Walmart 2014 Annual Report Download - page 31

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Transactions with Noncontrolling Interest Holders
As discussed in Note 13 to our Consolidated Financial Statements, we
have completed or anticipate completing the following transactions
with noncontrolling interest shareholders that have impacted our cash
ows from nancing activities or that will impact our cash ows from
nancing activities in the future:
India Operations
During scal 2014, the Company acquired, for $100 million, the
remaining ownership interest in Bharti Walmart Private Limited,
previously a joint venture between Bharti Ventures Limited (“Bharti”)
and the Company established in 2007, which operated the Company’s
wholesale cash & carry business in India. Upon completion of the
transaction, the Company became the sole owner of the cash &
carry business in India. In addition, the Company also terminated
its joint venture, franchise and supply agreements with Bharti Retail
Limited (“Bharti Retail”), which operates Bharti’s retail business in
India, and transferred its investment in that business to Bharti. In
connection with the agreements related to the Bharti retail business,
the Company paid and forgave indebtedness of approximately
$234 million. The amounts paid to complete these transactions are
included in the other investing and other nancing categories in the
Company’s Consolidated Statements of Cash Flows for scal 2014.
Walmart Chile
In September 2013, certain redeemable noncontrolling interest
shareholders exercised put options that required the Company to
purchase a portion of their shares in Walmart Chile at the mutually
agreed upon redemption value to be determined after exercise of
the put options. In scal 2014, the Company recorded an increase to
redeemable noncontrolling interest of $1.0 billion, with a correspond-
ing decrease to capital in excess of par value, to reect the estimated
redemption value of the redeemable noncontrolling interest at
$1.5 billion. Subsequent to the initial exercise, the Company negotiated
with the redeemable noncontrolling interest shareholders to acquire
all of their redeemable noncontrolling interest shares. The Company
completed this transaction in February 2014, after period end, using
its existing cash and bringing its ownership interest in Walmart Chile
to approximately 99.7 percent. The Company has since initiated a
tender oer for the remaining 0.3 percent noncontrolling interest
held by the public in Chile at the same value per share as was paid
to the redeemable noncontrolling interest shareholders. The tender
oer will expire in the rst quarter of scal 2015.
Capital Resources
We believe cash ows from continuing operations, our current cash
position and access to debt and capital markets will continue to be
sucient to meet our anticipated operating cash needs, including
seasonal buildups in merchandise inventories, and complete our capital
expenditures, dividend payments and share repurchases.
We have strong commercial and long-term debt ratings that have
enabled and should continue to enable us to renance our debt as it
becomes due at favorable rates in debt capital markets. At January 31,
2014, the ratings assigned to our commercial paper and rated series
of our outstanding long-term debt were as follows:
Rating agency Commercial paper Long-term debt
Standard & Poor’s A-1+ AA
Moody’s Investors Service P-1 Aa2
Fitch Ratings F1+ AA
Credit rating agencies review their ratings periodically and, therefore, the
credit ratings assigned to us by each agency may be subject to revision
at any time. Accordingly, we are not able to predict whether our current
credit ratings will remain consistent over time. Factors that could aect
our credit ratings include changes in our operating performance, the
general economic environment, conditions in the retail industry, our
nancial position, including our total debt and capitalization, and
changes in our business strategy. Any downgrade of our credit ratings
by a credit rating agency could increase our future borrowing costs or
impair our ability to access capital and credit markets on terms com-
mercially acceptable to us. In addition, any downgrade of our current
short-term credit ratings could impair our ability to access the commercial
paper markets with the same exibility that we have experienced
historically, potentially requiring us to rely more heavily on more expensive
types of debt nancing. The credit rating agency ratings are not
recommendations to buy, sell or hold our commercial paper or debt
securities. Each rating may be subject to revision or withdrawal at any
time by the assigning rating organization and should be evaluated
independently of any other rating. Moreover, each credit rating is specic
to the security to which it applies.
To monitor our credit rating and our capacity for long-term nancing,
we consider various qualitative and quantitative factors. We monitor the
ratio of our debt-to-total capitalization as support for our long-term
nancing decisions. At January 31, 2014 and 2013, the ratio of our debt-
to-total capitalization was 42.6% and 41.5%, respectively. For the purpose
of this calculation, debt is dened as the sum of short-term borrowings,
long-term debt due within one year, obligations under capital leases
due within one year, long-term debt and long-term obligations under
capital leases. Total capitalization is dened as debt plus total Walmart
shareholders’ equity. The increase in our debt-to-total capitalization
ratio was primarily driven by changes in working capital and higher
long-term debt balances.
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