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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 October 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 2,837,174,936 shares of common stock outstanding as of December 2, 2019.

Table of Contents

Walmart Inc.

Form 10-Q

For the Quarterly Period Ended October 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 October 31,						Nine Months Ended October 31,
(Amounts in millions, except per share data)	2019			2018			2019			2018
Revenues:
Net sales	$	126,981		$	123,897		$	379,318		$	372,586
Membership and other income	1,010			997			2,975			3,026
Total revenues	127,991			124,894			382,293			375,612
Costs and expenses:
Cost of sales	95,900			93,116			286,857			280,394
Operating, selling, general and administrative expenses	27,373			26,792			80,190			79,328
Operating income	4,718			4,986			15,246			15,890
Interest:
Debt	547			501			1,693			1,398
Finance, capital lease and financing obligations	86			92			254			279
Interest income	(44		)	(59		)	(148		)	(153		)
Interest, net	589			534			1,799			1,524
Other (gains) and losses	(244		)	1,876			(996		)	8,570
Income before income taxes	4,373			2,576			14,443			5,796
Provision for income taxes	1,052			759			3,536			2,430
Consolidated net income	3,321			1,817			10,907			3,366
Consolidated net income attributable to noncontrolling interest	(33		)	(107		)	(167		)	(383		)
Consolidated net income attributable to Walmart	$	3,288		$	1,710		$	10,740		$	2,983

Net income per common share:
Basic net income per common share attributable to Walmart	$	1.16		$	0.58		$	3.76		$	1.01
Diluted net income per common share attributable to Walmart	1.15			0.58			3.74			1.01

Weighted-average common shares outstanding:
Basic	2,843			2,924			2,855			2,940
Diluted	2,861			2,941			2,872			2,956

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 October 31,						Nine Months Ended October 31,
(Amounts in millions)	2019			2018			2019			2018
Consolidated net income	$	3,321		$	1,817		$	10,907		$	3,366
Consolidated net income attributable to noncontrolling interest	(33		)	(107		)	(167		)	(383		)
Consolidated net income attributable to Walmart	3,288			1,710			10,740			2,983

Other comprehensive income (loss), net of income taxes
Currency translation and other	(1,188		)	1,020			(762		)	(200		)
Net investment hedges	(113		)	114			135			375
Cash flow hedges	(12		)	(109		)	(301		)	(341		)
Minimum pension liability	8			12			13			64
Other comprehensive income (loss), net of income taxes	(1,305		)	1,037			(915		)	(102		)
Other comprehensive (income) loss attributable to noncontrolling interest	193			123			75			250
Other comprehensive income (loss) attributable to Walmart	(1,112		)	1,160			(840		)	148

Comprehensive income, net of income taxes	2,016			2,854			9,992			3,264
Comprehensive (income) loss attributable to noncontrolling interest	160			16			(92		)	(133		)
Comprehensive income attributable to Walmart	$	2,176		$	2,870		$	9,900		$	3,131

See accompanying notes.

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Walmart Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



	October 31,			January 31,			October 31,
(Amounts in millions)	2019			2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	8,606		$	7,722		$	9,174
Receivables, net	5,612			6,283			5,785
Inventories	51,546			44,269			50,380
Prepaid expenses and other	2,148			3,623			4,107
Total current assets	67,912			61,897			69,446

Property and equipment, net	104,326			104,317			104,358
Operating lease right-of-use assets, net	16,944			—			—
Finance lease right-of-use assets, net	4,155			—			—
Property under capital lease and financing obligations, net	—			7,078			6,991
Goodwill	30,716			31,181			31,044
Other long-term assets	15,777			14,822			14,744
Total assets	$	239,830		$	219,295		$	226,583

LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings	$	4,926		$	5,225		$	7,795
Accounts payable	49,750			47,060			49,729
Dividends payable	1,507			—			1,516
Accrued liabilities	20,973			22,159			22,795
Accrued income taxes	327			428			616
Long-term debt due within one year	4,093			1,876			2,591
Operating lease obligations due within one year	1,740			—			—
Finance lease obligations due within one year	468			—			—
Capital lease and financing obligations due within one year	—			729			709
Total current liabilities	83,784			77,477			85,751

Long-term debt	44,912			43,520			43,275
Long-term operating lease obligations	15,741			—			—
Long-term finance lease obligations	4,068			—			—
Long-term capital lease and financing obligations	—			6,683			6,621
Deferred income taxes and other	13,018			11,981			11,467

