WAL MART STORES INC, 10-Q filed on 12/8/2009
Quarterly Report
Statement Of Income Alternative - Unaudited (USD $)
In Millions, except Per Share data
3 Months Ended
Oct. 31, 2009
9 Months Ended
Oct. 31, 2009
3 Months Ended
Oct. 31, 2008
9 Months Ended
Oct. 31, 2008
Revenues:
 
 
 
 
Net sales
$ 98,667 
$ 292,220 
$ 97,619 
$ 293,207 
Membership and other income
744 
2,343 
726 
2,420 
Revenues, Total
99,411 
294,563 
98,345 
295,627 
Costs and expenses:
 
 
 
 
Cost of sales
73,805 
219,346 
73,621 
222,111 
Operating, selling, general and administrative expenses
20,013 
58,525 
19,432 
57,095 
Operating income
5,593 
16,692 
5,292 
16,421 
Interest:
 
 
 
 
Debt
442 
1,337 
464 
1,402 
Capital leases
68 
206 
73 
222 
Interest income
(35)
(128)
(81)
(216)
Interest, net
475 
1,415 
456 
1,408 
Income from continuing operations before income taxes
5,118 
15,277 
4,836 
15,013 
Provision for income taxes
1,758 
5,214 
1,690 
5,186 
Income from continuing operations
3,360 
10,063 
3,146 
9,827 
(Loss) income from discontinued operations, net of tax
(7)
(22)
105 
146 
Consolidated net income
3,353 
10,041 
3,251 
9,973 
Less consolidated net income attributable to noncontrolling interest
(114)
(338)
(113)
(365)
Consolidated net income attributable to Walmart
3,239 
9,703 
3,138 
9,608 
Basic net income per common share:
 
 
 
 
Basic income per share from continuing operations attributable to Walmart
0.84 
2.50 
0.77 
2.40 
Basic income per share from discontinued operations attributable to Walmart
0.00 
0.00 
0.03 
0.04 
Basic net income per share attributable to Walmart
0.84 
2.50 
0.80 
2.44 
Diluted net income per common share:
 
 
 
 
Diluted income per share from continuing operations attributable to Walmart
0.84 
2.50 
0.77 
2.39 
Diluted income (loss) per share from discontinued operations attributable to Walmart
0.00 
(0.01)
0.03 
0.04 
Diluted net income per share attributable to Walmart
0.84 
2.49 
0.80 
2.43 
Weighted-average number of common shares:
 
 
 
 
Basic
3,851 
3,887 
3,931 
3,944 
Diluted
3,861 
3,897 
3,944 
3,956 
Dividends declared per common share
$ 0.00 
$ 1.09 
$ 0.00 
$ 0.95 
Statement Of Financial Position Classified - Unaudited (USD $)
In Millions
Oct. 31, 2009
Jan. 31, 2009
Oct. 31, 2008
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$ 6,003 
$ 7,275 
$ 5,920 
Receivables
3,776 
3,905 
3,250 
Inventories
38,775 
34,511 
40,416 
Prepaid expenses and other
3,249 
3,063 
3,245 
Current assets of discontinued operations
145 
195 
262 
Total current assets
51,948 
48,949 
53,093 
Property and equipment, at cost:
 
 
 
Property and equipment, at cost
135,152 
125,820 
125,173 
Less accumulated depreciation
(36,716)
(32,964)
(31,467)
Property and equipment, net
98,436 
92,856 
93,706 
Property under capital lease:
 
 
 
Property under capital lease
5,618 
5,341 
5,420 
Less accumulated amortization
(2,833)
(2,544)
(2,581)
Property under capital lease, net
2,785 
2,797 
2,839 
Goodwill
16,162 
15,260 
15,416 
Other assets and deferred charges
3,603 
3,567 
2,789 
Total assets
172,934 
163,429 
167,843 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Commercial paper and other short-term borrowings
5,239 
1,506 
7,932 
Accounts payable
30,920 
28,849 
30,782 
Dividends payable
1,021 
993 
Accrued liabilities
16,638 
18,112 
15,343 
Accrued income taxes
810 
677 
355 
Long-term debt due within one year
4,169 
5,848 
4,753 
Obligations under capital leases due within one year
344 
315 
314 
Current liabilities of discontinued operations
38 
83 
152 
Total current liabilities
59,179 
55,390 
60,624 
Long-term debt
34,394 
31,349 
30,803 
Long-term obligations under capital leases
3,207 
3,200 
3,268 
Deferred income taxes and other
6,202 
6,014 
5,575 
Redeemable noncontrolling interest
310 
397 
Commitments and contingencies
Equity:
 
 
 
