Walmart 2011 Annual Report Download - page 28

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
26 Walmart 2011 Annual Report
Interest Rate Risk
The table below provides information about the Company’s nancial instruments that are sensitive to changes in interest rates. For debt obligations,
the table represents the principal cash ows and related weighted-average interest rates by expected maturity dates. For interest rate swaps, the
table represents the contractual cash ows and weighted-average interest rates by the contractual maturity date. The notional amounts are used to
calculate contractual cash ows to be exchanged under the contracts. The weighted-average variable rates are based upon prevailing market rates
at January 31, 2011.
Expected Maturity Date
FY12 FY13 FY14 FY15 FY16 Thereafter Total
Liabilities
Short-term borrowings:
Variable rate $ 1,031 $ — $ — $ — $ — $ — $ 1,031
Average interest rate 0.2% — — — — — 0.2%
Long-term debt:
Fixed rate $ 3,095 $ 1,744 $ 4,295 $ 2,601 $ 4,273 $ 26,074 $ 42,082
Average interest rate 3.5% 4.8% 3.9% 2.5% 2.3% 5.3% 4.6%
Variable rate $ 1,560 $ — $ 818 $ 231 $ 389 $ — $ 2,998
Average interest rate 2.5% — 2.0% 1.5% 0.9% — 2.0%
Interest rate derivatives
Interest rate swaps:
Variable to xed $ — $ — $ (18) $ (3) $ 3 $ — $ (18)
Average pay rate — — 2.0% 1.5% 0.9% — 1.6%
Average receive rate — — 0.9% 1.1% 1.0% — 1.0%
Fixed to variable $ — $ 10 $ 205 $ 52 $ — $ — $ 267
Average pay rate — 3.3% 1.2% 1.4% — — 1.7%
Average receive rate — 4.6% 5.0% 3.1% — — 4.5%
Purchase obligations include legally binding contracts such as rm
commitments for inventory and utility purchases, as well as commitments
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, contractual obligations for
purchase of goods or services are dened as agreements that are
enforceable and legally binding and that specify all signicant terms,
including: xed or minimum quantities to be purchased; xed, 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 contractual 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, $795 million of
unrecognized tax benets are considered uncertain tax positions and
have been recorded as liabilities. The timing of the payment associated
with these liabilities is uncertain. Refer to Note 10 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 discussed
below for which the timing of payment, if any, is unknown.
In connection with certain debt nancing, the Company could be liable
for early termination payments if certain unlikely events were to occur.
At January 31, 2011, the aggregate termination payment would have
been $84 million. The arrangement pursuant to which this payment
could be made will expire in scal 2019.
The Company has future lease commitments for land and buildings for
approximately 424 future locations. These lease commitments have lease
terms ranging from 4 to 30 years and provide for certain minimum rentals.
If executed, payments under operating leases would increase by $109 million
for scal 2012, based on current cost estimates.
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
currency exchange rates.
The analysis presented below for each of our market risk sensitive
instruments is based on a hypothetical scenario used to calibrate
potential risk and does not represent our view of future market changes.
The eect of a change in a particular assumption is calculated without
adjusting any other assumption. In reality, however, a change in one
factor could cause a change in another, which may magnify or negate
other sensitivities.