Commitments and contingencies

Equity:
Common stock	284			288			291
Capital in excess of par value	3,091			2,965			2,887
Retained earnings	80,656			80,785			80,287
Accumulated other comprehensive loss	(12,382		)	(11,542		)	(11,469		)
Total Walmart shareholders' equity	71,649			72,496			71,996
Noncontrolling interest	6,658			7,138			7,473
Total equity	78,307			79,634			79,469
Total liabilities and equity	$	239,830		$	219,295		$	226,583

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, 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
Consolidated net income	—		—			—			3,288			—			3,288			33			3,321
Other comprehensive loss, net of income taxes	—		—			—			—			(1,112		)	(1,112		)	(193		)	(1,305		)
Dividends	—		—			—			5			—			5			—			5
Purchase of Company stock	(10	)	(1		)	(39		)	(1,068		)	—			(1,108		)	—			(1,108		)
Dividends to noncontrolling interest	—		—			—			—			—			—			3			3
Other	2		—			250			(1		)	—			249			11			260
Balances as of October 31, 2019	2,839		$	284		$	3,091		$	80,656		$	(12,382	)	$	71,649		$	6,658		$	78,307

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, 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 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
Consolidated net income	—		—			—			1,710			—			1,710			107			1,817
Other comprehensive income (loss), net of income taxes	—		—			—			—			1,160			1,160			(123		)	1,037
Dividends	—		—			—			14			—			14			—			14
Purchase of Company stock	(25	)	(3		)	(75		)	(2,242		)	—			(2,320		)	—			(2,320		)
Dividends to noncontrolling interest	—		—			—			—			—			—			(3		)	(3		)
Noncontrolling interest of acquired entity	—		—			—			—			—			—			4,852			4,852
Other	2		—			252			(5		)	—			247			13			260
Balances as of October 31, 2018	2,912		$	291		$	2,887		$	80,287		$	(11,469	)	$	71,996		$	7,473		$	79,469

See accompanying notes.

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Walmart Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Nine Months Ended October 31,
(Amounts in millions)	2019			2018
Cash flows from operating activities:
Consolidated net income	$	10,907		$	3,366
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization	8,159			7,947
Unrealized (gains) and losses	(911		)	3,727
(Gains) and losses for disposal of business operations	(1		)	4,846
Deferred income taxes	574			(346		)
Other operating activities	938			735
Changes in certain assets and liabilities, net of effects of acquisitions and dispositions:
Receivables, net	661			178
Inventories	(7,558		)	(7,279		)
Accounts payable	2,925			4,137
Accrued liabilities	(1,107		)	103
Accrued income taxes	(48		)	(106		)
Net cash provided by operating activities	14,539			17,308

Cash flows from investing activities:
Payments for property and equipment	(7,765		)	(7,014		)
Proceeds from the disposal of property and equipment	218			308
Proceeds from the disposal of certain operations	833			—
Payments for business acquisitions, net of cash acquired	(56		)	(13,269		)
Other investing activities	485			(579		)
Net cash used in investing activities	(6,285		)	(20,554		)

Cash flows from financing activities:
Net change in short-term borrowings	(282		)	2,611
Proceeds from issuance of long-term debt	5,492			15,851
Repayments of long-term debt	(1,907		)	(3,050		)
Dividends paid	(4,545		)	(4,597		)
Purchase of Company stock	(4,829		)	(4,161		)
Dividends paid to noncontrolling interest	(407		)	(252		)
Other financing activities	(735		)	(481		)
Net cash provided by (used in) financing activities	(7,213		)	5,921

Effect of exchange rates on cash, cash equivalents and restricted cash	(166		)	(485		)

Net increase in cash, cash equivalents and restricted cash	875			2,190
Cash, cash equivalents and restricted cash at beginning of year	7,756			7,014
Cash, cash equivalents and restricted cash at end of period	$	8,631		$	9,204

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 October 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 not classified as part of cash and cash equivalents was $25 million and $34 million as of October 31, 2019 and January 31, 2019, respectively, and was primarily recorded in other long-term assets in the Condensed Consolidated Balance Sheets. Restricted cash not classified as part of cash and cash equivalents was $30 million and approximately $0.3 billion as of October 31, 2018 and January 31, 2018, respectively, and was primarily recorded in other long-term assets in the Condensed Consolidated Balance Sheets.

Inventories

At October 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)	October 31, 2019		January 31, 2019
Assets:
Receivables from transactions with customers, net	$	2,618	$	2,538

Liabilities:
Deferred gift card revenue	$	1,863	$	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