Common stock and capital in excess of par value
4,134 
4,313 
4,219 
Retained earnings
64,105 
63,660 
59,809 
Accumulated other comprehensive (loss) income
(551)
(2,688)
1,511 
Total Walmart shareholders' equity
67,688 
65,285 
65,539 
Noncontrolling interest
1,954 
1,794 
2,034 
Total equity
69,642 
67,079 
67,573 
Total liabilities and equity
$ 172,934 
$ 163,429 
$ 167,843 
Statement Of Cash Flows Indirect - Unaudited (USD $)
In Millions
9 Months Ended
Oct. 31,
2009
2008
Cash flows from operating activities:
 
 
Consolidated net income
$ 10,041 
$ 9,973 
Loss (income) from discontinued operations, net of tax
22 
(146)
Income from continuing operations
10,063 
9,827 
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
 
 
Depreciation and amortization
5,255 
5,054 
Other
225 
637 
Changes in certain assets and liabilities, net of effects of acquisitions:
 
 
Decrease in accounts receivable
540 
394 
Increase in inventories
(3,415)
(5,655)
Increase in accounts payable
1,028 
914 
Decrease in accrued liabilities
(1,256)
(745)
Net cash provided by operating activities
12,440 
10,426 
Cash flows from investing activities:
 
 
Payments for property and equipment
(8,885)
(8,174)
Proceeds from disposal of property and equipment
265 
779 
Proceeds from disposal of certain international operations
838 
Investment in international operations, net of cash acquired
(74)
Other investing activities
(41)
(166)
Net cash used in investing activities
(8,661)
(6,797)
Cash flows from financing activities:
 
 
Increase in commercial paper and other short-term borrowings, net
3,475 
2,949 
Proceeds from issuance of long-term debt
5,465 
5,568 
Payment of long-term debt
(4,799)
(5,064)
Dividends paid
(3,179)
(2,814)
Purchase of Company stock
(5,105)
(3,521)
Purchase of redeemable noncontrolling interest
(456)
Other financing activities
(327)
(165)
Net cash used in financing activities
(4,926)
(3,047)
Effect of exchange rates on cash
(125)
(231)
Net (decrease) increase in cash and cash equivalents
(1,272)
351 
Cash and cash equivalents at beginning of year
7,275 1
5,569 1
Cash and cash equivalents at end of period
$ 6,003 
$ 5,920 
1 Basis of Presentation
1 Basis of Presentation

1 Basis of Presentation

The Condensed Consolidated Balance Sheets of Wal-Mart Stores, Inc. and its subsidiaries (“Walmart,” the “Company” or “we”) as of October 31, 2009 and 2008, the related Condensed Consolidated Statements of Income for the three- and nine-month periods ended October 31, 2009 and 2008, and the related Condensed Consolidated Statements of Cash Flows for the nine-month periods ended October 31, 2009 and 2008, are unaudited. The Condensed Consolidated Balance Sheet as of January 31, 2009, is derived from the Company’s audited Consolidated Balance Sheet at that date.

The Company’s operations in Argentina, Brazil, Chile, China, Costa Rica, El Salvador, Guatemala, Honduras, India, Japan, Mexico, Nicaragua and the United Kingdom are consolidated using a December 31 fiscal year end, generally due to statutory reporting requirements. The Company’s operations in Canada and Puerto Rico are consolidated using a January 31 fiscal year end.

In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for a full year.

The Condensed Consolidated Financial Statements and notes thereto are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and do not contain certain information included in the Company’s Annual Report to Shareholders for the fiscal year ended January 31, 2009. Therefore, the interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report to Shareholders.

In connection with the Company’s finance transformation project, we reviewed and adjusted the classification of certain revenue and expense items within our Condensed Consolidated Statements of Income for financial reporting purposes. The reclassifications did not impact operating income or consolidated net income attributable to Walmart. The changes were effective February 1, 2009 and have been reflected in all prior periods presented.

2 Net Income Per Common Share
2 Net Income Per Common Share

2 Net Income Per Common Share

Basic net income per common share attributable to Walmart is based on the weighted-average number of outstanding common shares. Diluted net income per common share attributable to Walmart is based on the weighted-average number of outstanding common shares adjusted for the dilutive effect of stock options and other share-based awards. The dilutive effect of outstanding stock options and other share-based awards was 10 million shares for the three and nine months ended October 31, 2009; and 13 million and 12 million shares for the three and nine months ended October 31, 2008, respectively. The Company had approximately 22 million and 1 million stock options outstanding at October 31, 2009 and 2008, respectively, which were not included in the diluted net income per share calculation because their effect would be antidilutive.

For purposes of determining consolidated net income per common share attributable to Walmart, income from continuing operations attributable to Walmart and the (loss) gain from discontinued operations, net of tax, are as follows:

 

     Three Months Ended
October 31,
    Nine Months Ended
October 31,
 
(Amounts in millions)        2009             2008             2009             2008      

Income from continuing operations

   $ 3,360      $ 3,146      $ 10,063      $ 9,827   

Less consolidated net income attributable to noncontrolling interest

     (114     (113     (338     (365
                                

Income from continuing operations attributable to Walmart

     3,246        3,033        9,725        9,462   

(Loss) income from discontinued operations, net of tax

     (7     105        (22     146   
                                

Consolidated net income attributable to Walmart

   $ 3,239      $ 3,138      $ 9,703      $ 9,608   
                                

Beginning February 1, 2009, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share. The adoption of this policy, as a result of changes in accounting standards, did not have, and is not expected to have, a material impact on basic or diluted earnings per share.

