Walmart 2008 Annual Report Download - page 23

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
WAL-MART 2008 ANNUAL REPORT 21
Purchase obligations include legally binding contracts such as rm
commitments for inventory and utility purchases, as well as commit-
ments to make capital expenditures, software acquisition/license
commitments and legally binding service contracts. Purchase orders
for the purchase of inventory and other services are not included in
the table above. Purchase orders represent authorizations to purchase
rather than binding agreements. For the purposes of this table, con-
tractual obligations for purchase of goods or services are dened as
agreements that are enforceable and legally binding and that specify
all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum or variable price provisions; and the
approximate timing of the transaction. Our purchase orders are
based on our current inventory needs and are fullled by our suppliers
within short time periods. We also enter into contracts for outsourced
services; however, the obligations under these contracts are not
signicant and the contracts generally contain clauses allowing for
cancellation without signicant penalty.
The expected timing for payment of the obligations discussed
above is estimated based on current information. Timing of payments
and actual amounts paid with respect to some unrecorded contrac-
tual commitments may be dierent depending on the timing of
receipt of goods or services or changes to agreed-upon amounts
for some obligations.
In addition to the amounts shown in the table above, $868 million
of unrecognized tax benefits have been recorded as liabilities in
accordance with Financial Accounting Standards Board Interpreta-
tion No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
the timing of which is uncertain except for $50 million to $200 million
that may become payable during the next twelve months. FIN 48,
which was adopted for scal year 2008, set out criteria for the use
of judgment in assessing the timing and amounts of deductible and
taxable items. Refer to Note 5 to the Consolidated Financial Statements
for additional discussion on unrecognized tax benets.
O Balance Sheet Arrangements
In addition to the unrecorded contractual obligations discussed and
presented above, the Company has made certain guarantees as dis-
cussed below for which the timing of payment, if any, is unknown.
In connection with certain debt nancing, we could be liable for early
termination payments if certain unlikely events were to occur. At
January 31, 2008, the aggregate termination payment would have
been $129 million. The two arrangements pursuant to which these
payments could be made expire in scal 2011 and scal 2019.
In connection with the development of our grocery distribution
network in the United States, we have agreements with third parties
which would require us to purchase or assume the leases on certain
unique equipment in the event the agreements are terminated.
These agreements, which can be terminated by either party at will,
cover up to a ve-year period and obligate the Company to pay up
to approximately $97 million upon termination of some or all of
these agreements.
The Company has potential future lease commitments for land and
buildings for 165 future locations. These lease commitments have
lease terms ranging from 2 to 39 years and provide for certain mini-
mum rentals. If executed, payments under operating leases would
increase by $67 million for scal 2009, based on current cost estimates.
Contractual Obligations and Other Commercial Commitments
The following table sets forth certain information concerning our obligations and commitments to make contractual future payments, such
as debt and lease agreements, and contingent commitments:
Payments Due During Fiscal Years Ending January 31,
(In millions) Total 2009 2010–2011 2012–2013 Thereafter
Recorded contractual obligations:
Long-term debt $ 35,712 $ 5,913 $ 7,788 $ 3,172 $18,839
Commercial paper 5,040 5,040 — — —
Capital lease obligations 5,997 595 1,137 1,022 3,243
Unrecorded contractual obligations:
Non-cancelable operating leases 13,759 1,094 2,045 1,654 8,966
Interest on long-term debt 25,009 1,810 2,909 2,277 18,013
Undrawn lines of credit 8,500 4,000 — 4,500 —
Trade letters of credit 2,720 2,720 — — —
Standby letters of credit 2,156 2,156 — — —
Purchase obligations 6,748 5,906 616 119 107
Total commercial commitments $105,641 $29,234 $14,495 $12,744 $49,168