581

See accompanying notes.

29



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
 
Loss
 
Equity
 
Interest
 
Equity
 
 
Interest
Balances as of February 1, 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 loss, net of income taxes

 

 

 

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

Cash dividends declared ($1.96 per share)

 

 

 
(6,294
)
 

 
(6,294
)
 

 
(6,294
)
 
 

Purchase of Company stock
(65
)
 
(6
)
 
(102
)
 
(4,148
)
 

 
(4,256
)
 

 
(4,256
)
 
 

Cash dividend declared to noncontrolling interest

 

 

 

 

 

 
(691
)
 
(691
)
 
 

Other
(1
)
 

 
(555
)
 
(8
)
 

 
(563
)
 
(632
)
 
(1,195