Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
General
Walmart Inc. ("Walmart" or the "Company") helps people around the world save money and live better – anytime and anywhere – by providing the opportunity to shop in retail stores and through eCommerce. Through innovation, the Company is striving to continuously improve a customer-centric experience that seamlessly integrates eCommerce and retail stores in an omni-channel offering that saves time for its customers. Each week, the Company serves over 265 million customers who visit approximately 11,500 stores and numerous eCommerce websites under 56 banners in 27 countries.
The Company's operations comprise three reportable segments: Walmart U.S., Walmart International and Sam's Club.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Walmart and its subsidiaries as of and for the fiscal years ended January 31, 2020 ("fiscal 2020"), January 31, 2019 ("fiscal 2019") and January 31, 2018 ("fiscal 2018"). Intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates variable interest entities where it has been determined that the Company is the primary beneficiary of those entities' operations. Investments for which the Company exercises significant influence but does not have control are accounted for under the equity method. These variable interest entities and equity method investments are immaterial to the Company's Consolidated Financial Statements.
The Company's Consolidated Financial Statements are based on a fiscal year ending on January 31 for the United States ("U.S.\") and Canadian operations. The Company consolidates all other operations generally using a one-month lag and based on a calendar year. There were no significant intervening events during the month of January 2020 related to the operations consolidated using a lag that materially affected the Consolidated Financial Statements.
Use of Estimates
The Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles. Those principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Management's estimates and assumptions also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Cash and Cash Equivalents
The Company considers investments with a maturity when purchased of three months or less to be cash equivalents. All credit card, debit card and electronic transfer transactions that process in less than seven days are classified as cash and cash equivalents. The amounts due from banks for these transactions classified as cash and cash equivalents totaled $1.7 billion and $1.4 billion as of January 31, 2020 and 2019, respectively.
The Company's cash balances are held in various locations around the world. Most of the Company's $9.5 billion and $7.7 billion of cash and cash equivalents as of January 31, 2020 and January 31, 2019 were held outside of the U.S. Cash and cash equivalents held outside of the U.S. are generally utilized to support liquidity needs in the Company's non-U.S. operations.
The Company uses intercompany financing arrangements in an effort to ensure cash can be made available in the country in which it is needed with the minimum cost possible.
As of January 31, 2020 and 2019, cash and cash equivalents of approximately $2.3 billion and $2.8 billion, respectively, may not be freely transferable to the U.S. due to local laws or other restrictions. Of the $2.3 billion as of January 31, 2020, approximately $0.6 billion can only be accessed through dividends or intercompany financing arrangements subject to approval of Flipkart Private Limited ("Flipkart") minority shareholders; however, this cash is expected to be utilized to fund the operations of Flipkart.
Receivables
Receivables are stated at their carrying values, net of a reserve for doubtful accounts, and are primarily due from the following: customers, which also includes insurance companies resulting from pharmacy sales, banks for customer credit, debit cards and electronic transfer transactions that take in excess of seven days to process; suppliers for marketing or incentive programs; governments for income taxes; and real estate transactions. As of January 31, 2020 and January 31, 2019, receivables from transactions with customers, net were $2.9 billion and $2.5 billion, respectively.
Inventories
The Company values inventories at the lower of cost or market as determined primarily by the retail inventory method of accounting, using the last-in, first-out ("LIFO") method for the Walmart U.S. segment's inventories. The inventory for the Walmart International segment is valued primarily by the retail inventory method of accounting, using the first-in, first-out ("FIFO") method. The retail inventory method of accounting results in inventory being valued at the lower of cost or market, since permanent markdowns are immediately recorded as a reduction of the retail value of inventory. The inventory at the Sam's Club segment is valued using the weighted-average cost LIFO method. As of January 31, 2020 and January 31, 2019, the Company's inventories valued at LIFO approximated those inventories as if they were valued at FIFO.
Assets Held for Sale
Assets held for sale represent components and businesses that meet accounting requirements to be classified as held for sale and are presented as single asset and liability amounts in the Company's financial statements with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less costs to sell. The Company reviews all businesses and assets held for sale each reporting period to determine whether the existing carrying amounts are fully recoverable in comparison to estimated fair values. As of January 31, 2020 and January 31, 2019, immaterial amounts for assets and liabilities held for sale were classified in prepaid expenses and other and accrued liabilities, respectively, in the Consolidated Balance Sheets.
Property and Equipment
Property and equipment are initially recorded at cost. Gains or losses on disposition are recognized as earned or incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are expensed as incurred. The following table summarizes the Company's property and equipment balances and includes the estimated useful lives that are generally used to depreciate the assets on a straight-line basis:
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As of January 31,
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(Amounts in millions)
|
|
Estimated Useful Lives
|
|
2020
|
|
2019
|
Land
|
|
N/A
|
|
$
|
24,619
|
|
|
$
|
24,526
|
|
Buildings and improvements
|
|
3-40 years
|
|
105,674
|
|
|
101,006
|
|
Fixtures and equipment
|
|
1-30 years
|
|
58,607
|
|
|
54,488
|
|
Transportation equipment
|
|
3-15 years
|
|
2,377
|
|
|
2,316
|
|
Construction in progress
|
|
N/A
|
|
3,751
|
|
|
3,474
|
|
Property and equipment
|
|
|
|
195,028
|
|
|
185,810
|
|
Accumulated depreciation
|
|
|
|
(89,820
|
)
|
|
(81,493
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)
|
Property and equipment, net
|
|
|
|
$
|
105,208
|
|
|
$
|
104,317
|
|
Leasehold improvements are depreciated or amortized over the shorter of the estimated useful life of the asset or the remaining expected lease term. Total depreciation and amortization expense for property and equipment, property under finance leases and financing obligations, property under capital leases and intangible assets for fiscal 2020, 2019 and 2018 was $11.0 billion, $10.7 billion and $10.5 billion, respectively.
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lease assets and liabilities to be recorded on the balance sheet. The Company adopted this ASU and related amendments as of February 1, 2019 under the modified retrospective approach and elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases. For leases subject to index or rate adjustments, the most current index or rate adjustments were included in the measurement of operating lease obligations at adoption.
The adoption of this ASU and related amendments resulted in a $14.8 billion increase to total assets and a $15.1 billion increase to total liabilities in the first quarter of fiscal 2020. In the first quarter of fiscal 2020, the Company recognized $16.8 billion and $17.5 billion of operating lease right-of-use assets and operating lease obligations, respectively, and removed $2.2 billion and $1.7 billion, respectively, of assets and liabilities related to financial obligations connected with the construction of leased stores. Several other asset and liability line items in the Company's Consolidated Balance Sheet were also impacted by immaterial amounts. Additionally, the adoption resulted in a cumulative-effect adjustment to retained earnings of approximately $0.3 billion, net of tax, which primarily consisted of the recognition of impairment. The Company’s Consolidated Statement of Income and Consolidated Statement of Cash Flows were immaterially impacted. Accounting policies as a result of the adoption of this ASU are described below. Refer to Note 7 for additional lease disclosures.
For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use ("ROU") assets and lease obligations for its finance and operating leases, which are
initially recognized based on the discounted future lease payments over the term of the lease. As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments.
Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less.
For a majority of all classes of underlying assets, the Company has elected to not separate lease from non-lease components. For leases in which the lease and non-lease components have been combined, the variable lease expense includes expenses such as common area maintenance, utilities, and repairs and maintenance.
Impairment of Long-Lived Assets
Management reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows, which is at the individual store or club level. Undiscounted cash flows expected to be generated by the related assets are estimated over the assets' useful lives based on updated projections. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.
Goodwill and Other Acquired Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations and is allocated to the appropriate reporting unit when acquired. Other acquired intangible assets are stated at the fair value acquired as determined by a valuation technique commensurate with the intended use of the related asset. Goodwill and indefinite-lived intangible assets are not amortized; rather, they are evaluated for impairment annually and whenever events or changes in circumstances indicate that the value of the asset may be impaired. Definite-lived intangible assets are considered long-lived assets and are amortized on a straight-line basis over the periods that expected economic benefits will be provided.
Goodwill is assigned to the reporting unit which consolidates the acquisition. Components within the same reportable segment are aggregated and deemed a single reporting unit if the components have similar economic characteristics. As of January 31, 2020, the Company's reporting units consisted of Walmart U.S., Walmart International and Sam's Club. Goodwill is evaluated for impairment using either a qualitative or quantitative approach for each of the Company's reporting units. Generally, a qualitative assessment is first performed to determine whether a quantitative goodwill impairment test is necessary. If management determines, 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 goodwill impairment test would be required. The quantitative test for goodwill impairment is performed by determining the fair value of the related reporting units. Fair value is measured based on the discounted cash flow method and relative market-based approaches. After evaluation, management determined the fair value of each reporting unit is significantly greater than the carrying amount and, accordingly, the Company has not recorded any impairment charges related to goodwill.
