Walmart 2009 Annual Report Download - page 49

47Wal-Mart 2009 Annual Report
Petition. The court heard oral argument on the Petition on March 24,
2009. If the Company is not successful in its appeal of class certi cation,
or an appellate court issues a ruling that allows for the certi cation of
a class or classes with a di erent size or scope, and if there is a subse-
quent adverse verdict on the merits from which there is no successful
appeal, or in the event of a negotiated settlement of the litigation, the
resulting liability could be material to the Company’s  nancial condi-
tion or results of operations. The plainti s also seek punitive damages
which, if awarded, could result in the payment of additional amounts
material to the Company’s  nancial condition or results of operations.
However, because of the uncertainty of the outcome of the appeal
from the district court’s certi cation decision, because of the uncer-
tainty of the balance of the proceedings contemplated by the district
court, and because the Company’s liability, if any, arising from the
litigation, including the size of any damages award if plainti s are
successful in the litigation or any negotiated settlement, could vary
widely, the Company cannot reasonably estimate the possible loss
or range of loss that may arise from the litigation.
The Company is a defendant in a lawsuit that was  led by the Equal
Employment Opportunity Commission (“EEOC”) on August 24, 2001,
in the United States District Court for the Eastern District of Kentucky
on behalf of Janice Smith and all other females who made applica-
tion or transfer requests at the London, Kentucky, distribution center
from 1998 to the present, and who were not hired or transferred into
the warehouse positions for which they applied. The complaint alleges
that the Company based hiring decisions on gender in violation of
Title VII of the 1964 Civil Rights Act as amended. The EEOC can main-
tain this action as a class without certi cation. The EEOC seeks back
pay and front pay for those females not selected for hire or transfer
during the relevant time period, plus compensatory and punitive
damages and injunctive relief. The EEOC has asserted that the hiring
practices in question resulted in a shortfall of 245 positions. The claims
for compensatory and punitive damages are capped by statute at
$300,000 per shortfall position. The amounts of back pay and front
pay that are being sought have not been speci ed. The case has
been set for trial on March 1, 2010.
Hazardous Materials Investigations: On November 8, 2005, the
Company received a grand jury subpoena from the United States
Attorney’s O ce for the Central District of California, seeking docu-
ments and information relating to the Company’s receipt, transportation,
handling, identi cation, recycling, treatment, storage and disposal of
certain merchandise that constitutes hazardous materials or hazard-
ous waste. The Company has been informed by the U.S. Attorney’s
O ce for the Central District of California that it is a target of a criminal
investigation into potential violations of the Resource Conservation
and Recovery Act (“RCRA”), the Clean Water Act and the Hazardous
Materials Transportation Statute. This U.S. Attorney’s O ce contends,
among other things, that the use of Company trucks to transport
certain returned merchandise from the Company’s stores to its return
centers is prohibited by RCRA because those materials may be con-
sidered hazardous waste. The government alleges that, to comply
with RCRA, the Company must ship from the store certain materials
as “hazardous waste” directly to a certi ed disposal facility using a
certi ed hazardous waste carrier. The Company contends that the
practice of transporting returned merchandise to its return centers
for subsequent disposition, including disposal by certi ed facilities, is
compliant with applicable laws and regulations. While management
cannot predict the ultimate outcome of this matter, management
does not believe the outcome will have a material e ect on the
Company’s  nancial condition or results of operations.
Additionally, the U.S. Attorney’s O ce in the Northern District of
California has initiated its own investigation regarding the Company’s
handling of hazardous materials and hazardous waste and the
Company has received administrative document requests from the
California Department of Toxic Substances Control requesting docu-
ments and information with respect to two of the Company’s distri-
bution facilities. Further, the Company also received a subpoena from
the Los Angeles County District Attorney’s O ce for documents and
administrative interrogatories requesting information, among other
things, regarding the Company’s handling of materials and hazardous
waste. California state and local government authorities and the State
of Nevada have also initiated investigations into these matters. The
Company is cooperating fully with the respective authorities. While
management cannot predict the ultimate outcome of this matter,
management does not believe the outcome will have a material
e ect on the Company’s  nancial condition or results of operations.
9 Commitments
The Company and certain of its subsidiaries have long-term leases
for stores and equipment. Rentals (including amounts applicable to
taxes, insurance, maintenance, other operating expenses and con-
tingent rentals) under operating leases and other short-term rental
arrangements were $1.8 billion, $1.6 billion and $1.4 billion in 2009,
2008 and 2007, respectively. Aggregate minimum annual rentals at
January 31, 2009, under non-cancelable leases are as follows:
(Amounts in millions) Operating Capital
Fiscal Year Leases Leases
2010 $ 1,161 $ 569
2011 1,138 556
2012 997 527
2013 888 492
2014 816 460
Thereafter 7,830 2,914
Total minimum rentals $12,830 $5,518
Less estimated executory costs 47
Net minimum lease payments 5,471
Less imputed interest at rates
ranging from 3.0% to 13.6% 1,956
Present value of minimum lease payments $3,515
Certain of the Company’s leases provide for the payment of contingent
rentals based on a percentage of sales. Such contingent rentals
amounted to $21 million, $33 million and $41 million in 2009, 2008 and
2007, respectively. Substantially all of the Company’s store leases have
renewal options, some of which may trigger an escalation in rentals.
In connection with certain debt  nancing, we could be liable for early
termination payments if certain unlikely events were to occur. At Jan-
uary 31, 2009, the aggregate termination payment would have been
$153 million. The two arrangements pursuant to which these payments
could be made expire in  scal 2011 and  scal 2019.