3 Inventories
3 Inventories

3 Inventories

The Company values inventories at the lower of cost or market as determined primarily by the retail method of accounting, using the last-in, first-out (“LIFO”) method for substantially all of the Walmart U.S. segment’s merchandise inventories. The Sam’s Club segment’s merchandise and merchandise in our distribution warehouses are valued based on the weighted-average cost using the LIFO method. Inventories of foreign operations are primarily valued by the retail method of accounting, using the first-in, first-out (“FIFO”) method. At October 31, 2009 and 2008, our inventories valued at LIFO approximate those inventories as if they were valued at FIFO.

4 Long-Term Debt
4 Long-Term Debt

4 Long-Term Debt

On March 27, 2009, the Company issued and sold £1.0 billion of 5.625% Notes Due 2034 at an issue price equal to 98.981% of the notes’ aggregate principal amount. Interest started accruing on the notes on March 27, 2009. The Company will pay interest on the notes on March 27 and September 27 of each year, commencing on September 27, 2009. The notes will mature on March 27, 2034. The notes are senior, unsecured obligations of Walmart.

On May 21, 2009, the Company issued and sold $1.0 billion of 3.20% Notes Due 2014 at an issue price equal to 99.987% of the notes’ aggregate principal amount. Interest started accruing on the notes on May 21, 2009. The Company will pay interest on the notes on May 15 and November 15 of each year, commencing on November 15, 2009. The notes will mature on May 15, 2014. The notes are senior, unsecured obligations of Walmart.

On July 27, 2009, the Company issued and sold $500 million of 6.200% Notes Due 2038 at an issue price equal to 106.001% of the notes’ aggregate principal amount. Interest started accruing on the notes on April 15, 2009. The Company will pay interest on the notes on April 15 and October 15 of each year, commencing on October 15, 2009. The notes will mature on April 15, 2038. The notes are senior, unsecured obligations of Walmart.

On August 6, 2009, the Company issued and sold ¥83.1 billion of its Japanese Yen Bonds—Third Series (2009) (the “Fixed Rate Bonds”) and its ¥16.9 billion of its Japanese Yen Floating Rate Bonds—Second Series (2009) (the “Floating Rate Bonds”) at an issue price, in the case of each issue of bonds, equal to the face amount of the bonds and used the proceeds to reduce a portion of its outstanding Yen credit facility. The Fixed Rate Bonds bear interest at a rate of 1.49% per annum. The Floating Rate Bonds bear interest at a floating rate of interest equal to an applicable six-month Yen LIBOR for each interest period plus 0.60%, with an initial interest rate of 1.235%. Interest started accruing on the bonds on August 6, 2009. The Company will pay interest on the bonds on February 6 and August 6 of each year, commencing on February 6, 2010. The notes will mature on August 6, 2014. The notes are senior, unsecured obligations of Walmart.

On September 21, 2009, the Company issued and sold €1.0 billion of its 4.875% Notes Due 2029 at an issue price equal to 99.074% of the notes’ aggregate principal amount. Interest started accruing on the notes on September 21, 2009. The Company will pay interest on the notes on September 21 of each year, commencing on September 21, 2010. The notes will mature on September 21, 2029. The notes are senior, unsecured obligations of Walmart.

5 Fair Value Measurements
5 Fair Value Measurements

5 Fair Value Measurements

The Company records and discloses certain financial and non-financial assets and liabilities at their fair value. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.

Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

   

Level 1, defined as observable inputs such as quoted prices in active markets;

 

   

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

   

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring the Company to develop our own assumptions.

The disclosure of fair value of certain financial assets and liabilities that are recorded at cost are as follows:

Cash and cash equivalents: The carrying amount approximates fair value due to the short maturity of these instruments.

 

Long-term debt: The fair value is based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements or, where applicable, quoted market prices. The cost and fair value of our debt as of October 31, 2009 is as follows:

 

(Amounts in millions)    Cost    Fair Value

Long-term debt

   $ 38,563    $ 40,490

Additionally, as of October 31, 2009 and 2008, the Company held certain derivative asset and liability positions that are required to be measured at fair value on a recurring basis. The majority of the Company’s derivative instruments relate to interest rate swaps. The fair values of these interest rate swaps have been measured in accordance with Level 2 inputs of the fair value hierarchy. As of October 31, 2009 and 2008, the notional amounts and fair values of these interest rate swaps are as follows (asset/(liability)):

 

     October 31, 2009     October 31, 2008  
(Amounts in millions)    Notional Amount    Fair Value     Notional Amount    Fair Value  