The following table reflects goodwill activity, by reportable segment, for fiscal 2020 and 2019:
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(Amounts in millions)
|
|
Walmart U.S.
|
|
Walmart
International
|
|
Sam's Club
|
|
Total
|
Balances as of February 1, 2018
|
|
$
|
2,445
|
|
|
$
|
15,484
|
|
|
$
|
313
|
|
|
$
|
18,242
|
|
Changes in currency translation and other
|
|
—
|
|
|
(743
|
)
|
|
—
|
|
|
(743
|
)
|
Acquisitions (1)
|
|
107
|
|
|
13,575
|
|
|
—
|
|
|
13,682
|
|
Balances as of January 31, 2019
|
|
2,552
|
|
|
28,316
|
|
|
313
|
|
|
31,181
|
|
Changes in currency translation and other
|
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
(149
|
)
|
Acquisitions
|
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
Balances as of January 31, 2020
|
|
$
|
2,593
|
|
|
$
|
28,167
|
|
|
$
|
313
|
|
|
$
|
31,073
|
|
(1) Goodwill recorded in fiscal 2019 for Walmart International relates to Flipkart.
Intangible assets are included in other long-term assets in the Company's Consolidated Balance Sheets. As of January 31, 2020 and 2019, the Company had $5.2 billion and $5.8 billion, respectively, in indefinite-lived intangible assets which is primarily made up of acquired trade names. Refer to Note 12 for additional information related to acquired intangible assets for the Flipkart acquisition. During fiscal 2020, the Company incurred approximately $0.7 billion in impairment charges related to its intangible assets. There were no significant impairment charges related to intangible assets for fiscal 2019 and 2018. Refer to Note 8 for additional information.
Fair Value Measurement
In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-01, Financial Instruments–Overall (Topic 825), which updated certain aspects of recognition, measurement, presentation and disclosure of financial instruments ("ASU 2016-01"). The Company adopted this ASU on February 1, 2018, which primarily impacted the Company's accounting for its investment in JD.com, Inc. ("JD") and resulted in a positive adjustment to retained earnings of approximately $2.6 billion, net of tax, in fiscal 2019 based on the market value of the Company's investment in JD as of January 31, 2018. The adoption required prospective changes in fair value of the Company's investment in JD to be recorded in the Consolidated Statement of Income, which the Company classifies in other gains and losses.
The Company records and discloses certain financial and non-financial assets and liabilities at fair value. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. The fair value of a liability is the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor. Refer to Note 8 for more information.
Self Insurance Reserves
The Company self-insures a number of risks, including, but not limited to, workers' compensation, general liability, auto liability, product liability and certain employee-related healthcare benefits. Standard actuarial procedures and data analysis are used to estimate the liabilities associated with these risks as of the balance sheet date on an undiscounted basis. The recorded liabilities reflect the ultimate cost for claims incurred but not paid and any estimable administrative run-out expenses related to the processing of these outstanding claim payments. On a regular basis, the liabilities are evaluated for appropriateness with claims reserve valuations. To limit exposure to some risks, the Company maintains insurance coverage with varying limits and retentions, including stop-loss insurance coverage for workers' compensation, general liability and auto liability.
Derivatives
The Company uses derivatives for hedging purposes to manage its exposure to changes in interest and currency exchange rates, as well as to maintain an appropriate mix of fixed- and variable-rate debt. Use of derivatives in hedging programs subjects the Company to certain risks, such as market and credit risks. The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Credit risk is monitored through established approval procedures, including setting concentration limits by counterparty, reviewing credit ratings and requiring collateral from the counterparty. The Company enters into derivatives with counterparties rated only "A-" or better by nationally recognized credit rating agencies. The Company is subject to master netting arrangements which provides set-off and close out netting of exposures with counterparties, but the Company does not offset derivative assets and liabilities in its Consolidated Balance Sheets. The Company’s collateral arrangements requires the counterparty in a net liability position in excess of pre-determined thresholds, after considering the effects of netting arrangements, to pledge cash collateral. Cash collateral received under these arrangements was not significant as of January 31, 2020 and 2019. The Company was not required to provide any cash collateral to counterparties as of January 31, 2020 and 2019.
In order to qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. If a derivative is recorded using hedge accounting, depending on the nature of the hedge, derivative gains and losses are recorded through the same financial statement line item in earnings or are recognized in accumulated other comprehensive loss until the hedged item is recognized in earnings. Derivatives that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are recorded at fair value with unrealized gains or losses reported in earnings. Derivatives with an unrealized gain are recorded in the Company's Consolidated Balance Sheets as either current or non-current assets, based on maturity date, and derivatives with an unrealized loss are recorded as either current or non-current liabilities, based on maturity date. Refer to Note 8 for the presentation of the Company's derivative assets and liabilities.
Fair Value Hedges
The Company is a party to receive fixed-rate, pay variable-rate interest rate swaps that the Company uses to hedge the fair value of fixed-rate debt. All interest rate swaps designated as fair value hedges of the related long-term debt meet the shortcut method requirements under U.S. GAAP. Accordingly, changes in the fair values of these interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. These derivatives will mature on dates ranging from October 2020 to April 2024.
Cash Flow Hedges
The Company is a party to receive fixed-rate, pay fixed-rate cross currency interest rate swaps used to hedge the currency exposure associated with the forecasted payments of principal and interest of certain non-U.S. denominated debt. The Company records changes in the fair value of these swaps in accumulated other comprehensive loss which is subsequently
reclassified into earnings in the period that the hedged forecasted transaction affects earnings. These derivatives will mature on dates ranging from April 2022 to March 2034.
Net Investment Hedges
The Company is a party to receive fixed-rate, pay fixed-rate cross currency interest rate swaps used to hedge the currency exposure associated with net investments of certain of its foreign operations. The Company records changes in fair value attributable to the hedged risk in accumulated other comprehensive loss. These derivatives will mature on dates ranging from July 2020 to February 2030. The Company also designated certain foreign currency denominated long-term debt as a hedge of currency exposure associated with the net investment of these operations. The Company records foreign currency gain or loss associated with designated long-term debt in accumulated other comprehensive loss. As of January 31, 2020 and 2019, the Company had $3.9 billion, respectively, of outstanding long-term debt designated as net investment hedges.
These derivative and non-derivative gains or losses continue to defer in accumulated other comprehensive loss until the sale or substantial liquidation of these foreign operations.
Income Taxes
Income taxes are accounted for under the balance sheet method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases ("temporary differences"). Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date.
Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent that a portion is not more likely than not to be realized. Many factors are considered when assessing whether it is more likely than not that the deferred tax assets will be realized, including recent cumulative earnings, expectations of future taxable income, carryforward periods, and other relevant quantitative and qualitative factors. The recoverability of the deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely on estimates.
The Tax Cuts and Jobs Act contains a provision which subjects a U.S. parent of a foreign subsidiary to current U.S. tax on its global intangible low–taxed income (“GILTI”). The GILTI income is eligible for a deduction, which lowers the effective tax rate to 10.5% for calendar years 2018 through 2025 and 13.125% after 2025. The Company will report the tax impact of GILTI as a period cost when incurred. Accordingly, the Company is not providing deferred taxes for basis differences expected to reverse as GILTI.
In determining the provision for income taxes, an annual effective income tax rate is used based on annual income, permanent differences between book and tax income, and statutory income tax rates. Discrete events such as audit settlements or changes in tax laws are recognized in the period in which they occur.
The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company records interest and penalties related to unrecognized tax benefits in interest expense and operating, selling, general and administrative expenses, respectively, in the Company's Consolidated Statements of Income. Refer to Note 9 for additional income tax disclosures.
Revenue Recognition
Net Sales
The Company recognizes sales revenue, net of sales taxes and estimated sales returns, at the time it sells merchandise or services to the customer. eCommerce sales include shipping revenue and are recorded upon delivery to the customer. Estimated sales returns are calculated based on expected returns.
Membership Fee Revenue
The Company recognizes membership fee revenue both in the U.S. and internationally over the term of the membership, which is typically 12 months. Membership fee revenue was $1.5 billion for fiscal 2020 and $1.4 billion for each of fiscal 2019 and 2018, respectively. Membership fee revenue is included in membership and other income in the Company's Consolidated Statements of Income. Deferred membership fee revenue is included in accrued liabilities in the Company's Consolidated Balance Sheets.
Gift Cards
Customer purchases of gift cards are not recognized as sales until the card is redeemed and the customer purchases merchandise using the gift card. Gift cards in the U.S. and some countries do not carry an expiration date; therefore, customers and members
can redeem their gift cards for merchandise and services indefinitely. Gift cards in some countries where the Company does business have expiration dates. While gift cards are generally redeemed within 12 months, a certain number of gift cards, both with and without expiration dates, will not be fully redeemed. Management estimates unredeemed balances and recognizes revenue for these amounts in membership and other income in the Company's Consolidated Statements of Income over the expected redemption period.
