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Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended July 31, 2019.



☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from to .

Commission File Number 001-6991

WALMART INC.

(Exact name of registrant as specified in its charter)



Delaware		71-0415188
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

702 S.W. 8th Street		72716
Bentonville	AR
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (479) 273-4000

Former name, former address and former fiscal year, if changed since last report: N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	WMT	New York Stock Exchange
1.900% Notes Due 2022		New York Stock Exchange
2.550% Notes Due 2026		New York Stock Exchange

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 2,844,284,080 shares of common stock outstanding as of September 4, 2019.

Table of Contents

Walmart Inc.

Form 10-Q

For the Quarterly Period Ended July 31, 2019

Table of Contents



			Page
Part I. Financial Information
	Item 1. Financial Statements
		Condensed Consolidated Statements of Income	3
		Condensed Consolidated Statements of Comprehensive Income	4
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Shareholders' Equity	6
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		20
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
	Item 4. Controls and Procedures		32

Part II. Other Information
	Item 1. Legal Proceedings		33
	Item 1A. Risk Factors		34
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
	Item 5. Other Information		34
	Item 6. Exhibits		38

Signatures			39

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

Walmart Inc.

Condensed Consolidated Statements of Income

(Unaudited)



	Three Months Ended July 31,						Six Months Ended July 31,
(Amounts in millions, except per share data)	2019			2018			2019			2018
Revenues:
Net sales	$	129,388		$	127,059		$	252,337		$	248,689
Membership and other income	989			969			1,965			2,029
Total revenues	130,377			128,028			254,302			250,718
Costs and expenses:
Cost of sales	97,923			95,571			190,957			187,278
Operating, selling, general and administrative expenses	26,871			26,707			52,817			52,536
Operating income	5,583			5,750			10,528			10,904
Interest:
Debt	558			460			1,146			897
Finance, capital lease and financing obligations	83			94			168			187
Interest income	(56		)	(51		)	(104		)	(94		)
Interest, net	585			503			1,210			990
Other (gains) and losses	85			4,849			(752		)	6,694
Income before income taxes	4,913			398			10,070			3,220
Provision for income taxes	1,233			1,125			2,484			1,671
Consolidated net income (loss)	3,680			(727		)	7,586			1,549
Consolidated net income attributable to noncontrolling interest	(70		)	(134		)	(134		)	(276		)
Consolidated net income (loss) attributable to Walmart	$	3,610		$	(861	)	$	7,452		$	1,273

Net income (loss) per common share:
Basic net income (loss) per common share attributable to Walmart	$	1.27		$	(0.29	)	$	2.60		$	0.43
Diluted net income (loss) per common share attributable to Walmart	1.26			(0.29		)	2.59			0.43

Weighted-average common shares outstanding:
Basic	2,853			2,946			2,861			2,948
Diluted	2,869			2,946			2,878			2,963

Dividends declared per common share	$	—		$	—		$	2.12		$	2.08

See accompanying notes.

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Walmart Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended July 31,						Six Months Ended July 31,
(Amounts in millions)	2019			2018			2019			2018
Consolidated net income (loss)	$	3,680		$	(727	)	$	7,586		$	1,549
Consolidated net income attributable to noncontrolling interest	(70		)	(134		)	(134		)	(276		)
Consolidated net income (loss) attributable to Walmart	3,610			(861		)	7,452			1,273

Other comprehensive income (loss), net of income taxes
Currency translation and other	(81		)	(2,685		)	426			(1,220		)
Net investment hedges	140			193			248			261
Cash flow hedges	(158		)	(155		)	(289		)	(232		)
Minimum pension liability	4			9			5			52
Other comprehensive income (loss), net of income taxes	(95		)	(2,638		)	390			(1,139		)
Other comprehensive (income) loss attributable to noncontrolling interest	(84		)	290			(118		)	127
Other comprehensive income (loss) attributable to Walmart	(179		)	(2,348		)	272			(1,012		)

Comprehensive income (loss), net of income taxes	3,585			(3,365		)	7,976			410
Comprehensive (income) loss attributable to noncontrolling interest	(154		)	156			(252		)	(149		)
Comprehensive income (loss) attributable to Walmart	$	3,431		$	(3,209	)	$	7,724		$	261

See accompanying notes.

