Walmart 2014 Annual Report Download - page 58

The Company could be exposed to a variety of negative consequences
as a result of the matters noted above. There could be one or more
enforcement actions in respect of the matters that are the subject of
some or all of the on-going government investigations, and such
actions, if brought, may result in judgments, settlements, nes, penalties,
injunctions, cease and desist orders, debarment or other relief, criminal
convictions and/or penalties. The shareholder lawsuits may result in
judgments against the Company and its current and former directors
and ocers named in those proceedings. The Company cannot predict
at this time the outcome or impact of the government investigations,
the shareholder lawsuits, or its own internal investigations and review. In
addition, the Company expects to incur costs in responding to requests
for information or subpoenas seeking documents, testimony and other
information in connection with the government investigations, in
defending the shareholder lawsuits, and in conducting the review and
investigations. These costs will be expensed as incurred. For scal 2014
and 2013, the Company incurred expenses of approximately $282 million
and $157 million, respectively, related to these matters. Of these expenses,
approximately $173 million and $100 million, respectively, represent costs
incurred for the ongoing inquiries and investigations and $109 million
and $57 million, respectively, relate to the Company’s global compliance
program and organizational enhancements. These matters may require
the involvement of certain members of the Company’s senior manage-
ment that could impinge on the time they have available to devote to
other matters relating to the business. The Company expects that there
will be on-going media and governmental interest, including additional
news articles from media publications on these matters, which could
impact the perception among certain audiences of the Company’s role
as a corporate citizen.
The Company’s process of assessing and responding to the governmental
investigations and the shareholder lawsuits continues. While the Company
believes that it is probable that it will incur a loss from these matters,
given the on-going nature and complexity of the review, inquiries and
investigations, the Company cannot reasonably estimate any loss or
range of loss that may arise from these matters. Although the Company
does not presently believe that these matters will have a material
adverse eect on its business, given the inherent uncertainties in such
situations, the Company can provide no assurance that these matters
will not be material to its business in the future.
11 Commitments
The Company has long-term leases for stores and equipment. Rentals
(including amounts applicable to taxes, insurance, maintenance, other
operating expenses and contingent rentals) under operating leases
and other short-term rental arrangements were $2.8 billion, $2.6 billion
and $2.4 billion in scal 2014, 2013 and 2012, respectively.
Aggregate minimum annual rentals at January 31, 2014, under
non-cancelable leases are as follows:
(Amounts in millions) Operating Capital
Fiscal Year Leases Leases
2015 $ 1,734 $ 586
2016 1,632 558
2017 1,462 519
2018 1,314 479
2019 1,192 438
Thereafter 9,836 3,711
Total minimum rentals $17,170 $6,291
Less estimated executory costs 60
Net minimum lease payments 6,231
Less imputed interest 3,134
Present value of minimum lease payments $3,097
Certain of the Company’s leases provide for the payment of contingent
rentals based on a percentage of sales. Such contingent rentals were
immaterial for scal 2014, 2013 and 2012. Substantially all of the Company’s
store leases have renewal options, some of which may trigger an
escalation in rentals.
The Company has future lease commitments for land and buildings for
approximately 317 future locations. These lease commitments have lease
terms ranging from 4 to 40 years and provide for certain minimum
rentals. If executed, payments under operating leases would increase
by $49 million for scal 2015, based on current cost estimates.
In connection with certain long-term debt issuances, the Company
could be liable for early termination payments if certain unlikely events
were to occur. At January 31, 2014, the aggregate termination payment
would have been $74 million. The arrangement pursuant to which this
payment could be made will expire in scal 2019.
12 Retirement-Related Benefits
The Company oers 401(k) plans for associates in the United States
and Puerto Rico, under which associates generally become participants
following one year of employment. Under these plans, the Company
matches 100% of participant contributions up to 6% of annual eligible
earnings. The matching contributions immediately vest at 100% for each
associate. Participants can contribute up to 50% of their pretax earnings,
but not more than the statutory limits. Participants age 50 or older may
defer additional earnings in catch-up contributions up to the maximum
statutory limits.
Associates in international countries who are not U.S. citizens are covered
by various dened contribution post-employment benet arrangements.
These plans are administered based upon the legislative and tax
requirements in the countries in which they are established.
Additionally, the Company’s subsidiaries in the United Kingdom (“Asda”)
and Japan have sponsored dened benet pension plans. The plan in
the United Kingdom was underfunded by $69 million and $346 million
at January 31, 2014 and 2013, respectively. The plan in Japan was under-
funded by $281 million and $338 million at January 31, 2014 and 2013,
56 Walmart 2014 Annual Report
Notes to Consolidated Financial Statements