Financial and Other Services
The Company recognizes revenue from service transactions at the time the service is performed. Generally, revenue from services is classified as a component of net sales in the Company's Consolidated Statements of Income.
Cost of Sales
Cost of sales includes actual product cost, the cost of transportation to the Company's distribution facilities, stores and clubs from suppliers, the cost of transportation from the Company's distribution facilities to the stores, clubs and customers and the cost of warehousing for the Sam's Club segment and import distribution centers. Cost of sales is reduced by supplier payments that are not a reimbursement of specific, incremental and identifiable costs.
Payments from Suppliers
The Company receives consideration from suppliers for various programs, primarily volume incentives, warehouse allowances and reimbursements for specific programs such as markdowns, margin protection, advertising and supplier-specific fixtures. Payments from suppliers are accounted for as a reduction of cost of sales, except in certain limited situations when the payment is a reimbursement of specific, incremental and identifiable costs, and are recognized in the Company's Consolidated Statements of Income when the related inventory is sold.
Operating, Selling, General and Administrative Expenses
Operating, selling, general and administrative expenses include all operating costs of the Company, except cost of sales, as described above. As a result, the majority of the cost of warehousing and occupancy for the Walmart U.S. and Walmart International segments' distribution facilities is included in operating, selling, general and administrative expenses. Because the Company only includes a portion of the cost of its Walmart U.S. and Walmart International segments' distribution facilities in cost of sales, its gross profit and gross profit as a percentage of net sales may not be comparable to those of other retailers that may include all costs related to their distribution facilities in cost of sales and in the calculation of gross profit.
Advertising Costs
Advertising costs are expensed as incurred, consist primarily of print, television and digital advertisements and are recorded in operating, selling, general and administrative expenses in the Company's Consolidated Statements of Income. In certain limited situations, reimbursements from suppliers that are for specific, incremental and identifiable advertising costs are recognized as a reduction of advertising costs in operating, selling, general and administrative expenses. Advertising costs were $3.7 billion, $3.5 billion and $3.1 billion for fiscal 2020, 2019 and 2018, respectively.
Currency Translation
The assets and liabilities of all international subsidiaries are translated from the respective local currency to the U.S. dollar using exchange rates at the balance sheet date. Related translation adjustments are recorded as a component of accumulated other comprehensive loss. The Company's Consolidated Statements of Income of all international subsidiaries are translated from the respective local currencies to the U.S. dollar using average exchange rates for the period covered by the income statements.
Recent Accounting Pronouncements
Financial Instruments
In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326), which modifies the measurement of expected credit losses of certain financial instruments. The Company adopted this ASU on February 1, 2020 with no material impact to the Company's Consolidated Financial Statements.
Note 2. Net Income Per Common Share
Basic net income per common share attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period. Diluted net income per common share attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period adjusted for the dilutive effect of share-based awards. The Company did not have significant share-based awards outstanding that were antidilutive and not included in the calculation of diluted net income per common share attributable to Walmart for fiscal 2020, 2019 and 2018.
The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income per common share attributable to Walmart:
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|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions, except per share data)
|
|
2020
|
|
2019
|
|
2018
|
Numerator
|
|
|
|
|
|
|
Consolidated net income
|
|
$
|
15,201
|
|
|
$
|
7,179
|
|
|
$
|
10,523
|
|
Consolidated net income attributable to noncontrolling interest
|
|
(320
|
)
|
|
(509
|
)
|
|
(661
|
)
|
Consolidated net income attributable to Walmart
|
|
$
|
14,881
|
|
|
$
|
6,670
|
|
|
$
|
9,862
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic
|
|
2,850
|
|
|
2,929
|
|
|
2,995
|
|
Dilutive impact of stock options and other share-based awards
|
|
18
|
|
|
16
|
|
|
15
|
|
Weighted-average common shares outstanding, diluted
|
|
2,868
|
|
|
2,945
|
|
|
3,010
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Walmart
|
|
|
|
|
|
|
Basic
|
|
$
|
5.22
|
|
|
$
|
2.28
|
|
|
$
|
3.29
|
|
Diluted
|
|
5.19
|
|
|
2.26
|
|
|
3.28
|
|
Note 3. Shareholders' Equity
The total authorized shares of $0.10 par value common stock is 11.0 billion, of which 2.8 billion and 2.9 billion were issued and outstanding as of January 31, 2020 and 2019, respectively.
Share-Based Compensation
The Company has awarded share-based compensation to associates and nonemployee directors of the Company. The compensation expense recognized for all stock incentive plans, including expense associated with plans of the Company's consolidated subsidiaries granted in the subsidiaries' respective stock, was $854 million, $773 million and $626 million for fiscal 2020, 2019 and 2018, respectively. Share-based compensation expense is generally included in operating, selling, general and administrative expenses in the Company's Consolidated Statements of Income. The total income tax benefit recognized for share-based compensation was $202 million, $181 million and $150 million for fiscal 2020, 2019 and 2018, respectively. The following table summarizes the Company's share-based compensation expense by award type for all plans:
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|
|
Fiscal Years Ended January 31,
|
(Amounts in millions)
|
2020
|
|
2019
|
|
2018
|
Restricted stock and performance share units
|
$
|
270
|
|
|
$
|
293
|
|
|
$
|
234
|
|
Restricted stock units
|
553
|
|
|
456
|
|
|
368
|
|
Other
|
31
|
|
|
24
|
|
|
24
|
|
Share-based compensation expense
|
$
|
854
|
|
|
$
|
773
|
|
|
$
|
626
|
|
The Walmart Inc. Stock Incentive Plan of 2015 (the "Plan"), as amended and restated effective February 23, 2016, as amended further as of February 1, 2017, and as renamed on February 1, 2018, was established to grant stock options, restricted (non-vested) stock, performance share units and other equity compensation awards for which 260 million shares of Walmart common stock issued or to be issued under the Plan have been registered under the Securities Act of 1933, as amended. The Company believes that such awards serve to align the interests of its associates with those of its shareholders.
The Plan's award types are summarized as follows:
|
|
•
|
Restricted Stock and Performance Share Units. Restricted stock awards are for shares that vest based on the passage of time and include restrictions related to employment. Performance share units vest based on the passage of time and achievement of performance criteria and may range from 0% to 150% of the original award amount. Vesting periods for these awards are generally between one and three years. Restricted stock and performance share units may be settled or deferred in stock and are accounted for as equity in the Company's Consolidated Balance Sheets. The fair value of restricted stock awards is determined on the date of grant and is expensed ratably over the vesting period. The fair value of performance share units is determined on the date of grant using the Company's stock price discounted for the expected dividend yield through the vesting period and is recognized over the vesting period. The weighted-average discount for the dividend yield used to determine the fair value of performance share units in fiscal 2020, 2019 and 2018 was 5.1%, 6.2% and 7.2%, respectively.
|
|
|
•
|
Restricted Stock Units. Restricted stock units provide rights to Company stock after a specified service period. Beginning in fiscal 2020, restricted stock units generally vest at a rate of 25% each year over a four year period from the date of the grant. Prior to fiscal 2020, 50% of restricted stock units generally vested three years from the grant date and the remaining 50% were vested five years from the grant date. The fair value of each restricted stock unit is determined on the date of grant using the stock price discounted for the expected dividend yield through the vesting period and is recognized ratably over the vesting period. The expected dividend yield is based on the anticipated
|
dividends over the vesting period. The weighted-average discount for the dividend yield used to determine the fair value of restricted stock units granted in fiscal 2020, 2019 and 2018 was 4.9%, 7.2% and 9.0%, respectively.
In addition to the Plan, the Company's United Kingdom subsidiary has stock option plans for certain colleagues which generally vest over three years. The stock option share-based compensation expense is included in the Other line in the table above.
Flipkart also maintains a stock option plan primarily for the benefit of employees and nonemployee directors under which options to acquire Flipkart common shares may be issued. The grants have no exercise price and no compensation expense was recognized during fiscal 2020 or fiscal 2019 where a performance condition was not deemed probable of occurring.
