Walmart 2012 Annual Report Download - page 32
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Please find page 32 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
30 Walmart 2012 Annual Report
Goodwill and other indefi nite-lived acquired intangible assets are not
amortized, but are evaluated for impairment annually or whenever events
or changes in circumstances indicate that the value of a certain asset may
be impaired. This evaluation begins with a qualitative assessment to determine
whether a quantitative goodwill impairment test is necessary. If we determine,
based on the qualitative factors, that the fair value of the reporting unit is
more likely than not less than the carrying amount, the quantitative goodwill
impairment test would be required. This quantitative test for impairment
requires management to make judgments relating to future cash fl ows,
growth rates, and economic and market conditions. These evaluations
are based on determining the fair value of a reporting unit or asset using
a valuation method such as discounted cash fl ow or a relative, market-
based approach. Historically, we have generated suffi cient returns within
the applicable reporting units to recover the cost of goodwill and other
indefi nite-lived acquired intangible assets. Because of the nature of the
factors used in these tests, if diff erent conditions occur in future periods,
future operating results could be materially impacted.
Income Taxes
Income taxes have a signifi cant eff ect on our net earnings. As a global
commercial enterprise, our tax rates are aff ected by many factors, including
our global mix of earnings, the extent to which those global earnings are
indefi nitely reinvested outside the United States, legislation, acquisitions,
dispositions and tax characteristics of our income. Our tax returns are
routinely audited and settlements of issues raised in these audits sometimes
aff ect our tax provisions. Accordingly, the determination of our provision
for income taxes requires signifi cant judgment, the use of estimates, and
the interpretation and application of complex tax laws. Signifi cant judgment
is required in assessing the timing and amounts of deductible and taxable
items and the probability of sustaining uncertain tax positions. The benefi ts
of uncertain tax positions are recorded in our fi nancial statements only
after determining a more-likely-than-not probability that the uncertain
tax positions will withstand challenge, if any, from taxing authorities. When
facts and circumstances change, we reassess these probabilities and record
any changes in the fi nancial statements as appropriate. We account for
uncertain tax positions by determining the minimum recognition threshold
that a tax position is required to meet before being recognized in the
fi nancial statements. This determination requires the use of judgment
in assessing the timing and amounts of deductible and taxable items.
Forward-Looking Statements
This Annual Report contains statements that Walmart believes are
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended. Those statements are intended
to enjoy the protection of the safe harbor for forward-looking statements
provided by that Act. Those forward-looking statements include state-
ments in Management’s Discussion and Analysis of Financial Condition
and Results of Operations: under the captions “Company Performance
Metrics – Growth – Net Sales” and “Results of Operations – Consolidated
Results of Operations” with respect to the volatility of currency exchange
rates possibly continuing to aff ect Walmart’s net sales in the future; under
the caption “Results of Operations – Consolidated Results of Operations”
with respect to the volatility of currency exchange rates possibly continuing
to aff ect Walmart’s operating income in the future and with respect
to Walmart’s fi scal 2013 annual eff ective tax rate and the factors that
may impact that annual eff ective tax rate; under the caption “Results of
Operations – Walmart International Segment” with respect to the volatility
of currency exchange rates possibly continuing to aff ect our Walmart
International segment’s operating results in the future; under the caption
“Results of Operations – Sam’s Club Segment” with respect to the volatility
of fuel prices possibly continuing to aff ect our Sam’s Club segment’s net
sales and operating income in the future; under the caption “Liquidity and
Capital Resources – Cash Equivalents and Working Capital, “ as well as in
Note 1 in the “Notes to Consolidated Financial Statements,” regarding our
ability to meet our liquidity needs through sources other than the cash we
hold outside of the United States, our intention to permanently reinvest
cash held outside of the United States, and our ability to repatriate cash
held outside of the United States; under the caption “Liquidity and Capital
Resources – Cash Flows from Investing Activities” with respect to Walmart’s
expected capital expenditures in fi scal 2013; under the caption “Liquidity
and Capital Resources – Cash Flows from Investing Activities – Global
Expansion Activities” with respect to Walmart’s expectation that it will
fi nance its fi scal 2013 global expansion plans primarily through cash fl ows
from operations and future debt fi nancings, with respect to Walmart’s
projected capital expenditures in fi scal 2013, with respect to the projected
growth in retail square feet in total and by operating segment in fi scal 2013,
and with respect to the projected allocation of capital expenditures for
property and equipment by category in fi scal 2013; under the caption
“Liquidity and Capital Resources – Cash Flows from Financing Activities –
Dividends,” as well as in Note 16 in the “Notes to Consolidated Financial
Statements” and under the caption “Walmart-Corporate and Stock
Information-Dividends payable per share,” with respect to the payment
of dividends in fi scal 2013, Walmart’s expected payment of dividends on
certain dates in fi scal 2013, and the expected total amount of dividends to
be paid in fi scal 2013; under the caption “Liquidity and Capital Resources –
Capital Resources” with respect to Walmart’s ability to fi nance seasonal
build-ups in inventories and to meet other cash requirements with cash
fl ows from operations and short-term borrowings, Walmart’s ability to
fund certain cash fl ow shortfalls by short-term borrowings and long-term
debt, Walmart’s plan to refi nance long-term debt as it matures, Walmart’s
anticipated funding of any shortfall in cash to pay dividends and make
capital expenditures through short-term borrowings and long-term debt,
Walmart’s plan to refi nance existing long-term debt as it matures, the
possibility that Walmart may obtain additional long-term fi nancing for
other corporate purposes, Walmart’s ability to obtain fi nancing from the
commercial paper and long-term debt markets, the factors that infl uence
Walmart’s ability to access those markets on favorable terms, and the factors
that could adversely aff ect Walmart’s ability to access those markets on
favorable terms; and under the caption “Off Balance Sheet Arrangements”
with respect to the amount of increases in payments under operating
leases if certain leases are executed.
These forward-looking statements also include statements in: Note 3 in
the “Notes to Consolidated Financial Statements” regarding the weighted-
average periods over which certain compensation cost is expected to be
recognized; Note 10 in the “Notes to Consolidated Financial Statements”
regarding the possible reduction of U.S. tax liability on accumulated but
undistributed earnings of our non-U.S. subsidiaries, the realization of certain
deferred tax assets, possible reduction of unrecognized tax benefi ts, and
the reasons for such reductions and the magnitude of their impact on our
results of operations and fi nancial condition; and the eff ect of the adverse
resolutions of certain other tax matters; Note 11 in the “Notes to Consolidated
Financial Statements” regarding an adverse decision in, or settlement of,
certain litigation or other legal proceedings to which Walmart is a party or
is subject possibly resulting in liability material to our fi nancial condition or
results of operations; and Note 14 in the “Notes to Consolidated Financial
Statements” with respect to Walmart’s expected completion of a certain
acquisition in the future after certain conditions are satisfi ed. The letter of