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Walmart Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



	July 31,			January 31,			July 31,
(Amounts in millions)	2019			2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	9,283		$	7,722		$	15,840
Receivables, net	5,382			6,283			5,002
Inventories	44,134			44,269			41,985
Prepaid expenses and other	2,572			3,623			3,543
Total current assets	61,371			61,897			66,370

Property and equipment, net	104,674			104,317			104,019
Operating lease right-of-use assets, net	17,239			—			—
Finance lease right-of-use assets, net	3,949			—			—
Property under capital lease and financing obligations, net	—			7,078			6,998
Goodwill	31,454			31,181			17,840
Other long-term assets	16,174			14,822			10,835
Total assets	$	234,861		$	219,295		$	206,062

LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings	$	3,681		$	5,225		$	444
Accounts payable	45,871			47,060			43,128
Dividends payable	3,023			—			3,057
Accrued liabilities	20,691			22,159			22,846
Accrued income taxes	387			428			424
Long-term debt due within one year	4,396			1,876			1,090
Operating lease obligations due within one year	1,795			—			—
Finance lease obligations due within one year	439			—			—
Capital lease and financing obligations due within one year	—			729			694
Total current liabilities	80,283			77,477			71,683

Long-term debt	44,404			43,520			44,958
Long-term operating lease obligations	16,079			—			—
Long-term finance lease obligations	3,915			—			—
Long-term capital lease and financing obligations	—			6,683			6,610
Deferred income taxes and other	13,049			11,981			8,999

Commitments and contingencies

Equity:
Common stock	285			288			294
Capital in excess of par value	2,880			2,965			2,710
Retained earnings	78,432			80,785			80,810
Accumulated other comprehensive loss	(11,270		)	(11,542		)	(12,629		)
Total Walmart shareholders' equity	70,327			72,496			71,185
Noncontrolling interest	6,804			7,138			2,627
Total equity	77,131			79,634			73,812
Total liabilities and equity	$	234,861		$	219,295		$	206,062

See accompanying notes.

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Walmart Inc.

Condensed Consolidated Statements of Shareholders' Equity

(Unaudited)



												Accumulated			Total
						Capital in						Other			Walmart
(Amounts in millions)	Common Stock					Excess of			Retained			Comprehensive			Shareholders'			Noncontrolling			Total
(Amounts in millions)	Shares		Amount			Par Value			Earnings			Loss			Equity			Interest			Equity
Balances as of February 1, 2019	2,878		$	288		$	2,965		$	80,785		$	(11,542	)	$	72,496		$	7,138		$	79,634
Adoption of new accounting standards on February 1, 2019, net of income taxes	—		—			—			(266		)	—			(266		)	(34		)	(300		)
Consolidated net income	—		—			—			3,842			—			3,842			64			3,906
Other comprehensive income (loss), net of income taxes	—		—			—			—			451			451			34			485
Dividends declared ($2.12 per share)	—		—			—			(6,071		)	—			(6,071		)	—			(6,071		)
Purchase of Company stock	(21	)	(2		)	(73		)	(2,012		)	—			(2,087		)	—			(2,087		)
Dividends declared to noncontrolling interest	—		—			—			—			—			—			(481		)	(481		)
Other	5		—			(158		)	(2		)	—			(160		)	(16		)	(176		)
Balances as of April 30, 2019	2,862		$	286		$	2,734		$	76,276		$	(11,091	)	$	68,205		$	6,705		$	74,910
Consolidated net income	—		—			—			3,610			—			3,610			70			3,680
Other comprehensive income (loss), net of income taxes	—		—			—			—			(179		)	(179		)	84			(95		)
Dividends	—		—			—			15			—			15			—			15
Purchase of Company stock	(15	)	(2		)	(54		)	(1,499		)	—			(1,555		)	—			(1,555		)
Dividends to noncontrolling interest	—		—			—			—			—			—			6			6
Other	—		1			200			30			—			231			(61		)	170
Balances as of July 31, 2019	2,847		$	285		$	2,880		$	78,432		$	(11,270	)	$	70,327		$	6,804		$	77,131

See accompanying notes.