The following table shows the activity for restricted stock and performance share units and restricted stock units during fiscal 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock and Performance Share Units
|
|
Restricted Stock Units
|
(Shares in thousands)
|
|
Shares
|
|
Weighted-Average Grant-Date Fair Value Per Share
|
|
Shares
|
|
Weighted-Average Grant-Date Fair Value Per Share
|
Outstanding as of February 1, 2019
|
|
8,799
|
|
|
$
|
75.39
|
|
|
23,955
|
|
|
$
|
70.47
|
|
Granted
|
|
3,354
|
|
|
100.38
|
|
|
8,504
|
|
|
95.92
|
|
Adjustment for performance achievement(1)
|
|
898
|
|
|
64.50
|
|
|
—
|
|
|
—
|
|
Vested/exercised
|
|
(5,365
|
)
|
|
67.96
|
|
|
(6,496
|
)
|
|
68.13
|
|
Forfeited
|
|
(1,641
|
)
|
|
82.77
|
|
|
(2,702
|
)
|
|
78.86
|
|
Outstanding as of January 31, 2020
|
|
6,045
|
|
|
$
|
93.04
|
|
|
23,261
|
|
|
$
|
79.51
|
|
|
|
(1)
|
Represents the adjustment to previously granted performance share units for performance achievement.
|
The following table includes additional information related to restricted stock and performance share units and restricted stock units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions, except years)
|
|
2020
|
|
2019
|
|
2018
|
Fair value of restricted stock and performance share units vested
|
|
$
|
365
|
|
|
$
|
183
|
|
|
$
|
181
|
|
Fair value of restricted stock units vested
|
|
442
|
|
|
386
|
|
|
344
|
|
Unrecognized compensation cost for restricted stock and performance share units
|
|
326
|
|
|
362
|
|
|
291
|
|
Unrecognized compensation cost for restricted stock units
|
|
1,096
|
|
|
1,002
|
|
|
972
|
|
Weighted average remaining period to expense for restricted stock and performance share units (years)
|
|
1.4
|
|
|
1.1
|
|
|
1.2
|
|
Weighted average remaining period to expense for restricted stock units (years)
|
|
1.3
|
|
|
1.6
|
|
|
1.8
|
|
Share Repurchase Program
From time to time, the Company repurchases shares of its common stock under share repurchase programs authorized by the Company's Board of Directors. All repurchases made during fiscal 2020 were made under the current $20.0 billion share repurchase program approved in October 2017, which has no expiration date or other restrictions limiting the period over which the Company can make share repurchases. As of January 31, 2020, authorization for 5.7 billion of share repurchases remained under the share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status.
The Company regularly reviews share repurchase activity and considers several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings, results of operations and the market price of the Company's common stock. 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 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions, except per share data)
|
|
2020
|
|
2019
|
|
2018
|
Total number of shares repurchased
|
|
53.9
|
|
|
79.5
|
|
|
104.9
|
|
Average price paid per share
|
|
$
|
105.98
|
|
|
$
|
93.18
|
|
|
$
|
79.11
|
|
Total cash paid for share repurchases
|
|
$
|
5,717
|
|
|
$
|
7,410
|
|
|
$
|
8,296
|
|
Note 4. Accumulated Other Comprehensive Loss
The following table provides the changes in the composition of total accumulated other comprehensive loss for fiscal 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions and net of immaterial income taxes)
|
Currency
Translation
and Other
|
|
Net Investment Hedges
|
|
Unrealized Gain on Available-for-Sale Securities
|
|
Cash Flow Hedges
|
|
Minimum
Pension Liability
|
|
Total
|
Balances as of February 1, 2017
|
$
|
(14,507
|
)
|
|
$
|
1,435
|
|
|
$
|
145
|
|
|
$
|
(315
|
)
|
|
$
|
(990
|
)
|
|
$
|
(14,232
|
)
|
Other comprehensive income (loss) before reclassifications, net
|
2,345
|
|
|
(405
|
)
|
|
1,501
|
|
|
436
|
|
|
83
|
|
|
3,960
|
|
Amounts reclassified from accumulated other comprehensive loss, net
|
26
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
64
|
|
|
91
|
|
Balances as of January 31, 2018
|
(12,136
|
)
|
|
1,030
|
|
|
1,646
|
|
|
122
|
|
|
(843
|
)
|
|
(10,181
|
)
|
Adoption of new accounting standards on February 1, 2018(1)
|
89
|
|
|
93
|
|
|
(1,646
|
)
|
|
28
|
|
|
—
|
|
|
(1,436
|
)
|
Other comprehensive income (loss) before reclassifications, net
|
(2,093
|
)
|
|
272
|
|
|
—
|
|
|
(339
|
)
|
|
93
|
|
|
(2,067
|
)
|
Reclassifications to income, net(2)
|
2,055
|
|
|
—
|
|
|
—
|
|
|
49
|
|
|
38
|
|
|
2,142
|
|
Balances as of January 31, 2019
|
(12,085
|
)
|
|
1,395
|
|
|
—
|
|
|
(140
|
)
|
|
(712
|
)
|
|
(11,542
|
)
|
Other comprehensive income (loss) before reclassifications, net(3)
|
281
|
|
|
122
|
|
|
—
|
|
|
(399
|
)
|
|
(1,283
|
)
|
|
(1,279
|
)
|
Reclassifications to income, net
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
16
|
|
Balances as of January 31, 2020
|
$
|
(11,827
|
)
|
|
$
|
1,517
|
|
|
$
|
—
|
|
|
$
|
(539
|
)
|
|
$
|
(1,956
|
)
|
|
$
|
(12,805
|
)
|
(1) Primarily relates to the adoption of ASU 2016-01 and ASU 2018-02, Income Statement–Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
(2) Includes a cumulative foreign currency translation loss of $2.0 billion, for which there was no related income taxes, upon sale of the majority stake in Walmart Brazil (see Note 12).
(3) Primarily includes the remeasurement of Asda's pension benefit obligation subsequent to the cash contribution made by Asda, as described more fully in Note 11.
Amounts reclassified from accumulated other comprehensive loss for derivatives are recorded in interest, net, in the Company's Consolidated Statements of Income, and the amounts for the minimum pension liability, as well as the cumulative translation resulting from the disposition of a business, are recorded in other gains and losses in the Company's Consolidated Statements of Income. Amounts related to the Company's derivatives expected to be reclassified from accumulated other comprehensive loss to net income during the next 12 months are not significant.
Note 5. Accrued Liabilities
The Company's accrued liabilities consist of the following as of January 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
Accrued wages and benefits(1)
|
|
$
|
6,093
|
|
|
$
|
6,504
|
|
Self-insurance(2)
|
|
4,469
|
|
|
3,979
|
|
Accrued non-income taxes(3)
|
|
3,039
|
|
|
2,979
|
|
Deferred gift card revenue
|
|
1,990
|
|
|
1,932
|
|
Other(4)
|
|
6,705
|
|
|
6,765
|
|
Total accrued liabilities
|
|
$
|
22,296
|
|
|
$
|
22,159
|
|
|
|
(1)
|
Accrued wages and benefits include accrued wages, salaries, vacation, bonuses and other incentive plans.
|
|
|
(2)
|
Self-insurance consists of insurance-related liabilities, such as workers' compensation, general liability, auto liability, product liability and certain employee-related healthcare benefits.
|
|
|
(3)
|
Accrued non-income taxes include accrued payroll, property, value-added, sales and miscellaneous other taxes.
|
|
|
(4)
|
Other accrued liabilities consist of various items such as interest, maintenance, utilities, legal contingencies, and advertising.
|
Note 6. Short-term Borrowings and Long-term Debt
Short-term borrowings consist of commercial paper and lines of credit. Short-term borrowings as of January 31, 2020 and 2019 were $0.6 billion and $5.2 billion, respectively, with weighted-average interest rates of 5.0% and 2.7%, respectively. Short-term borrowings as of January 31, 2020 were primarily outside of the U.S.
The Company has various committed lines of credit in the U.S. totaling $15.0 billion as of January 31, 2020 and 2019, respectively. These committed lines of credit are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
January 31, 2019
|
(Amounts in millions)
|
|
Available
|
|
Drawn
|
|
Undrawn
|
|
Available
|
|
Drawn
|
|
Undrawn
|
Five-year credit facility(1)
|
|
$
|
5,000
|
|
|
$
|
—
|
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
|
$
|
—
|
|
|
$
|
5,000
|
|
364-day revolving credit facility(1)
|
|
10,000
|
|
|
—
|
|
|
10,000
|
|
|
10,000
|
|
|
—
|
|
|
10,000
|
|
Total
|
|
$
|
15,000
|
|
|
$
|
—
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
—
|
|
|
$
|
15,000
|
|
|
|
(1)
|
In May 2019, the Company renewed and extended its existing five-year credit facility and its existing 364-day revolving credit facility, both of which are used to support its commercial paper program.
|
The committed lines of credit in the table above mature at various times between May 2020 and May 2024, carry interest rates generally ranging between LIBOR plus 10 basis points and LIBOR plus 75 basis points, and incur commitment fees ranging between 1.5 and 4.0 basis points. In conjunction with the committed lines of credit listed in the table above, the Company has agreed to observe certain covenants, the most restrictive of which relates to the maximum amount of secured debt. Additionally, the Company also maintains other committed lines of credit outside of the U.S., with available amounts of approximately $3.0 billion as of each of January 31, 2020 and 2019, respectively, of which approximately $0.1 billion and $0.2 billion was drawn as of January 31, 2020 and 2019, respectively.