Receive fixed-rate, pay floating-rate interest rate swaps designated as fair value hedges

   $ 4,445    $ 238      $ 5,195    $ 223   

Receive fixed-rate, pay fixed-rate cross-currency interest rate swaps designated as net investment hedges

     1,250      177        1,250      240   

Receive floating-rate, pay fixed-rate interest rate swaps designated as cash flow hedges

     462      (15     462      (10

Receive fixed-rate, pay fixed-rate cross-currency interest rate swaps designated as cash flow hedges

     2,902      235        —        —     
                              

Total

   $ 9,059    $ 635      $ 6,907    $ 453   
                              

The fair values above are the estimated amounts the Company would receive or pay upon a termination of the agreements relating to such instruments as of the reporting dates.

6 Derivative Financial Instruments
6 Derivative Financial Instruments

6 Derivative Financial Instruments

The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to changes in interest and foreign exchange rates, as well as to maintain an appropriate mix of fixed- and floating-rate debt. Use of derivative financial instruments in hedging programs subjects the Company to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative instrument will change. In a hedging relationship, the change in the value of the derivative is offset to a great extent by the change in the value of the underlying hedged item. Credit risk related to derivatives represents the possibility that the counterparty will not fulfill the terms of the contract. The notional, or contractual, amount of the Company’s derivative financial instruments is used to measure interest to be paid or received and does not represent the Company’s exposure due to credit risk. Credit risk is monitored through established approval procedures, including setting concentration limits by counterparty, reviewing credit ratings and requiring collateral (generally cash) from the counterparty when appropriate.

The Company’s transactions are with counterparties rated “A+” or better by nationally recognized credit rating agencies. In connection with various derivative agreements with counterparties, the Company is holding $208 million in cash collateral from these counterparties at October 31, 2009. It is our policy to record cash collateral exclusive of any derivative asset, and any collateral holdings are reflected in our accrued liabilities as amounts due to the counterparties. Furthermore, as part of the master netting arrangements with these counterparties, the Company is also required to post collateral if the derivative liability position exceeds $150 million. The Company has no outstanding collateral postings and in the event of providing cash collateral, the Company would record the posting as a receivable exclusive of any derivative liability.

When the Company uses derivative financial instruments for purposes of hedging its exposure to interest and foreign exchange rates, the contract terms of a hedge instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria are recorded using hedge accounting. If a derivative instrument is a hedge, depending on the nature of the hedge, changes in the fair value of the instrument will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or be recognized in accumulated other comprehensive (loss) income until the hedged item is recognized in earnings. The ineffective portion of an instrument’s change in fair value will be immediately recognized in earnings. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of change.

 

Fair Value Instruments

The Company is party to receive fixed-rate, pay floating-rate interest rate swaps to hedge the fair value of fixed-rate debt. Under certain swap agreements, the Company pays floating-rate interest and receives fixed-rate interest payments periodically over the life of the instruments. The notional amounts are used to measure interest to be paid or received and do not represent the exposure due to credit loss. The Company’s interest rate swaps that receive fixed-interest rate payments and pay floating-interest rate payments are designated as fair value hedges. As the specific terms and notional amounts of the derivative instruments match those of the instruments being hedged, the derivative instruments were assumed to be perfectly effective hedges and all changes in fair value of the hedges were recorded on the balance sheet with no net impact on the income statement. These fair value instruments will mature on various dates ranging from February 15, 2011 to May 15, 2014.

Net Investment Instruments

At October 31, 2009 and 2008, the Company is party to cross-currency interest rate swaps that hedge its net investment in the United Kingdom. The agreements are contracts to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. All changes in the fair value of these instruments are recorded in accumulated other comprehensive (loss) income, offsetting the foreign currency translation adjustment that is also recorded in accumulated other comprehensive (loss) income.

The Company has approximately £3.0 billion of outstanding debt that is designated as a hedge of the Company’s net investment in the United Kingdom as of October 31, 2009 and 2008. The Company also has outstanding approximately ¥437.4 billion and ¥457.1 billion of debt that is designated as a hedge of the Company’s net investment in Japan at October 31, 2009 and 2008, respectively. Any translation of foreign-denominated debt is recorded in accumulated other comprehensive (loss) income, offsetting the foreign currency translation adjustment that is also recorded in accumulated other comprehensive (loss) income.

Cash Flow Instruments

The Company is party to receive floating-rate, pay fixed-rate interest rate swaps to hedge the interest rate risk of certain foreign-denominated debt. The swaps are designated as cash flow hedges of interest expense risk. Changes in the foreign benchmark interest rate result in reclassification of amounts from accumulated other comprehensive (loss) income to earnings to offset the floating-rate interest expense. These cash flow instruments will mature on August 5, 2013.

