Walmart 2009 Annual Report Download - page 30

28 Wal-Mart 2009 Annual Report
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Self-Insurance
We use a combination of insurance, self-insured retention and self-
insurance for a number of risks, including, without limitation, workers’
compensation, general liability, vehicle liability, and the Company’s
obligation for employee-related health care bene ts. Liabilities
associated with the risks that we retain are estimated by considering
historical claims experience, including frequency, severity, demographic
factors and other actuarial assumptions. In calculating our liability, we
analyze our historical trends, including loss development, and apply
appropriate loss development factors to the incurred costs associated
with the claims made against our self-insured program. The estimated
accruals for these liabilities could be signi cantly a ected if future
occurrences or loss development di er from these assumptions.
For example, for our workers’ compensation and general liability, a
1% increase or decrease to the assumptions for claims costs or loss
development factors would increase or decrease our self-insurance
accrual by $25 million.
During the last few years, we have enhanced how we manage our
workers’ compensation and general liability claims. As a result, our
loss experience with respect to such claims has improved and the
actuarially determined ultimate loss estimates, primarily for claims
from  scal 2004 through 2007, were reduced during the quarter ended
July 31, 2007. The reductions in ultimate loss estimates resulted primar-
ily from improved claims handling experience, which impacts loss
development factors and other actuarial assumptions. Due to the
bene cial change in estimate of our ultimate losses, accrued liabilities
for general liability and workers’ compensation claims were reduced
by $196 million after tax, resulting in an increase in net income per
basic and diluted common share of $0.05 for the second quarter of
 s c a l y e a r 2 0 0 8 .
For a summary of our signi cant accounting policies, please see
Note 1 to our Consolidated Financial Statements that appear after
this discussion.
Forward-Looking Statements
This Annual Report contains statements that Wal-Mart believes are
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements are intended
to enjoy the protection of the safe harbor for forward-looking state-
ments provided by that Act. These forward-looking statements include
statements in Management’s Discussion and Analysis of Financial
Condition and Results of Operations: under the caption “Company
Performance Metrics—Comparable Store Sales” regarding the e ect of
the opening of new stores on comparable store sales and the decline
in that impact over time as new store growth is reduced and the trend
of Sam’s Club net sales decreasing as a percentage of total net sales
for the foreseeable future; under the caption “Results of Operations—
Consolidated Results of Operations” with the respect to increased
expenses from transformation projects to continue in the foresee-
able future; under the caption “Results of Operations—International
Segment” with respect to the possible impact of currency exchange
rate  uctuations on the International segment’s reported results;
under the caption “Liquidity and Capital Resources—Common Stock
Dividends” regarding the payment of dividends in  scal 2010; under
the caption “Liquidity and Capital Resources—O Balance Sheet
Arrangements” with respect to the amount of increases in payments
under operating leases if certain leases are executed; under the
caption “Liquidity and Capital Resources—Capital Resources” with
respect to our ability to  nance seasonal build-ups in inventories and
to meet other cash requirements with cash  ows from operations
and the sale of commercial paper, our ability to fund certain cash
 ow shortfalls by the sale of commercial paper and long-term debt
securities, our plan to re nance long-term debt as it matures, our
anticipated funding of any shortfall in cash to pay dividends and
make capital expenditures through the sale of commercial paper and
long-term debt securities, our plan to re nance existing long-term
debt as it matures, and our ability to sell our long-term securities; and
under the caption “Liquidity and Capital Resources—Future Expansion”
with respect to the our capital expenditures in  scal 2010, how we
will  nance expansion and any acquisitions made during  scal 2010,
the anticipated number of new stores and clubs to be opened in
the United States and internationally and the anticipated allocation
of capital expenditures in  scal 2010. These statements also include
statements in Note 2 to our Consolidated Financial Statements
regarding the effect of the adoption of Statement of Financial
Accounting Standards No. 157, in Note 5 to our Consolidated Financial
Statements regarding the realization of certain deferred tax assets,
possible tax treatment and e ect of the loss recorded in connection
with the disposition of our German operations in  scal year 2007, the
e ect of the resolution of certain tax audits, the possible timing and
e ect of certain tax payments, and the e ect of certain tax issues on
our consolidated  nancial condition or results of operations, in Note 8
to our Consolidated Financial Statements regarding the aggregate
amount of the payments to be made in connection with the settle-
ment of certain litigation and in Note 13 to our Consolidated Financial
Statements as to the expected lack of material impact on the Company’s
financial condition or results of operations from the adoption of
Statement of Financial Accounting Standards No. 141(R) and No. 160.