Apart from the committed lines of credit, the Company has syndicated and fronted letters of credit available totaling $1.8 billion as of each of January 31, 2020 and 2019, respectively, of which $1.6 billion was drawn as of each of January 31, 2020 and 2019, respectively. The Company also has trade letters of credit, without stated limits, of which $0.2 billion and $0.4 billion was drawn as of January 31, 2020 and 2019, respectively.
The Company's long-term debt, which includes the fair value instruments further discussed in Note 8, consists of the following as of January 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
January 31, 2019
|
(Amounts in millions)
|
|
Maturity Dates
By Fiscal Year
|
|
Amount
|
|
Average Rate(1)
|
|
Amount
|
|
Average Rate(1)
|
Unsecured debt
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
2021 - 2050
|
|
$
|
39,752
|
|
|
3.8%
|
|
$
|
35,816
|
|
|
3.9%
|
Variable
|
|
2021 - 2022
|
|
1,500
|
|
|
2.1%
|
|
1,800
|
|
|
2.9%
|
Total U.S. dollar denominated
|
|
|
|
41,252
|
|
|
|
|
37,616
|
|
|
|
Fixed
|
|
2023 - 2030
|
|
2,758
|
|
|
3.3%
|
|
2,870
|
|
|
3.3%
|
Variable
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Total Euro denominated
|
|
|
|
2,758
|
|
|
|
|
2,870
|
|
|
|
Fixed
|
|
2031 - 2039
|
|
3,518
|
|
|
5.4%
|
|
3,524
|
|
|
5.4%
|
Variable
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Total Sterling denominated
|
|
|
|
3,518
|
|
|
|
|
3,524
|
|
|
|
Fixed
|
|
2021 - 2028
|
|
1,652
|
|
|
0.4%
|
|
1,651
|
|
|
0.4%
|
Variable
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Total Yen denominated
|
|
|
|
1,652
|
|
|
|
|
1,651
|
|
|
|
Total unsecured debt
|
|
|
|
49,180
|
|
|
|
|
45,661
|
|
|
|
Total other(2)
|
|
|
|
(104
|
)
|
|
|
|
(265
|
)
|
|
|
Total debt
|
|
|
|
49,076
|
|
|
|
|
45,396
|
|
|
|
Less amounts due within one year
|
|
|
|
(5,362
|
)
|
|
|
|
(1,876
|
)
|
|
|
Long-term debt
|
|
|
|
$
|
43,714
|
|
|
|
|
$
|
43,520
|
|
|
|
|
|
(1)
|
The average rate represents the weighted-average stated rate for each corresponding debt category, based on year-end balances and year-end interest rates.
|
|
|
(2)
|
Includes deferred loan costs, discounts, fair value hedges, foreign-held debt and secured debt.
|
Annual maturities of long-term debt during the next five years and thereafter are as follows:
|
|
|
|
|
|
(Amounts in millions)
|
|
Annual
|
Fiscal Year
|
|
Maturities
|
2021
|
|
$
|
5,362
|
|
2022
|
|
3,009
|
|
2023
|
|
2,830
|
|
2024
|
|
4,652
|
|
2025
|
|
4,367
|
|
Thereafter
|
|
28,960
|
|
Total
|
|
$
|
49,180
|
|
Debt Issuances
Information on long-term debt issued during fiscal 2020, for general corporate purposes, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
Issue Date
|
|
Principal Amount
|
|
Maturity Date
|
|
Fixed vs. Floating
|
|
Interest Rate
|
|
Net Proceeds
|
April 23, 2019
|
|
$1,500
|
|
July 8, 2024
|
|
Fixed
|
|
2.850%
|
|
$
|
1,493
|
|
April 23, 2019
|
|
$1,250
|
|
July 8, 2026
|
|
Fixed
|
|
3.050%
|
|
1,242
|
|
April 23, 2019
|
|
$1,250
|
|
July 8, 2029
|
|
Fixed
|
|
3.250%
|
|
1,243
|
|
September 24, 2019
|
|
$500
|
|
September 24, 2029
|
|
Fixed
|
|
2.375%
|
|
497
|
|
September 24, 2019
|
|
$1,000
|
|
September 24, 2049
|
|
Fixed
|
|
2.950%
|
|
975
|
|
Various
|
|
$42
|
|
Various
|
|
Various
|
|
Various
|
|
42
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
5,492
|
|
Information on long-term debt issued during fiscal 2019, to fund a portion of the purchase price for the Flipkart acquisition and for general corporate purposes, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
Issue Date
|
|
Principal Amount
|
|
Maturity Date
|
|
Fixed vs. Floating
|
|
Interest Rate
|
|
Net Proceeds
|
June 27, 2018
|
|
$750
|
|
June 23, 2020
|
|
Floating
|
|
Floating
|
|
$
|
748
|
|
June 27, 2018
|
|
$1,250
|
|
June 23, 2020
|
|
Fixed
|
|
2.850%
|
|
1,247
|
|
June 27, 2018
|
|
$750
|
|
June 23, 2021
|
|
Floating
|
|
Floating
|
|
748
|
|
June 27, 2018
|
|
$1,750
|
|
June 23, 2021
|
|
Fixed
|
|
3.125%
|
|
1,745
|
|
June 27, 2018
|
|
$2,750
|
|
June 26, 2023
|
|
Fixed
|
|
3.400%
|
|
2,740
|
|
June 27, 2018
|
|
$1,500
|
|
June 26, 2025
|
|
Fixed
|
|
3.550%
|
|
1,490
|
|
June 27, 2018
|
|
$2,750
|
|
June 26, 2028
|
|
Fixed
|
|
3.700%
|
|
2,725
|
|
June 27, 2018
|
|
$1,500
|
|
June 28, 2038
|
|
Fixed
|
|
3.950%
|
|
1,473
|
|
June 27, 2018
|
|
$3,000
|
|
June 29, 2048
|
|
Fixed
|
|
4.050%
|
|
2,935
|
|
Various
|
|
$21
|
|
Various
|
|
Various
|
|
Various
|
|
21
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
15,872
|
|
The fiscal 2020 and fiscal 2019 issuances are senior, unsecured notes which rank equally with all other senior, unsecured debt obligations of the Company, and are not convertible or exchangeable. These issuances do not contain any financial covenants which restrict the Company's ability to pay dividends or repurchase company stock.
Repayments
The following table provides details of debt repayments during fiscal 2020:
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
|
|
|
|
|
|
|
Maturity Date
|
|
Principal Amount
|
|
Fixed vs. Floating
|
|
Interest Rate
|
|
Repayment
|
February 1, 2019
|
|
$500
|
|
Fixed
|
|
4.125%
|
|
$
|
364
|
|
October 20, 2019
|
|
$300
|
|
Floating
|
|
Floating
|
|
300
|
|
October 20, 2019
|
|
$1,200
|
|
Fixed
|
|
1.750%
|
|
1,200
|
|
Various(1)
|
|
$43
|
|
Various
|
|
Various
|
|
43
|
|
Total repayment of matured debt
|
|
|
|
|
|
|
|
$
|
1,907
|
|
(1) Includes repayments of smaller long-term debt as it matured in several non-U.S. operations.
The following table provides details of debt repayments during fiscal 2019:
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
|
|
|
|
|
|
|
Maturity Date
|
|
Principal Amount
|
|
Fixed vs. Floating
|
|
Interest Rate
|
|
Repayment
|
February 15, 2018
|
|
$1,250
|
|
Fixed
|
|
5.800%
|
|
$
|
1,250
|
|
April 11, 2018
|
|
$1,250
|
|
Fixed
|
|
1.125%
|
|
1,250
|
|
June 1, 2018
|
|
$500
|
|
Floating
|
|
Floating
|
|
500
|
|
December 15, 2018
|
|
$724
|
|
Fixed
|
|
1.950%
|
|
724
|
|
Various(1)
|
|
$60
|
|
Various
|
|
Various
|
|
60
|
|
Total repayment of matured debt
|
|
|
|
|
|
|
|
$
|
3,784
|
|
(1) Includes repayments of smaller long-term debt as it matured in several non-U.S. operations.
Note 7. Leases
The Company leases certain retail locations, distribution and fulfillment centers, warehouses, office spaces, land and equipment throughout the U.S. and internationally.