The Company is also party to receive fixed-rate, pay fixed-rate cross-currency interest rate swaps to hedge the currency exposure associated with the forecasted payments of principal and interest of foreign-denominated debt. The swaps are designated as cash flow hedges of the currency risk related to payments on the foreign-denominated debt. Changes in the currency exchange rate result in reclassification of amounts from accumulated other comprehensive (loss) income to earnings to offset the re-measurement (loss) gain on the foreign-denominated debt. These cash flow instruments will mature on March 27, 2034 and September 21, 2029.

Financial Statement Presentation

Hedging instruments with an unrealized gain are recorded on the Condensed Consolidated Balance Sheets in other assets and deferred charges, based on maturity date. Those instruments with an unrealized loss are recorded in accrued liabilities or deferred income taxes and other, based on maturity date.

As of October 31, 2009, our financial instruments were classified as follows in the Condensed Consolidated Balance Sheets:

 

     October 31, 2009
(Amounts in millions)    Fair Value
Instruments
   Net Investment
Hedge
   Cash Flow
Instruments

Balance Sheet Classification:

        

Other assets and deferred charges

   $ 238    $ 177    $ 278
                    

Total assets

   $ 238    $ 177    $ 278
                    

Long-term debt

     238      —        —  

Deferred income taxes and other

     —        —        58
                    

Total liabilities

   $ 238    $ —      $ 58
                    

During the first nine months of fiscal 2010, we reclassified $215 million from accumulated other comprehensive (loss) income to earnings to offset currency translation losses on the re-measurement of foreign denominated debt.

7 Segments
7 Segments

7 Segments

The Company is engaged in the operations of retail stores located in all 50 states of the United States, our wholly-owned subsidiaries in Argentina, Brazil, Canada, Japan, Puerto Rico and the United Kingdom, our majority-owned subsidiaries in Central America, Chile and Mexico and our joint ventures in China and India and our other controlled subsidiaries in China. The Company defines our segments as those business units whose operating results our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources.

The Walmart U.S. segment includes the Company’s mass merchant concept in the United States operating under the “Walmart” or “Wal-Mart” brand, as well as walmart.com. The Sam’s Club segment includes the warehouse membership clubs in the United States, as well as samsclub.com. The International segment consists of the Company’s operations outside of the 50 United States. The amounts under the caption “Other” in the table below relating to operating income are unallocated corporate overhead items.

The Company measures the results of its segments using each segment’s operating income which includes certain corporate overhead allocations. From time to time, we revise the measurement of each segment’s operating income, including any corporate overhead allocations, as dictated by the information regularly reviewed by our CODM. When we do so, the segment operating income for each segment affected by the revisions is restated for all periods presented to maintain comparability.

Net sales by operating segment were as follows:

 

     Three Months Ended
October 31,
   Nine Months Ended
October 31,
(Amounts in millions)    2009    2008    2009    2008

Net Sales:

           

Walmart U.S.

   $ 61,807    $ 61,075    $ 187,260    $ 184,055

International

     25,307      24,905      70,535      74,089

Sam’s Club

     11,553      11,639      34,425      35,063
                           

Total Company

   $ 98,667    $ 97,619    $ 292,220    $ 293,207
                           

Operating income by segment was as follows:

 

     Three Months Ended
October 31,
    Nine Months Ended
October 31,
 
(Amounts in millions)    2009     2008     2009     2008  

Operating Income:

        

Walmart U.S.

   $ 4,525      $ 4,232      $ 13,890      $ 13,219   

International

     1,119        1,182        3,142        3,450   

Sam’s Club

     395        374        1,207        1,208   

Other

     (446     (496     (1,547     (1,456
                                

Operating income

   $ 5,593      $ 5,292      $ 16,692      $ 16,421   

Interest expense, net

     (475     (456     (1,415     (1,408
                                

Income from continuing operations before income taxes

   $ 5,118      $ 4,836      $ 15,277      $ 15,013   
                                

Goodwill is recorded on the Condensed Consolidated Balance Sheets for the operating segments as follows:

 

(Amounts in millions)    October 31,
2009
   October 31,
2008
   January 31,
2009

International

   $ 15,857    $ 15,111    $ 14,955

Sam’s Club

     305      305      305
                    

Total goodwill

   $ 16,162    $ 15,416    $ 15,260
                    

The increase in the International segment’s goodwill since October 31, 2008, primarily resulted from currency exchange rate fluctuations and the acquisition of Distribución y Servicio D&S S.A. (“D&S”) in January 2009. The increase in the International segment’s goodwill since January 31, 2009 primarily resulted from currency exchange rate fluctuations.

