Walmart 2016 Annual Report Download - page 31

29Only Walmart
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Contractual Obligations and Other Commercial Commitments
The following table sets forth certain information concerning our obligations and commitments to make contractual future payments, such as debt
and lease agreements, and certain contingent commitments:
Payments Due During Fiscal Years Ending January 31,
(Amounts in millions) Total 2017 2018-2019 2020-2021 Thereafter
Recorded contractual obligations:
Long-term debt
(1)
$ 40,959 $ 2,745 $ 5,016 $ 3,850 $29,348
Short-term borrowings 2,708 2,708 — — —
Capital lease and financing obligations
(2)
8,655 815 1,468 1,279 5,093
Unrecorded contractual obligations:
Non-cancelable operating leases 21,505 2,057 3,783 3,227 12,438
Estimated interest on long-term debt 30,391 1,806 3,445 3,129 22,011
Trade letters of credit 2,709 2,709
Stand-by letters of credit 1,813 1,813 — — —
Purchase obligations 14,099 6,830 5,527 1,549 193
Total commercial commitments $122,839 $21,483 $19,239 $13,034 $69,083
(1) “Long-term debt” includes the fair value of our derivatives classified as fair value hedges.
(2) “Capital lease and financing obligations” includes executory costs and imputed interest related to capital lease and financing obligations that are not yet recorded.
Refer to Note 11 in the “Notes to the Consolidated Financial Statements” for more information.
Additionally, the Company has $15.0 billion in undrawn committed lines
of credit which, if drawn upon, would be included in the current liabilities
section of the Company’s Consolidated Balance Sheets.
Estimated interest payments are based on our principal amounts and
expected maturities of all debt outstanding at January 31, 2016, and
management’s forecasted market rates for our variable rate debt.
Purchase obligations include legally binding contracts, such as firm
commitments for inventory and utility purchases, as well as commitments
to make capital expenditures, software acquisition and license commit-
ments and legally binding service contracts. Purchase orders for inventory
and other services are not included in the table above. Purchase orders
represent authorizations to purchase rather than binding agreements.
For the purposes of this table, contractual obligations for the purchase
of goods or services are defined as agreements that are enforceable and
legally binding and that specify all significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. Our purchase
orders are based on our current inventory needs and are fulfilled by our
suppliers within short time periods. We also enter into contracts for
outsourced services; however, the obligations under these contracts
are not significant and the contracts generally contain clauses allowing
for cancellation without significant penalty.
The expected timing for payment of the obligations discussed above is
estimated based on current information. Timing of payments and actual
amounts paid with respect to some unrecorded contractual commitments
may be different depending on the timing of receipt of goods or services
or changes to agreed-upon amounts for some obligations.
In addition to the amounts shown in the table above, $607 million of
unrecognized tax benefits are considered uncertain tax positions and
have been recorded as liabilities. The timing of the payment, if any,
associated with these liabilities is uncertain. Refer to Note 9 in the
“Notes to Consolidated Financial Statements” for additional discussion
of unrecognized tax benefits.
Off Balance Sheet Arrangements
In addition to the unrecorded contractual obligations presented above,
we have entered into certain arrangements, as discussed below, for which
the timing of payment, if any, is unknown.
The Company has future lease commitments for land and buildings for
approximately 215 future locations. These lease commitments have
lease terms ranging from 10 to 30 years and provide for certain mini-
mum rentals. If leases for all of those future locations had been executed
as of February 1, 2016, payments under operating leases would increase
by $34 million for fiscal 2017, based on current estimates.
In connection with certain long-term debt issuances, we could be liable
for early termination payments if certain unlikely events were to occur.
At January 31, 2016, the aggregate termination payment would have
been $44 million. The arrangement pursuant to which this payment
could be made will expire in fiscal 2019.
Market Risk
In addition to the risks inherent in our operations, we are exposed to
certain market risks, including changes in interest rates and fluctuations
in currency exchange rates.
The analysis presented below for each of our market risk sensitive
instruments is based on a hypothetical scenario used to calibrate
potential risk and does not represent our view of future market changes.
The effect of a change in a particular assumption is calculated without
adjusting any other assumption. In reality, however, a change in one
factor could cause a change in another, which may magnify or negate
other sensitivities.