The Company's lease costs recognized in the Consolidated Statement of Income consist of the following:
|
|
|
|
|
|
(Amounts in millions)
|
|
Fiscal Year Ended January 31, 2020
|
Operating lease cost(1)
|
|
$
|
2,670
|
|
Finance lease cost:
|
|
|
Amortization of right-of-use assets
|
|
480
|
|
Interest on lease obligations
|
|
306
|
|
Variable lease cost
|
|
691
|
|
(1) Rentals (including amounts applicable to taxes, insurance, maintenance, other operating expenses and contingent rentals) under operating leases and other short-term rental arrangements were $3.0 billion and $2.9 billion in fiscal 2019 and 2018, respectively.
Other lease information is as follows:
|
|
|
|
|
|
(Dollar amounts in millions)
|
|
Fiscal Year Ended January 31, 2020
|
Cash paid for amounts included in measurement of lease obligations:
|
|
|
Operating cash flows from operating leases
|
|
$
|
2,614
|
|
Operating cash flows from finance leases
|
|
278
|
|
Financing cash flows from finance leases
|
|
485
|
|
Assets obtained in exchange for operating lease obligations
|
|
2,151
|
|
Assets obtained in exchange for finance lease obligations
|
|
1,081
|
|
Weighted-average remaining lease term - operating leases
|
|
15.6 years
|
|
Weighted-average remaining lease term - finance leases
|
|
14.4 years
|
|
Weighted-average discount rate - operating leases
|
|
5.4
|
%
|
Weighted-average discount rate - finance leases
|
|
8.6
|
%
|
The aggregate annual lease obligations at January 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
|
|
|
Fiscal Year
|
|
Operating Leases
|
|
Finance Leases
|
2021
|
|
$
|
2,587
|
|
|
$
|
797
|
|
2022
|
|
2,358
|
|
|
757
|
|
2023
|
|
2,138
|
|
|
640
|
|
2024
|
|
1,932
|
|
|
552
|
|
2025
|
|
1,728
|
|
|
492
|
|
Thereafter
|
|
15,514
|
|
|
5,612
|
|
Total undiscounted lease obligations
|
|
26,257
|
|
|
8,850
|
|
Less imputed interest
|
|
(8,293
|
)
|
|
(4,032
|
)
|
Net lease obligations
|
|
$
|
17,964
|
|
|
$
|
4,818
|
|
Upon adoption of ASU 2016-02, Leases (Topic 842), the Company's aggregate annual lease obligations includes leases with reasonably assured renewals. The aggregate minimum annual lease rentals as of January 31, 2019 for the remaining contractual term of non-cancelable leases under ASC 840 were as follows:
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
|
|
|
Fiscal Year
|
|
Operating Leases(1)
|
|
Capital Lease and Financing Obligations
|
2020
|
|
$
|
1,856
|
|
|
$
|
917
|
|
2021
|
|
1,655
|
|
|
856
|
|
2022
|
|
1,420
|
|
|
794
|
|
2023
|
|
1,233
|
|
|
667
|
|
2024
|
|
1,063
|
|
|
593
|
|
Thereafter
|
|
6,891
|
|
|
6,069
|
|
Total minimum rentals
|
|
14,118
|
|
|
9,896
|
|
Less estimated executory costs
|
|
|
|
23
|
|
Net minimum lease payments
|
|
|
|
9,873
|
|
Financing obligation noncash gains and other
|
|
|
|
2,278
|
|
Less imputed interest
|
|
|
|
(4,739
|
)
|
Present value of minimum lease payments
|
|
|
|
$
|
7,412
|
|
|
|
(1)
|
Represents minimum contractual obligation for non-cancelable leases with initial or remaining terms greater than 12 months as of January 31, 2019.
|
Note 8. Fair Value Measurements
Assets and liabilities recorded at fair value are measured using the fair value hierarchy, which prioritizes the inputs used in measuring fair value. The levels of the fair value hierarchy are:
|
|
•
|
Level 1: observable inputs such as quoted prices in active markets;
|
|
|
•
|
Level 2: inputs other than quoted prices in active markets that are either directly or indirectly observable; and
|
|
|
•
|
Level 3: unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions.
|
The Company measures the fair value of equity investments (primarily its investment in JD) on a recurring basis and records them in other long-term assets in the accompanying Consolidated Balance Sheets. Measurement details about the Company's two portions of the investment in JD are as follows:
|
|
•
|
The purchased portion of the investment in JD is measured using Level 1 inputs.
|
|
|
•
|
The portion of the investment in JD received in exchange for selling certain assets related to Yihaodian, the Company's former eCommerce operation in China, measured using Level 2 inputs. Fair value is determined primarily using quoted prices in active markets for similar assets.
|
The fair value of the Company's investment in JD is as follows:
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
Fair Value as of January 31, 2020
|
|
Fair Value as of January 31, 2019
|
Investment in JD measured using Level 1 inputs
|
$
|
2,715
|
|
|
$
|
1,791
|
|
Investment in JD measured using Level 2 inputs
|
2,723
|
|
|
1,792
|
|
Total
|
$
|
5,438
|
|
|
$
|
3,583
|
|
Derivatives
The Company also has derivatives recorded at fair value. Derivative fair values are the estimated amounts the Company would receive or pay upon termination of the related derivative agreements as of the reporting dates. The fair values have been measured using the income approach and Level 2 inputs, which include the relevant interest rate and foreign currency forward curves. As of January 31, 2020 and January 31, 2019, the notional amounts and fair values of these derivatives were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
January 31, 2019
|
|
(Amounts in millions)
|
Notional Amount
|
|
Fair Value
|
|
Notional Amount
|
|
Fair Value
|
|
Receive fixed-rate, pay variable-rate interest rate swaps designated as fair value hedges
|
$
|
4,000
|
|
|
$
|
97
|
|
(1)
|
$
|
4,000
|
|
|
$
|
(78
|
)
|
(2)
|
Receive fixed-rate, pay fixed-rate cross-currency swaps designated as net investment hedges
|
3,750
|
|
|
455
|
|
(1)
|
2,250
|
|
|
334
|
|
(1)
|
Receive fixed-rate, pay fixed-rate cross-currency swaps designated as cash flow hedges
|
4,067
|
|
|
(696
|
)
|
(2)
|
4,173
|
|
|
(272
|
)
|
(3)
|
Total
|
$
|
11,817
|
|
|
$
|
(144
|
)
|
|
$
|
10,423
|
|
|
$
|
(16
|
)
|
|
|
|
(1)
|
Classified in Other long-term assets within the Company's Consolidated Balance Sheets.
|
|
|
(2)
|
Classified in Deferred income taxes and other within the Company's Consolidated Balance Sheets.
|
|
|
(3)
|
Approximately $350 million of cash flow hedges were classified in Deferred income taxes and other and $78 million of cash flow were classified in Other long-term assets in the Company's Consolidated Balance Sheets.
|
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company's assets and liabilities are also subject to nonrecurring fair value measurements. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.
For the fiscal year ended January 31, 2020, the Company recorded impairment charges related to assets measured at fair value on a non-recurring basis primarily related to the following:
|
|
•
|
in the Walmart U.S. segment, $0.5 billion in impairment charges for impaired assets consisting primarily of trade names and acquired developed software due to strategic decisions that resulted in the write-down of certain eCommerce assets; and
|
|
|
•
|
in the Walmart International segment, $0.4 billion in impairment charges consisting primarily of the write-off of the carrying value of one of Flipkart's two fashion trade names, Jabong.com, as a result of a strategic decision to focus on the Myntra.com fashion platform.
|
These impairment charges were classified in operating, selling, general and administrative expenses in the Company's Consolidated Statements of Income. Other impairment charges for assets measured at fair value on a nonrecurring basis during fiscal 2020 were immaterial.
As discussed in Note 12, the Company sold the majority stake in Walmart Brazil during fiscal 2019. The assets of the disposal group totaled $3.3 billion and were comprised of $1.0 billion in current assets, $1.6 billion in property and equipment and property under capital lease and financing obligations, net, and $0.7 billion of other long-term assets. When measured as held for sale, these assets were fully impaired as the carrying value of the disposal group exceeded the fair value, less costs to sell and contributed to a pre-tax net loss of $4.8 billion in the Walmart International segment, which was recorded in other gains and losses in the Company's Consolidated Statement of Income. Other impairment charges to assets measured at fair value on a nonrecurring basis during fiscal 2019 were immaterial.
Other Fair Value Disclosures
The Company records cash and cash equivalents, restricted cash and short-term borrowings at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities.