8 Equity and Comprehensive Income
8 Equity and Comprehensive Income

8 Equity and Comprehensive Income

The following is a summary of the changes in total equity:

 

     2009     2008  
     Walmart
shareholders’
equity
    Noncontrolling
interest
    Total
equity
    Walmart
shareholders’
equity
    Noncontrolling
interest
    Total
equity
 
(Amounts in millions)                                     

Balances—January 31,

   $ 65,285      $ 1,794      $ 67,079      $ 64,608      $ 1,929      $ 66,537   

Net income

     9,703        320 (1)      10,023        9,608        365        9,973   

Components of other comprehensive income, net of tax

            

Foreign currency translation

     2,198        8        2,206        (2,353     22        (2,331

Other unrealized losses

     (61     —          (61     —          —          —     

Cash dividends

     (4,200     —          (4,200     (3,801     —          (3,801

Purchase of Company stock

     (5,241     —          (5,241     (3,416     —          (3,416

Purchase of redeemable noncontrolling interest

     (288     —          (288     —          —          —     

Other equity transactions

     292        (168     124        893        (282     611   
                                                

Balances—October 31,

   $ 67,688      $ 1,954      $ 69,642      $ 65,539      $ 2,034      $ 67,573   
                                                

 

(1) Excludes $18 million for the first nine months of fiscal 2010 that is related to the redeemable noncontrolling interest.

The components of comprehensive income (loss) for the three and nine months ended October 31, 2009 and 2008 were as follows:

 

     Three Months Ended
October 31,
    Nine Months Ended
October 31,
 
(Amounts in millions)    2009     2008     2009     2008  

Consolidated net income

   $ 3,353  (1)    $ 3,251      $ 10,041  (1)    $ 9,973   

Other comprehensive income, net of tax

        

Foreign currency translation

     (336 ) (2)      (3,302     2,260 (2)      (2,331

Other unrealized income (losses)

     56        —          (61     —     
                                

Comprehensive income (loss)

   $ 3,073      $ (51   $ 12,240      $ 7,642   

Less comprehensive income attributable to the noncontrolling interest

     (67 ) (3)      (224     (400 ) (3)      (387
                                

Comprehensive income (loss) attributable to Walmart

   $ 3,006      $ (275   $ 11,840      $ 7,255   
                                

 

(1) Includes $10 million for the third quarter of fiscal 2010 and $18 million for the first nine months of fiscal 2010 that is related to the redeemable noncontrolling interest.
(2) Includes ($20) million for the third quarter of fiscal 2010 and $54 million for the first nine months of fiscal 2010 that is related to the redeemable noncontrolling interest.
(3) Includes $10 million for the third quarter of fiscal 2010 and ($72) million for the first nine months of fiscal 2010 that is related to the redeemable noncontrolling interest.

 

Accumulated other comprehensive (loss) income is composed of the following:

 

(Amounts in millions)    October 31,
2009
    October 31,
2008
    January 31,
2009
 

Foreign currency translation

   $ (198   $ 1,750      $ (2,396

Other unrealized losses

     (78     (10     (17

Minimum pension liability

     (275     (229     (275
                        

Total accumulated comprehensive (loss) income

   $ (551   $ 1,511      $ (2,688
                        
9 Common Stock Dividends
9 Common Stock Dividends

9 Common Stock Dividends

On March 5, 2009, the Company’s Board of Directors approved an increase in the annual dividend for fiscal 2010 to $1.09 per share, an increase of 15% over the dividends paid in fiscal 2009. The annual dividend is payable in four quarterly installments on April 6, 2009, June 1, 2009, September 8, 2009, and January 4, 2010 to holders of record on March 13, May 15, August 14 and December 11, 2009, respectively. The dividend installments payable on April 6, 2009 and June 1, 2009 and September 8, 2009 were paid as scheduled.

10 Income and Other Taxes
10 Income and Other Taxes

10 Income and Other Taxes

The Company’s effective tax rate was 34.3% for the three months ended October 31, 2009, compared to 34.9% for the three months ended October 31, 2008. The Company expects the fiscal 2010 annual effective tax rate to be approximately 34-35%. Significant factors that will impact the annual effective tax rate include completion of certain discrete tax matters, changes in management’s assessment of certain tax matters and the mix of domestic and international income.

In determining the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate based on forecasted annual income and permanent items, statutory tax rates and tax planning opportunities in the various jurisdictions in which the Company operates. The impact of significant discrete items is separately recognized in the quarter in which they occur.

In the normal course of its business, the Company provides for uncertain tax positions, and the related interest and penalties, and adjusts its unrecognized tax benefits, accrued interest and penalties accordingly. During the third quarter of fiscal 2010, unrecognized tax benefits related to continuing operations and accrued interest increased by $29 million and $15 million, respectively. For the first nine months of fiscal 2010, unrecognized tax benefits related to continuing operations decreased by $53 million and accrued interest and penalties increased by $34 million and $10 million, respectively. As of October 31, 2009 the Company’s unrecognized tax benefits relating to continuing operations were $964 million, of which $558 million would, if recognized, affect the Company’s effective tax rate.

During the next twelve months, it is reasonably possible that tax audit resolutions could reduce unrecognized tax benefits by $310 million to $430 million, either because our tax positions are sustained on audit or because the Company agrees to their disallowance. The Company does not expect any such audit resolutions to cause a significant change in its effective tax rate.