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Walmart Inc.

Condensed Consolidated Statements of Shareholders' Equity

(Unaudited)



												Accumulated			Total
						Capital in						Other			Walmart
(Amounts in millions)	Common Stock					Excess of			Retained			Comprehensive			Shareholders'			Noncontrolling			Total
(Amounts in millions)	Shares		Amount			Par Value			Earnings			Loss			Equity			Interest			Equity
Balances as of February 1, 2018	2,952		$	295		$	2,648		$	85,107		$	(10,181	)	$	77,869		$	2,953		$	80,822
Adoption of new accounting standards on February 1, 2018, net of income taxes	—		—			—			2,361			(1,436		)	925			(1		)	924
Consolidated net income	—		—			—			2,134			—			2,134			142			2,276
Other comprehensive income (loss), net of income taxes	—		—			—			—			1,336			1,336			163			1,499
Dividends declared ($2.08 per share)	—		—			—			(6,135		)	—			(6,135		)	—			(6,135		)
Purchase of Company stock	(5	)	(1		)	(15		)	(492		)	—			(508		)	—			(508		)
Dividends declared to noncontrolling interest	—		—			—			—			—			—			(489		)	(489		)
Other	4		—			(76		)	7			—			(69		)	4			(65		)
Balances as of April 30, 2018	2,951		$	294		$	2,557		$	82,982		$	(10,281	)	$	75,552		$	2,772		$	78,324
Consolidated net income	—		—			—			(861		)	—			(861		)	134			(727		)
Other comprehensive income (loss), net of income taxes	—		—			—			—			(2,348		)	(2,348		)	(290		)	(2,638		)
Dividends	—		—			—			14			—			14			—			14
Purchase of Company stock	(16	)	(1		)	(41		)	(1,324		)	—			(1,366		)	—			(1,366		)
Dividends to noncontrolling interest	—		—			—			—			—			—			9			9
Other	—		1			194			(1		)	—			194			2			196
Balances as of July 31, 2018	2,935		$	294		$	2,710		$	80,810		$	(12,629	)	$	71,185		$	2,627		$	73,812

See accompanying notes.

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Walmart Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended July 31,
(Amounts in millions)	2019			2018
Cash flows from operating activities:
Consolidated net income	$	7,586		$	1,549
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization	5,436			5,332
Unrealized (gains) and losses	(731		)	1,939
(Gains) and losses for disposal of business operations	—			4,755
Deferred income taxes	241			(117		)
Other operating activities	348			469
Changes in certain assets and liabilities, net of effects of acquisitions and dispositions:
Receivables, net	978			257
Inventories	220			441
Accounts payable	(1,242		)	(1,588		)
Accrued liabilities	(1,657		)	(1,702		)
Accrued income taxes	6			(240		)
Net cash provided by operating activities	11,185			11,095

Cash flows from investing activities:
Payments for property and equipment	(4,871		)	(4,282		)
Proceeds from the disposal of property and equipment	128			205
Proceeds from the disposal of certain operations	833			—
Payments for business acquisitions, net of cash acquired	(56		)	—
Other investing activities	142			(351		)
Net cash used in investing activities	(3,824		)	(4,428		)

Cash flows from financing activities:
Net change in short-term borrowings	(1,564		)	(4,761		)
Proceeds from issuance of long-term debt	4,020			15,851
Repayments of long-term debt	(407		)	(3,050		)
Dividends paid	(3,036		)	(3,067		)
Purchase of Company stock	(3,707		)	(1,844		)
Dividends paid to noncontrolling interest	(259		)	(171		)
Other financing activities	(578		)	(478		)
Net cash (used in) provided by financing activities	(5,531		)	2,480

Effect of exchange rates on cash, cash equivalents and restricted cash	(266		)	(299		)

Net increase (decrease) in cash, cash equivalents and restricted cash	1,564			8,848
Cash, cash equivalents and restricted cash at beginning of year	7,756			7,014
Cash, cash equivalents and restricted cash at end of period	$	9,320		$	15,862

See accompanying notes.

