Walmart 2016 Annual Report Download - page 30

2016 Annual Report28
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Company Share Repurchase Program
From time to time, we repurchase shares of our common stock under
share repurchase programs authorized by the Company’s Board of
Directors. On October 13, 2015, the Board of Directors replaced the
previous $15.0 billion share repurchase program, which had $8.6 billion
of remaining authorization for share repurchases as of that date, with a
new $20.0 billion share repurchase program. As was the case with the
replaced share repurchase program, the new share repurchase program
has no expiration date or other restrictions limiting the period over
which we can make share repurchases. At January 31, 2016, authorization
for $17.5 billion of share repurchases remained under the current share
repurchase program. Any repurchased shares are constructively retired
and returned to an unissued status. The Company intends to utilize the
current share repurchase authorization through the fiscal year ending
January 31, 2018.
We regularly review share repurchase activity and consider several factors
in determining when to execute share repurchases, including, among
other things, current cash needs, capacity for leverage, cost of borrowings,
our results of operations and the market price of our common stock. We
anticipate that a significant majority of the ongoing share repurchase
program will be funded through the Company’s free cash flows. The
following table provides, on a settlement date basis, the number of
shares repurchased, average price paid per share and total amount paid
for share repurchases for fiscal 2016, 2015 and 2014:
(Amounts in millions, Fiscal Years Ended January 31,
except per share data) 2016 2015 2014
Total number of shares repurchased 62.4 13.4 89.1
Average price paid per share $65.90 $75.82 $74.99
Total amount paid for share repurchases $4,112 $1,015 $6,683
Share repurchases increased $3.1 billion for fiscal 2016 and decreased
$5.7 billion for fiscal 2015, respectively, when compared to the previous
fiscal year. For fiscal 2016, the increase in share repurchases resulted from
our intention to utilize the current share repurchase authorization over
the next two years. For fiscal 2015, the decrease was a result of cash
needs, reduced leverage and increased cash used in transactions with
noncontrolling interests described further below.
Significant Transactions with Noncontrolling Interests
As described in Note 13 to our Consolidated Financial Statements, in July
2015, we completed the purchase of all of the remaining noncontrolling
interest in Yihaodian, our e-commerce operations in China, for approxi-
mately $760 million, using existing cash to complete this transaction and
during fiscal 2015, we completed the purchase of substantially all of the
remaining noncontrolling interest in Walmart Chile for approximately
$1.5 billion, using existing cash to complete this transaction.
Capital Resources
We believe cash flows from continuing operations, our current cash
position and access to capital markets will continue to be sufficient to
meet our anticipated operating cash needs, which include funding
seasonal buildups in merchandise inventories and funding our capital
expenditures, dividend payments and share repurchases.
We have strong commercial paper and long-term debt ratings that have
enabled and should continue to enable us to refinance our debt as it
becomes due at favorable rates in capital markets. At January 31, 2016,
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 affect
our credit ratings include changes in our operating performance, the
general economic environment, conditions in the retail industry, our
financial 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
commercially 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 flexibility that we have
experienced historically, potentially requiring us to rely more heavily
on more expensive types of debt financing. 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 specific to the security to which it applies.