Walmart 2013 Annual Report Download - page 27

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Walmart 2013 Annual Report || 25
Net sales for Sam’s Club increased 4.9% and 8.8% for  scal 2013 and 2012,
respectively, when compared to the previous  scal year. The net sales
increase in  scal 2013 was primarily due to positive comparable club sales,
driven by an increase in customer tra c and average ticket. The addition
of nine new clubs in  scal 2013 also helped increase net sales. The net
sales increase in  scal 2012 was primarily due to positive comparable
club sales, driven by an increase in customer tra c and average ticket
and higher fuel sales. Higher fuel sales, resulting from higher fuel prices
and increased gallons sold, positively impacted comparable sales by
340 basis points during  scal 2012.
Gross pro t rate was  at in  scal 2013 when compared to  scal 2012 and
was not impacted by fuel. In  scal 2012, gross pro t rate decreased 41 basis
points when compared to  scal 2011, driven by the highly competitive
retail environment, as well as in ation and high fuel costs. In  scal 2012,
fuel costs negatively impacted the comparison by 33 basis points.
Operating expenses, as a percentage of net sales, decreased 9 and
55 basis points for  scal 2013 and 2012, respectively, when compared to
the previous  scal year. The  scal 2013 decrease was due to improved
wage management, a bene t related to a prior year overpayment of
state excise taxes and the extent of club remodels. In  scal 2012, the
decrease was due to the impact of fuel, which positively impacted the
comparison by 31 basis points, and improved wage management.
Sam’s Club leveraged operating expenses during  scal 2013 and 2012.
As a result of the factors discussed above, as well as continued growth
in membership and other income, operating income was $2.0 billion,
$1.8 billion and $1.7 billion for  scal 2013, 2012 and 2011, respectively.
Sam’s Club grew operating income faster than sales in  scal 2013
and 2012.
Liquidity and Capital Resources
Liquidity
Cash  ows provided by operating activities have historically supplied
us with a significant source of liquidity. We use these cash flows,
supplemented with long-term debt and short-term borrowings, to
fund our operations and global expansion activities. Generally, some
or all of the remaining available cash  ow, if any, funds all or part of
the dividends on our common stock and share repurchases.
Fiscal Years Ended January 31,
(Amounts in millions) 2013 2012 2011
Net cash provided by
operating activities $ 25,591 $ 24,255 $ 23,643
Payments for property
and equipment (12,898) (13,510) (12,699)
Free cash  ow $ 12,693 $ 10,745 $ 10,944
Net cash used in
investing activities
(1)
$(12,611) $(16,609) $(12,193)
Net cash used in
 nancing activities $(11,972) $ (8,458) $(12,028)
(1) “Net cash used in investing activities” includes payments for property and
equipment, which is also included in our computation of free cash fl ow.
Cash Flows Provided by Operating Activities
Cash  ows provided by operating activities were $25.6 billion, $24.3 billion
and $23.6 billion for  scal 2013, 2012 and 2011, respectively. The increase
in cash  ows provided by operating activities in  scal 2013 and 2012,
when compared to the previous  scal year, is primarily due to higher
income from continuing operations.
Cash Equivalents and Working Capital
Cash and cash equivalents were $7.8 billion and $6.6 billion at January 31,
2013 and 2012, respectively. Our working capital de cits were $11.9 billion
and $7.3 billion at January 31, 2013 and 2012, respectively. The increase in
our working capital de cit is primarily attributable to the increase in our
long-term debt due within one year, as well as an increase in accrued
income taxes. We generally operate with a working capital de cit due
to our e cient use of cash in funding operations and in providing returns
to our shareholders in the form of stock repurchases and payments
of dividends.
We employ  nancing strategies in an e ort to ensure cash can be
made available in the country in which it is needed with the minimum
cost possible. We do not believe it will be necessary to repatriate cash
and cash equivalents held outside of the U.S. and anticipate our domestic
liquidity needs will be met through other funding sources (ongoing
cash  ows generated from operations, external borrowings, or both).
Accordingly, we intend, with only certain limited exceptions, to continue
to permanently reinvest the Company’s cash and cash equivalents held
outside of the U.S. in our foreign operations. If our intentions were to
change, most of the amounts held within our foreign operations could
be repatriated to the U.S., although any repatriations under current U.S.
tax laws would be subject to U.S. federal income taxes, less applicable
foreign tax credits. As of January 31, 2013 and January 31, 2012, cash and
cash equivalents of approximately $876 million and $768 million,
respectively, may not be freely transferable to the U.S. due to local laws
or other restrictions. We do not expect local laws, other limitations or
potential taxes on anticipated future repatriations of amounts held
outside of the U.S. to have a material e ect on our overall liquidity,
 nancial condition or results of operations.
Cash Flows Used in Investing Activities
Cash  ows used in investing activities generally consist of payments
for property and equipment, which were $12.9 billion, $13.5 billion and
$12.7 billion for  scal 2013, 2012 and 2011, respectively. These capital
expenditures primarily relate to new store growth, as well as remodeling
costs for existing stores. We are focused on lowering the average cost of
remodels in order to shift more capital to new stores, while lowering the
amount of overall capital expenditures. Cash  ows used in investing
activities also consist of payments for investments and business
acquisitions, net of cash acquired, which were of $0.3 billion, $3.5 billion
and $0.2 billion for  scal 2013, 2012 and 2011, respectively.