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Walmart Inc.

Notes to Condensed Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The Condensed Consolidated Financial Statements of Walmart Inc. and its subsidiaries ("Walmart" or the "Company") and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2019 ("fiscal 2019"). Therefore, the interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K.

The Company's Consolidated Financial Statements are based on a fiscal year ending January 31 for the United States ("U.S.") and Canadian operations. The Company consolidates all other operations generally using a one-month lag and based on a calendar year. There were no significant intervening events during the month of July related to the operations consolidated using a lag that materially affected the Condensed Consolidated Financial Statements.

The Company's business is seasonal to a certain extent due to calendar events and national and religious holidays, as well as weather patterns. Historically, the Company's highest sales volume and operating income have occurred in the fiscal quarter ending January 31.

Restricted Cash

Restricted cash held outside of cash and cash equivalents was $37 million and $34 million as of July 31, 2019 and January 31, 2019, respectively, and was primarily recorded in prepaid expenses and other in the Condensed Consolidated Balance Sheets. Restricted cash not classified as part of cash and cash equivalents was $22 million and approximately $0.3 billion as of July 31, 2018 and January 31, 2018, respectively, and was primarily recorded in other long-term assets in the Condensed Consolidated Balance Sheets.

Inventories

At July 31, 2019 and January 31, 2019, the Company's inventories valued at LIFO approximated those inventories as if they were valued at FIFO.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lease assets and liabilities to be recorded on the balance sheet. The Company adopted this ASU and related amendments as of February 1, 2019 under the modified retrospective approach and elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases. For leases subject to index or rate adjustments, the most current index or rate adjustments were included in the measurement of operating lease obligations at adoption.

The adoption of this ASU and related amendments resulted in a $14.8 billion increase to total assets and a $15.1 billion increase to total liabilities in the first quarter of the fiscal year ending January 31, 2020 ("fiscal 2020"). In the first quarter of fiscal 2020, the Company recognized $16.8 billion and $17.5 billion of operating lease right-of-use assets and operating lease obligations, respectively, and removed $2.2 billion and $1.7 billion, respectively, of assets and liabilities related to financial obligations connected with the construction of leased stores. Several other asset and liability line items in the Company's Condensed Consolidated Balance Sheet were also impacted by immaterial amounts. Additionally, the adoption resulted in a cumulative-effect adjustment to retained earnings of approximately $0.3 billion, net of tax, which primarily consisted of the recognition of impairment. The Company’s Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows were immaterially impacted. Updated accounting policies as a result of the adoption of this ASU are described below. Note 10 provides additional lease disclosures.

For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use ("ROU") assets and lease obligations for its finance and operating leases, which are initially recognized based on the discounted future minimum lease payments over the term of the lease. As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments.

Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less.

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For a majority of all classes of underlying assets, the Company has elected to not separate lease from non-lease components. For leases in which the lease and non-lease components have been combined, the variable lease expense includes expenses such as common area maintenance, utilities, and repairs and maintenance.

Revenue Recognition

Contract Balances

Contract balances as a result of transactions with customers primarily consist of receivables included in receivables, net, and deferred gift card revenue included in accrued liabilities in the Company's Condensed Consolidated Balance Sheets. The following table provides the Company's receivables and deferred gift card revenue from transactions with customers:



(Amounts in millions)	July 31, 2019		January 31, 2019
Assets:
Receivables from transactions with customers, net	$	2,483	$	2,538

Liabilities:
Deferred gift card revenue	$	1,765	$	1,932

Derivatives

In fiscal 2020, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The adoption of the standard had no current or historical impact on the Company's Condensed Consolidated Financial Statements. The Company continues to use qualitative methods to assess the effectiveness of its designated hedging relationships. Upon adopting ASU 2017-12, the Company modified its existing hedge documentation to use a quantitative method for assessing effectiveness when the hedge is subsequently determined to be ineffective under the qualitative method. There were no other significant changes to the Company's accounting policies for derivatives.