The Company's long-term debt is also recorded at cost. The fair value is estimated using Level 2 inputs based on the Company's current incremental borrowing rate for similar types of borrowing arrangements. The carrying value and fair value of the Company's long-term debt as of January 31, 2020 and 2019, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
January 31, 2019
|
(Amounts in millions)
|
|
Carrying Value
|
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
Long-term debt, including amounts due within one year
|
|
$
|
49,076
|
|
|
$
|
57,769
|
|
|
$
|
45,396
|
|
|
$
|
49,570
|
|
Note 9. Taxes
The components of income (loss) before income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
|
2018
|
U.S.
|
|
$
|
17,098
|
|
|
$
|
15,875
|
|
|
$
|
10,722
|
|
Non-U.S.
|
|
3,018
|
|
|
(4,415
|
)
|
|
4,401
|
|
Total income before income taxes
|
|
$
|
20,116
|
|
|
$
|
11,460
|
|
|
$
|
15,123
|
|
A summary of the provision for income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
|
2018
|
Current:
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
2,794
|
|
|
$
|
2,763
|
|
|
$
|
2,998
|
|
U.S. state and local
|
|
587
|
|
|
493
|
|
|
405
|
|
International
|
|
1,205
|
|
|
1,495
|
|
|
1,377
|
|
Total current tax provision
|
|
4,586
|
|
|
4,751
|
|
|
4,780
|
|
Deferred:
|
|
|
|
|
|
|
U.S. federal
|
|
663
|
|
|
(361
|
)
|
|
(22
|
)
|
U.S. state and local
|
|
35
|
|
|
(16
|
)
|
|
(12
|
)
|
International
|
|
(369
|
)
|
|
(93
|
)
|
|
(146
|
)
|
Total deferred tax expense (benefit)
|
|
329
|
|
|
(470
|
)
|
|
(180
|
)
|
Total provision for income taxes
|
|
$
|
4,915
|
|
|
$
|
4,281
|
|
|
$
|
4,600
|
|
In December 2017, the Tax Act was enacted and significantly changed U.S. income tax law. Beginning January 2018, the Tax Act reduced the U.S. statutory tax rate and created new taxes focused on foreign-sourced earnings and related-party payments, including the creation of the base erosion anti-abuse tax and a new tax on global intangible low-taxed income ("GILTI"). In addition, the Company was subject to a one-time transition tax in fiscal 2018 on accumulated foreign subsidiary earnings not previously subject to U.S. income tax.
The SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), which allowed companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in its financial statements as of January 31, 2018, in accordance with SAB 118. The Company elected to apply the measurement period provisions of this guidance to certain income tax effects of the Tax Act when it became effective. The provisional measurement period ended in the fourth quarter of fiscal 2019. Management completed the Company's accounting for Tax Reform in fiscal 2019 based on prevailing regulations and currently available information, and any additional guidance issued by the IRS could impact the aforementioned amounts in future periods. The net tax benefit recognized in fiscal 2018 related to the Tax Act was $207 million, and in fiscal 2019, the Company recorded $442 million of additional tax expense related to the Tax Act, included as a component of provision for income taxes.
One-time Transition Tax
The Tax Act required the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets, as defined by the Tax Act, and 8.0% on the remaining earnings. In fiscal 2018, the Company recorded a provisional amount of $1.9 billion of additional income tax expense for its one-time transitional tax liability. The Company calculated the Transition Tax liability and increased the provisional amount by $413 million, with the increase included as a component of provision for income taxes in fiscal 2019.
Deferred Tax Effects
The Tax Act reduced the U.S. statutory tax rate from 35.0% to 21.0%, beginning January 2018. Accordingly, the Company re-measured its deferred taxes as of January 31, 2018, to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. In fiscal 2018, the Company recognized a deferred tax benefit of $2.1 billion to reflect the reduced U.S. tax rate and other effects of the Tax Act. In fiscal 2018, the Company made no provisional adjustment with respect to the GILTI provision of the Tax Act. Upon finalizing the provisional accounting for the remeasurement of U.S. deferred tax assets and liabilities in fiscal 2019, the Company recorded an additional tax benefit of $75 million, which is included as a component of provision for income taxes.
Effective Income Tax Rate Reconciliation
In the past, the Company's effective income tax rate was typically lower than the U.S. statutory tax rate primarily because of benefits from lower-taxed global operations partially offset by a valuation allowance. However, beginning January 2018, the U.S. statutory rate of 21.0% generally falls below statutory rates in international jurisdictions. A reconciliation of the significant differences between the U.S. statutory tax rate and the effective income tax rate on pretax income from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
|
|
2020
|
|
2019
|
|
2018
|
U.S. statutory tax rate
|
|
21.0
|
%
|
|
21.0
|
%
|
|
33.8
|
%
|
U.S. state income taxes, net of federal income tax benefit
|
|
2.2
|
%
|
|
3.0
|
%
|
|
1.7
|
%
|
Impact of the Tax Act:
|
|
|
|
|
|
|
|
One-time transition tax
|
|
—
|
%
|
|
3.6
|
%
|
|
12.3
|
%
|
Deferred tax effects
|
|
—
|
%
|
|
(0.7
|
)%
|
|
(14.1
|
)%
|
Income taxed outside the U.S.
|
|
(1.0
|
)%
|
|
(3.4
|
)%
|
|
(6.3
|
)%
|
Disposition of Walmart Brazil
|
|
—
|
%
|
|
6.7
|
%
|
|
—
|
%
|
Valuation allowance
|
|
2.3
|
%
|
|
6.3
|
%
|
|
2.1
|
%
|
Net impact of repatriated international earnings
|
|
0.4
|
%
|
|
0.8
|
%
|
|
(0.1
|
)%
|
Federal tax credits
|
|
(0.8
|
)%
|
|
(1.3
|
)%
|
|
(0.9
|
)%
|
Enacted change in tax laws
|
|
(1.9
|
)%
|
|
—
|
%
|
|
—
|
%
|
Change in reserve for tax contingencies
|
|
2.5
|
%
|
|
0.6
|
%
|
|
(0.1
|
)%
|
Other, net
|
|
(0.3
|
)%
|
|
0.8
|
%
|
|
2.0
|
%
|
Effective income tax rate
|
|
24.4
|
%
|
|
37.4
|
%
|
|
30.4
|
%
|
Deferred Taxes
The significant components of the Company's deferred tax account balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
|
Loss and tax credit carryforwards
|
|
$
|
9,056
|
|
|
$
|
2,964
|
|
Accrued liabilities
|
|
2,483
|
|
|
2,135
|
|
Share-based compensation
|
|
250
|
|
|
245
|
|
Lease obligations
|
|
4,098
|
|
|
—
|
|
Other
|
|
1,020
|
|
|
1,131
|
|
Total deferred tax assets
|
|
16,907
|
|
|
6,475
|
|
Valuation allowances
|
|
(8,588
|
)
|
|
(2,448
|
)
|
Deferred tax assets, net of valuation allowances
|
|
8,319
|
|
|
4,027
|
|
Deferred tax liabilities:
|
|
|
|
|
Property and equipment
|
|
4,621
|
|
|
4,175
|
|
Acquired intangibles
|
|
1,152
|
|
|
2,099
|
|
Inventory
|
|
1,414
|
|
|
1,354
|
|
Lease right of use assets
|
|
3,998
|
|
|
—
|
|
Mark-to-market investments
|
|
724
|
|
|
335
|
|
Other
|
|
700
|
|
|
564
|
|
Total deferred tax liabilities
|
|
12,609
|
|
|
8,527
|
|
Net deferred tax liabilities
|
|
$
|
4,290
|
|
|
$
|
4,500
|
|
The deferred taxes noted above are classified as follows in the Company's Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
Balance Sheet classification
|
|
|
|
|
Assets:
|
|
|
|
|
Other long-term assets
|
|
$
|
1,914
|
|
|
$
|
1,796
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Deferred income taxes and other
|
|
6,204
|
|
|
6,296
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
4,290
|
|
|
$
|
4,500
|
|
Unremitted Earnings
Prior to the Tax Act, the Company asserted that all unremitted earnings of its foreign subsidiaries were considered indefinitely reinvested. As a result of the Tax Act, the Company reported and paid U.S. tax on the majority of its previously unremitted foreign earnings and repatriations of foreign earnings will generally be free of U.S. federal tax, but may incur other taxes such as withholding or state taxes. As of January 31, 2020, the Company has not recorded approximately $3 billion of deferred tax liabilities associated with remaining unremitted foreign earnings considered indefinitely reinvested, for which U.S. and foreign income and withholding taxes would be due upon repatriation.
Net Operating Losses, Tax Credit Carryforwards and Valuation Allowances
As of January 31, 2020, the Company's net operating loss and capital loss carryforwards totaled approximately $37.8 billion. Of these carryforwards, approximately $25.2 billion will expire, if not utilized, in various years through 2040. The remaining carryforwards have no expiration.
The recoverability of these future tax deductions and credits is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is generally established. To the extent that a valuation allowance was established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the change in the valuation allowance is recognized in the consolidated statements of income.
