Walmart 2013 Annual Report Download - page 32

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
30 || Walmart 2013 Annual Report
Goodwill and other inde 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. Generally, this evaluation begins with a qualitative
assessment to determine whether a quantitative impairment test is
necessary. If we determine, after performing an assessment based on
the qualitative factors, that the fair value of the reporting unit is more
likely than not less than the carrying amount, or that a fair value of the
reporting unit substantially in excess of the carrying amount cannot be
assured, then a quantitative impairment test would be required. The
quantitative test for impairment requires management to make judgments
relating to future cash  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  ow or a relative, market-based approach. Historically, we have
generated su cient returns within the applicable reporting units to
recover the cost of goodwill and other inde nite-lived acquired intangible
assets. Because of the nature of the factors used in these tests, if di erent
conditions occur in future periods, future operating results could be
materially impacted.
Income Taxes
Income taxes have a signi cant e ect on our net earnings. As a global
commercial enterprise, our tax rates are a ected by many factors, includ-
ing our global mix of earnings, the extent to which those global earnings
are inde nitely reinvested outside the United States, legislation, acquisi-
tions, dispositions and tax characteristics of our income. Our tax returns
are routinely audited and settlements of issues raised in these audits
sometimes a ect our tax provisions. Accordingly, the determination of
our provision for income taxes requires signi cant judgment, the use of
estimates, and the interpretation and application of complex tax laws.
Signi cant judgment is required in assessing the timing and amounts of
deductible and taxable items and the probability of sustaining uncertain
tax positions. The bene ts of uncertain tax positions are recorded in
our  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  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  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 statements in Management’s Discussion and Analysis of Financial
Condition and Results of Operations: under the caption “Overview” with
respect to the volatility of currency exchange rates possibly a ecting
the results, including net sales and operating income, of Walmart and
its Walmart International segment in the future; under the captions
“Company Performance Metrics” and “Company Performance Metrics –
Leverage – Operating Income” with respect to Walmart’s objectives of
growing net sales at a faster rate than operating expenses and growing
operating income at a faster rate than net sales; under the caption
“Results of Operations – Consolidated Results of Operations” with respect
to our goal of reducing our operating expenses as a percentage of sales
by at least 100 basis points over a  ve-year period, regarding the possible
 uctuation of our e ective tax rate over future periods and with respect
to management’s expectation that our diluted earnings per share from
continuing operations attributable to Walmart for the  scal year ending
January 31, 2014 will be within the range of $5.20 and $5.40 per share,
and the earnings per share will include incremental expenses of approxi-
mately $0.09 per share for Walmart’s e-commerce business; under the
caption “Results of Operations – Sam’s Club Segment” with respect to the
volatility of fuel prices possibly continuing to a ect the operating results
of Walmart’s Sam’s Club segment in the future; under the caption
“Liquidity and Capital Resources – Cash Flows Provided by Operating
Activities – Cash Equivalents and Working Capital,” as well as in Note 1 to
our 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 Used in Investing Activities – Global Expansion Activities” with respect
to Walmart’s  scal 2014 global expansion plans including growing our
retail square feet and expanding our e-commerce capabilities and our
plans to  nance that expansion primarily through cash  ows and future
debt  nancings, with respect to Walmart’s estimated range of capital
expenditures (including e-commerce capital expenditures) in  scal 2014
for the Walmart U.S. segment, the Walmart International segment, the
Sam’s Club segment, in the “other unallocated” category and in total,
with respect to the estimated/projected growth in retail square feet in
total and by reportable segment in  scal 2014; under the caption
“Liquidity and Capital Resources – Cash Flows Used in Financing Activities –
Dividends,” as well as in Note 15 to our Consolidated Financial Statements
and elsewhere in this Annual Report under the caption “Dividends
payable per share,” regarding the payment of the dividend on our shares
of common stock in  scal 2014, the expected payment of certain
installments of the dividend on our shares of common stock on certain
dates in  scal 2014 and the expected total amount of the dividend per
share to be paid in  scal 2014; under the caption “Liquidity and Capital
Resources – Capital Resources” with respect to Walmart’s ability to  nance
seasonal build-ups in inventories and to meet other cash requirements
with cash  ows from operations and short-term borrowings, Walmart’s
anticipated funding of any shortfall in cash to pay dividends and to fund
capital expenditures with short-term borrowings and long-term debt,
Walmart’s plan to re nance existing long-term debt as it matures and its
anticipation that it may obtain additional long-term  nancing for other
corporate purposes, Walmart’s ability to obtain  nancing from the
commercial paper and long-term debt markets, the factors that in uence
Walmart’s ability to access those markets on favorable terms and the factors
that could adversely a ect Walmart’s ability to access those markets on
favorable terms; and under the caption “Liquidity and Capital Resources –
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 to
our Consolidated Financial Statements regarding the weighted-average
periods over which certain compensation cost is expected to be recog-
nized; Note 9 to our 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 bene ts, and the
reasons for such reductions, the magnitude of their impact on our results