Recent Accounting Pronouncements

Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326), which modifies the measurement of expected credit losses of certain financial instruments. The Company will adopt this ASU on February 1, 2020. Management is currently evaluating this ASU to determine its impact to the Company's Consolidated Financial Statements.

Note 2. Net Income or Loss Per Common Share

Basic net income (loss) per common share attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period. Diluted net income (loss) per common share attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period adjusted for the dilutive effect of share-based awards. The Company did not have significant share-based awards outstanding that were anti-dilutive and not included in the calculation of diluted net income (loss) per common share attributable to Walmart for the three and six months ended July 31, 2019 and 2018. Further, the calculation of diluted net loss per common share attributable to Walmart for the three months ended July 31, 2018 does not include the effect of stock options and other share-based awards as their inclusion would be anti-dilutive, and would reduce the net loss per common share.

The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income (loss) per common share attributable to Walmart:



	Three Months Ended July 31,						Six Months Ended July 31,
(Amounts in millions, except per share data)	2019			2018			2019			2018
Numerator
Consolidated net income (loss)	$	3,680		$	(727	)	$	7,586		$	1,549
Consolidated net income attributable to noncontrolling interest	(70		)	(134		)	(134		)	(276		)
Consolidated net income (loss) attributable to Walmart	$	3,610		$	(861	)	$	7,452		$	1,273

Denominator
Weighted-average common shares outstanding, basic	2,853			2,946			2,861			2,948
Dilutive impact of share-based awards	16			—			17			15
Weighted-average common shares outstanding, diluted	2,869			2,946			2,878			2,963

Net income (loss) per common share attributable to Walmart
Basic	$	1.27		$	(0.29	)	$	2.60		$	0.43
Diluted	1.26			(0.29		)	2.59			0.43

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Note 3. Accumulated Other Comprehensive Loss

The following table provides the changes in the composition of total accumulated other comprehensive loss for the three months ended April 30, 2019 and July 31, 2019, respectively:



(Amounts in millions and net of income taxes)	Currency Translation and Other			Net Investment Hedges		Cash Flow Hedges			Minimum Pension Liability			Total
Balances as of February 1, 2019	$	(12,085	)	$	1,395	$	(140	)	$	(712	)	$	(11,542	)
Other comprehensive income (loss) before reclassifications, net⁽¹⁾	496			108		(145		)	(7		)	452
Reclassifications to income, net⁽¹⁾	(23		)	—		14			8			(1		)
Balances as of April 30, 2019	$	(11,612	)	$	1,503	$	(271	)	$	(711	)	$	(11,091	)
Other comprehensive income (loss) before reclassifications, net⁽¹⁾	(165		)	140		(172		)	(5		)	(202		)
Reclassifications to income, net⁽¹⁾	—			—		14			9			23
Balances as of July 31, 2019	$	(11,777	)	$	1,643	$	(429	)	$	(707	)	$	(11,270	)

(1) Income tax impact is immaterial.

The following table provides the changes in the composition of total accumulated other comprehensive loss for the three months ended April 30, 2018 and July 31, 2018, respectively:



(Amounts in millions and net of income taxes)	Currency Translation and Other			Unrealized Gain on Available-for-Sale Securities			Net Investment Hedges		Cash Flow Hedges			Minimum Pension Liability			Total
Balances as of February 1, 2018	$	(12,136	)	$	1,646		$	1,030	$	122		$	(843	)	$	(10,181	)
Adoption of new accounting standards on February 1, 2018, net^{(1) (2)}	89			(1,646		)	93		28			—			(1,436		)
Other comprehensive income (loss) before reclassifications, net⁽¹⁾	1,302			—			68		(86		)