Additionally, at January 31, 2008 the Company had unrecognized tax benefits of up to $1.8 billion which, if recognized, would be recorded as discontinued operations. Of this, $63 million was recognized in discontinued operations during the second quarter of fiscal year 2009 following the resolution of a gain determination on a discontinued operation that was sold in fiscal year 2004. The balance of $1.7 billion at October 31, 2009 relates to a worthless stock deduction which the Company has claimed for the Company’s fiscal year 2007 disposition of its German operations. The Company believes it is reasonably possible this matter will be resolved within the next twelve months.

The Company classifies interest on uncertain tax benefits as interest expense and income tax penalties as operating, selling, general and administrative costs. At October 31, 2009, before any tax benefits, the Company had $306 million of accrued interest and penalties on unrecognized tax benefits.

The Company is subject to income tax examinations for its U.S. federal income taxes generally for the fiscal year 2009, with fiscal years 2004 through 2008 remaining open for a limited number of U.S. income tax issues. Non-U.S. income taxes are subject to income tax examination for the tax years 2002 through 2009, and state and local income taxes are open for the fiscal years 2004 through 2009 generally and for the fiscal years 1997 through 2003 for a limited number of issues.

Additionally, the Company is subject to tax examinations for payroll, value added, sales-based and other taxes. A number of these examinations are ongoing and, in certain cases, have resulted in assessments from the taxing authorities. Where appropriate, the

 

Company has made accruals for these matters which are reflected in the Company’s Condensed Consolidated Financial Statements. While these matters are individually immaterial, a group of related matters, if decided adversely to the Company, may result in liability material to the Company’s financial condition or results of operations.

12 Adoption of New Accounting Standards
12 Adoption of New Accounting Standards

12 Adoption of New Accounting Standards

The Company must, at times, adopt new accounting policies or adjust existing accounting policies to comply with new accounting standards promulgated by the Financial Accounting Standards Board (“FASB”) or the SEC. The following subcaptions provide a discussion of the Company’s adoption of new accounting policies as required by new accounting standards that became effective February 1, 2009 or will become effective in future periods.

Accounting for Acquisitions

The Company accounts for all consolidated acquisitions and business combinations using the purchase method of accounting. As a result of new accounting standards effective February 1, 2009, the Company changed some of its accounting for business combinations on February 1, 2009. Therefore, certain policies differ when accounting for these acquisitions occurring before and after February 1, 2009, as discussed below.

Prior to February 1, 2009, the Company applied the following policies in accounting for business combinations:

 

   

acquisition costs were included as part of the business combinations;

 

   

only the Company’s proportionate share in the fair value of assets and liabilities acquired in a partial acquisition (less than 100% control was acquired) was recorded as part of the purchase price;

 

   

goodwill was only recorded to the extent of the Company’s proportionate share in a less than 100% acquired entity;

 

   

contingent consideration, if any, is recorded as additional purchase price when settled;

 

   

any adjustments to income tax valuation allowances or uncertain tax positions are recognized as adjustments to the accounting for the business combination; and

 

   

contingent liabilities acquired are recorded at acquisition if probable and reasonably estimable.

Subsequent to February 1, 2009, the Company will apply the following policies in accounting for business combinations, when applicable:

 

   

costs related to an acquisition are expensed as incurred;

 

   

regardless of the level of ownership acquired, the Company records the full fair value of assets and liabilities acquired as part of the purchase price;

 

   

goodwill includes any noncontrolling interest portion and is recorded as the excess of the cost of the acquisition over the total fair value of the assets and liabilities acquired and any noncontrolling interest;

 

   

contingent consideration, if any, is recorded at fair value as part of initial purchase price;

 

   

any adjustments to income tax valuation allowances or uncertain tax positions after the acquisition date are generally recognized as income tax expense; and

 

   

contingent liabilities acquired are recorded at fair value. If fair value is not determinable, a reasonably estimable amount is recorded, provided the incurrence of the liability is probable.

No acquisitions have occurred subsequent to February 1, 2009. However, if any adjustments to income tax valuation allowances and uncertain tax positions that relate to acquisitions prior to February 1, 2009 occur within a one year period from the acquisition date due to revised facts and circumstances at the acquisition date, then the adjustment will be recorded to goodwill. Adjustments outside the one year measurement period are typically recorded to the provision for income taxes.

Noncontrolling Interests

Effective February 1, 2009, the Company generally reports noncontrolling interests in subsidiaries in the equity section of the Company’s balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and equity. Consolidated net income is also reduced by the amount attributable to the noncontrolling interest to arrive at income “attributable to Walmart.” Accordingly, the changes have been retroactively applied in the Company’s condensed consolidated financial statements. Furthermore, when the Company acquires some or all of the noncontrolling interest, the transaction is accounted for as an equity transaction and any amount paid in excess of the noncontrolling interest’s cost basis acquired is recorded to additional paid in capital.

