Walmart 2012 Annual Report Download - page 30
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Please find page 30 of the 2012 Walmart annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’s Discussion and Analysis of Financial
Condition and Results of Operations
28 Walmart 2012 Annual Report
Interest Rate Risk
We are exposed to changes in interest rates as a result of our short-term borrowings and long-term debt issuances. We hedge a portion of our interest
rate risk by managing the mix of fi xed and variable rate debt and entering into interest rate swaps.
The table below provides information about our fi nancial instruments that are sensitive to changes in interest rates. For debt obligations, the
table represents the principal cash fl ows and related weighted-average interest rates by expected maturity dates. For interest rate swaps, the table
represents the contractual cash fl ows and weighted-average interest rates by the contractual maturity date. The notional amounts are used to
calculate contractual cash fl ows to be exchanged under the contracts. The weighted-average variable rates are based upon prevailing market rates
at January 31, 2012.
Expected Maturity Date
(Dollar amounts in millions) FY13 FY14 FY15 FY16 FY17 Thereafter Total
Liabilities
Short-term borrowings:
Variable rate $4,047 $ — $ — $ — $ — $ — $ 4,047
Average interest rate 0.1% — — — — — 0.1%
Long-term debt:
Fixed rate $1,475 $4,512 $3,706 $4,357 $1,130 $28,912 $44,092
Average interest rate 4.8% 3.9% 2.2% 2.3% 2.8% 5.3% 4.6%
Variable rate $ 500 $ 656 $ 221 $ 393 $ — $ — $ 1,770
Average interest rate 5.2% 0.8% 0.9% 0.6% — — 2.0%
Interest rate derivatives
Interest rate swaps:
Variable to fi xed $ — $ 656 $ 222 $ 392 $ — $ — $ 1,270
Average pay rate — 2.0% 1.5% 0.9% — — 1.6%
Average receive rate — 0.8% 0.9% 0.6% — — 0.8%
Fixed to variable $ 500 $2,445 $1,000 $ — $ — $ — $ 3,945
Average pay rate 3.1% 1.0% 0.4% — — — 1.1%
Average receive rate 5.0% 5.0% 3.1% — — — 4.5%
Purchase obligations include legally binding contracts such as fi 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 preceding table.
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 defined as agreements that are
enforceable and legally binding and that specify all signifi cant terms,
including: fi xed or minimum quantities to be purchased; fi 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
fulfi lled by our suppliers within short time periods. We also enter into
contracts for outsourced services; however, the obligations under these
contracts are not signifi cant and the contracts generally contain clauses
allowing for cancellation without signifi 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 diff 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, $611 million of
unrecognized tax benefi 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 in the “Notes to Consolidated Financial
Statements” for additional discussion on unrecognized tax benefi ts.
O Balance Sheet Arrangements
In addition to the unrecorded contractual obligations discussed and
presented above, we have made certain arrangements as discussed
below for which the timing of payment, if any, is unknown.
In connection with certain debt fi nancing, we could be liable for early
termination payments if certain unlikely events were to occur. At
January 31, 2012, the aggregate termination payment would have been
$122 million. The arrangement pursuant to which this payment could be
made will expire in fi scal 2019.
The Company has future lease commitments for land and buildings
for approximately 425 future locations. These lease commitments have
lease terms ranging from 4 to 50 years and provide for certain minimum
rentals. If executed, payments under operating leases would increase
by $92 million for fi scal 2013, 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 eff 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.