Walmart 2009 Annual Report Download - page 28

26 Wal-Mart 2009 Annual Report
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Future Expansion
We expect to make capital expenditures of approximately $12.5 billion
to $13.5 billion in  scal 2010. We plan to  nance this expansion and
any acquisitions of other operations that we may make during  scal
2010 primarily out of cash  ows from operations.
Fiscal 2010 capital expenditures will include the addition of the
following new, relocated and expanded units:
Fiscal Year 2010
Projected Unit Growth
Supercenters 125–140
Neighborhood Markets 25
Total Walmart U.S. 150–165
Sam’s Club Segment 15–20
Total United States 165–185
Total International 550–600
Grand total 715–785
The following represents an allocation of our capital expenditures:
Allocation of Capital Expenditures
Projections Actual
Fiscal Year Fiscal Year Fiscal Year
Capital Expenditures 2010 2009 2008
New stores, including
expansions & relocations 31.1% 33.3% 48.1%
Remodels 14.1% 10.2% 5.7%
Information systems,
distribution and other 22.6% 20.3% 15.8%
Total United States 67.8% 63.8% 69.6%
International 32.2% 36.2% 30.4%
Total capital expenditures 100.0% 100.0% 100.0%
Market Risk
In addition to the risks inherent in our operations, we are exposed to
certain market risks, including changes in interest rates and changes
in foreign currency exchange rates.
The analysis presented for each of our market risk sensitive instruments
is based on a 10% change in interest or foreign currency exchange
rates. These changes are hypothetical scenarios used to calibrate
potential risk and do not represent our view of future market changes.
As the hypothetical  gures discussed below indicate, changes in fair
value based on the assumed change in rates generally cannot be
extrapolated because the relationship of the change in assumption
to the change in fair value may not be linear. The e ect of a variation
in a particular assumption is calculated without changing any other
assumption. In reality, changes in one factor may result in changes
in another, which may magnify or counteract the sensitivities.
At January 31, 2009 and 2008, we had $37.2 billion and $35.7 billion,
respectively, of long-term debt outstanding. Our weighted average
e ective interest rate on long-term debt, after considering the e ect
of interest rate swaps, was 4.4% and 4.8% at January 31, 2009 and 2008,
respectively. A hypothetical 10% increase in interest rates in e ect
at January 31, 2009 and 2008, would have increased annual interest
expense on borrowings outstanding at those dates by $16 million
and $25 million, respectively.
At January 31, 2009 and 2008, we had $1.5 billion and $5.0 billion of
outstanding commercial paper obligations. The weighted average
interest rate, including fees, on these obligations at January 31, 2009
and 2008, was 0.9% and 4.0%, respectively. A hypothetical 10%
increase in commercial paper rates in e ect at January 31, 2009 and
2008, would have increased annual interest expense on the out-
standing balances on those dates by $1 million and $20 million,
respectively.
We enter into interest rate swaps to minimize the risks and costs
associated with  nancing activities, as well as to maintain an appropri-
ate mix of  xed and  oating-rate debt. Our preference is to maintain
between 40% and 50% of our debt portfolio, including interest rate
swaps, in  oating-rate debt. The swap agreements are contracts to
exchange  xed- or variable-rates for variable- or  xed-interest rate
payments periodically over the life of the instruments. The aggregate
fair value of these swaps represented a gain of $304 million at January 31,
2009 and a gain of $265 million at January 31, 2008. A hypothetical
increase or decrease of 10% in interest rates from the level in e ect
at January 31, 2009, would have resulted in a loss or gain in value of
the swaps of $17 million. A hypothetical increase (or decrease) of 10%
in interest rates from the level in e ect at January 31, 2008, would
have resulted in a (loss) or gain in value of the swaps of ($45 million)
or $46 million, respectively.
We hold currency swaps to hedge the foreign currency exchange
component of our net investments in the United Kingdom. The
aggregate fair value of these swaps at January 31, 2009 and 2008
represented a gain of $526 million and a loss of $75 million, respec-
tively. A hypothetical 10% increase or decrease in the foreign currency
exchange rates underlying these swaps from the market rate would
have resulted in a loss or gain in the value of the swaps of $150 million
at January 31, 2009. A hypothetical 10% increase or decrease in the
foreign currency exchange rates underlying these swaps from the
market rate would have resulted in a loss or gain in the value of the
swaps of $182 million at January 31, 2008. A hypothetical 10% change
in interest rates underlying these swaps from the market rates in e ect
at January 31, 2009 and 2008, would have an insigni cant impact on
the value of the swaps.
In addition to currency swaps, we have designated debt of approxi-
mately £3.0 billion as of January 31, 2009 and 2008, as a hedge of our
net investment in the United Kingdom. At January 31, 2009, a hypo-
thetical 10% increase or decrease in value of the U.S. dollar relative
to the British pound would have resulted in a gain or loss in the value
of the debt of $440 million. At January 31, 2008, a hypothetical 10%
increase or decrease in value of the U.S. dollar relative to the British
pound would have resulted in a gain or loss in the value of the debt
of $601 million. In addition, we have designated debt of approximately
¥437.4 and ¥142.1 billion as of January 31, 2009 and 2008, respectively,