All noncontrolling interests where the Company may be required to repurchase a portion of the noncontrolling interest under a put option or other contractual redemption requirement are presented in the mezzanine section of the balance sheet between liabilities and equity, as redeemable noncontrolling interest.

 

In March 2009, the Company paid $436 million to acquire a portion of the redeemable noncontrolling interest in D&S through a second tender offer as required by the Chilean securities laws increasing its ownership stake in D&S to 74.6%. This transaction resulted in a $148 million acquisition of that portion of the redeemable noncontrolling interest and the remaining $288 million is reflected as a reduction of Walmart shareholders’ equity. Additionally, the former D&S controlling shareholders still hold a put option that is exercisable beginning in January 2011 through January 2016. During the exercise period, the put option allows each former controlling shareholder the right to require the Company to purchase up to all of their shares of D&S (approximately 25.1%) owned at fair market value at the time of an exercise, if any.

Future Accounting Policy Adoptions

A new accounting standard, effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period, changes the approach to determining the primary beneficiary of a variable interest entity (“VIE”) and requires companies to more frequently assess whether they must consolidate VIEs. The Company will adopt this new standard on February 1, 2010 and is currently assessing the potential impacts, if any, on its financial statements and disclosures.

13 Discontinued Operations
13 Discontinued Operations

13 Discontinued Operations

During fiscal 2009, the Company disposed of Gazeley Limited (“Gazeley”), an ASDA commercial property development subsidiary in the United Kingdom. Consequently, the results of operations associated with Gazeley are presented as discontinued operations in our Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets for all periods presented. The cash flows related to this operation were insignificant for all periods presented. In the third quarter of fiscal 2009, the Company recognized approximately $212 million, after tax, in operating profits and gains from the sale of Gazeley. The transaction continues to remain subject to certain indemnification obligations. The Company’s operations in the United Kingdom are consolidated using a December 31 fiscal year-end. Since the sale of Gazeley closed in July 2008, the Company recorded the gain to discontinued operations in the third quarter of fiscal 2009.

During the third quarter of fiscal 2009, the Company initiated a restructuring program under which the Company’s Japanese subsidiary, The Seiyu Ltd., has closed or will close approximately 23 stores and dispose of certain excess properties. This restructuring involves incurring costs associated with lease termination obligations, asset impairment charges and employee separation benefits. The costs associated with this restructuring are presented as discontinued operations in our Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets for all periods presented. In the third quarter of fiscal 2009, the Company recognized approximately $107 million, after tax, in restructuring expenses and operating results as discontinued operations. The cash flows and accrued liabilities related to this restructuring were insignificant for all periods presented. The Company recognized approximately $7 million and $22 million, after tax, in operating losses as discontinued operations for the three and nine months ended October 31, 2009, respectively. Additional costs will be recorded in future periods for lease termination obligations and employee separation benefits and are not expected to be material.

14 Subsequent Events
14 Subsequent Events

14 Subsequent Events

A subsequent event is a significant event or transaction occurring between the balance sheet date and the issue date of the financial statements that could make the financial statements misleading if not recognized or disclosed. Recognized subsequent events consist of those events that provide additional evidence with respect to conditions that existed at the date of the balance sheet and affect the estimates of amounts already recorded in financial statements. If required, the Company adjusts the financial statements for recognized subsequent events. Unrecognized subsequent events consist of those events that provide evidence with respect to conditions that did not exist at the balance sheet date being reported on, but arose subsequent to that date. These events should not result in an adjustment to the financial statements, but are disclosed if material. As of December 7, 2009, the date of issuance of the financial statements, we identified the following subsequent event for disclosure in the financial statements:

On December 6, 2009, the Company’s majority-owned subsidiary in Mexico, Wal-Mart de Mexico (“Walmex”), announced it has entered into an agreement to acquire 100 percent of the Company’s majority-owned subsidiary in Central America from the Company and the minority shareholders of that subsidiary. The effect of this transaction on the consolidated Company will be a purchase of the outstanding noncontrolling interest of our Central American business, with the Company’s ownership of Walmex declining slightly. Currently, the Company owns 68% of Walmex and 51% of the Central American business. The transaction is expected to close in the first quarter of fiscal 2010, subject to customary transaction closing conditions.

Document Information
9 Months Ended
Oct. 31, 2009
Document Information [Text Block]
 
Document Type
10-Q 
Amendment Flag
FALSE 
Document Period End Date
10/31/2009 
Entity Information
Dec. 3, 2009
9 Months Ended
Oct. 31, 2009
Entity [Text Block]
 
 
Trading Symbol
 
WMT 
Entity Registrant Name
 
WAL MART STORES INC 
Entity Central Index Key
 
0000104169 
Current Fiscal Year End Date
 
01/31 
Entity Filer Category
 
Large Accelerated Filer 
Entity Common Stock, Shares Outstanding
3,810,171,967