The Company had valuation allowances of $8.6 billion and $2.4 billion as of January 31, 2020 and 2019, respectively, on deferred tax assets associated primarily with net operating loss carryforwards for which management has determined it is more likely than not that the deferred tax assets will not be realized. Due to tax law changes in Luxembourg enacted in December 2019 the Company recognized additional deferred tax assets, and related valuation allowances, of $6.2 billion associated with existing net operating loss carryforwards. Other activity in the valuation allowance during fiscal 2020 related to valuation allowance increases in other markets, as well as releases due to the expiration of underlying deferred tax assets.
Uncertain Tax Positions
The benefits of uncertain tax positions are recorded in the Company's Consolidated Financial Statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities.
As of January 31, 2020 and 2019, the amount of unrecognized tax benefits related to continuing operations was $1.8 billion and $1.3 billion, respectively. The amount of unrecognized tax benefits that would affect the Company's effective income tax rate was $1.6 billion and $1.1 billion as of January 31, 2020 and 2019, respectively.
A reconciliation of unrecognized tax benefits from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
|
2018
|
Unrecognized tax benefits, beginning of year
|
|
$
|
1,305
|
|
|
$
|
1,010
|
|
|
$
|
1,050
|
|
Increases related to prior year tax positions
|
|
516
|
|
|
620
|
|
|
130
|
|
Decreases related to prior year tax positions
|
|
(15
|
)
|
|
(107
|
)
|
|
(254
|
)
|
Increases related to current year tax positions
|
|
66
|
|
|
203
|
|
|
122
|
|
Settlements during the period
|
|
(29
|
)
|
|
(390
|
)
|
|
(23
|
)
|
Lapse in statutes of limitations
|
|
(26
|
)
|
|
(31
|
)
|
|
(15
|
)
|
Unrecognized tax benefits, end of year
|
|
$
|
1,817
|
|
|
$
|
1,305
|
|
|
$
|
1,010
|
|
The Company classifies interest and penalties related to uncertain tax benefits as interest expense and as operating, selling, general and administrative expenses, respectively. Interest expense and penalties related to these positions were immaterial for fiscal 2020, 2019 and 2018. During the next twelve months, it is reasonably possible that tax audit resolutions could reduce unrecognized tax benefits by an immaterial amount, either because the tax positions are sustained on audit or because the Company agrees to their disallowance. The Company is focused on resolving tax audits as expeditiously as possible. As a result of these efforts, unrecognized tax benefits could potentially be reduced beyond the provided range during the next twelve months. The Company does not expect any change to have a material impact to its Consolidated Financial Statements.
The Company remains subject to income tax examinations for its U.S. federal income taxes generally for fiscal 2014, and 2017 through 2020. The Company also remains subject to income tax examinations for international income taxes for fiscal 2013 through 2020, and for U.S. state and local income taxes generally for the fiscal years ended 2013 through 2020. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before fiscal 2012.
Other Taxes
The Company is subject to tax examinations for value added, sales-based, payroll and other non-income taxes. A number of these examinations are ongoing in various jurisdictions. In certain cases, the Company has received assessments from the respective taxing authorities in connection with these examinations. Unless otherwise indicated, the possible losses or range of possible losses associated with these matters are individually immaterial, but a group of related matters, if decided adversely to the Company, could result in a liability material to the Company's Consolidated Financial Statements.
Note 10. Contingencies
Legal Proceedings
The Company is involved in a number of legal proceedings. The Company has made accruals with respect to these matters, where appropriate, which are reflected in the Company's Consolidated Financial Statements. For some matters, a liability is not probable or the amount cannot be reasonably estimated and therefore an accrual has not been made. However, where a liability is reasonably possible and may be material, such matters have been disclosed. The Company may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company and its shareholders.
Unless stated otherwise, the matters discussed below, if decided adversely to or settled by the Company, individually or in the aggregate, may result in a liability material to the Company's financial condition, results of operations or cash flows.
Asda Equal Value Claims
Asda Stores, Ltd. ("Asda"), a wholly-owned subsidiary of the Company, is a defendant in over 35,000 "equal value" claims that began in 2008 and are proceeding before an Employment Tribunal in Manchester (the "Employment Tribunal") in the United Kingdom ("UK") on behalf of current and former Asda store employees, and further claims may be asserted in the future. The claimants allege that the work performed by employees in Asda's retail stores is of equal value in terms of, among other things, the demands of their jobs compared to that of employees working in Asda's warehouse and distribution facilities, and that the difference in pay between these job positions disparately impacts women because more women work in retail stores while more men work in warehouses and distribution facilities, and that the pay difference is not objectively justified. The claimants are requesting differential back pay based on higher wage rates in the warehouse and distribution facilities and higher wage rates on a prospective basis.
In October 2016, following a preliminary hearing, the Employment Tribunal ruled that claimants could compare their positions in Asda's retail stores with those of employees in Asda's warehouse and distribution facilities. Asda appealed the ruling and the appeal is scheduled to be heard by the Supreme Court of the United Kingdom on July 14-15, 2020.
Notwithstanding the appeal, claimants are now proceeding in the next phase of their claims. That phase will determine whether the work performed by the claimants is of equal value to the work performed by employees in Asda's warehouse and distribution facilities.
At present, the Company cannot predict the number of such claims that may be filed, and cannot reasonably estimate any loss or range of loss that may arise from these proceedings. Accordingly, the Company can provide no assurance as to the scope and outcomes of these matters and no assurance as to whether its business, financial position, results of operations or cash flows will not be materially adversely affected. The Company believes it has substantial factual and legal defenses to these claims, and intends to defend the claims vigorously.
National Prescription Opiate Litigation and Related Matters
In December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous lawsuits filed against a wide array of defendants by various plaintiffs, including counties, cities, healthcare providers, Native American tribes, individuals, and third-party payors, asserting claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation is entitled In re National Prescription Opiate Litigation (MDL No. 2804), and is pending in the U.S. District Court for the Northern District of Ohio. The Company is named as a defendant in some of the cases included in this multidistrict litigation. Similar cases that name the Company have also been filed in state courts by state, local and tribal governments, health care providers and other plaintiffs. Plaintiffs are seeking compensatory and punitive damages, as well as injunctive relief including abatement. The Company cannot predict the number of such claims that may be filed, but believes it has substantial factual and legal defenses to these claims, and intends to defend the claims vigorously. The Company has also been responding to subpoenas, information requests and investigations from governmental entities related to nationwide controlled substance dispensing and distribution practices involving opioids. The Company cannot reasonably estimate any loss or range of loss that may arise from these matters. Accordingly, the Company can provide no assurance as to the scope and outcome of these matters and no assurance as to whether its business, financial position, results of operations or cash flows will not be materially adversely affected.
FCPA Investigation and Related Matters
As previously disclosed, the Company was under investigation by the U.S. Department of Justice (the "DOJ") and the Securities and Exchange Commission (the "SEC") regarding possible violations of the U.S. Foreign Corrupt Practices Act (the "FCPA"). Throughout the investigative process, the Company cooperated with the DOJ and the SEC, and on June 20, 2019, the Company announced the resolution of the investigations with the DOJ and the SEC and paid $283 million in June 2019 consisting of a combination of penalties, disgorgement and interest as further described below (the "Settlement Amount"). The Company previously recorded the Settlement Amount in the Company's fiscal 2018 consolidated financial statements in anticipated settlement of these matters.
The resolution of the investigations with the DOJ and SEC included:
|
|
1.
|
A non-prosecution agreement (the "NPA") between the DOJ and the Company for a three-year term. Pursuant to the NPA, the Company paid a $138 million penalty and agreed to maintain the Company's anti-corruption compliance program for three years, certain reporting obligations for three years, and a limited monitorship with a third-party for two years regarding the Company's anti-corruption compliance program, with the possibility of a third year pending the results of the monitorship during the initial two-year period. The DOJ agreed that it will not prosecute the Company for any conduct described in the NPA provided that the Company performs its obligations under the NPA for the three-year term.
|
|
|
2.
|
A plea agreement (the "Plea Agreement") entered into for a three-year term by the DOJ and WMT Brasilia S.a.r.l., an indirect wholly-owned foreign subsidiary of the Company ("WMT Brasilia") that previously owned a majority stake of the Company's Brazilian business. Through the Plea Agreement, entered in the United States District Court for the Eastern District of Virginia, WMT Brasilia pled guilty to one count of causing a books and records violation of the FCPA. The Company on behalf of WMT Brasilia was assessed a $4 million penalty, including forfeiture, that was deducted from the amount paid by the Company under the NPA.
|
|
|
3.
|
A Cease-and-Desist Order entered into by the SEC in a civil administrative proceeding (the "SEC Order"), the entry of which the Company consented to with respect to certain violations of the books and records and internal controls provisions of the FCPA. The Company paid $145 million in disgorgement and interest, and agreed to make certain reports to the SEC on its anti-corruption compliance and remediation efforts for two years, and cease and desist any violations of the books and records and internal controls provisions of the FCPA.
|
On June 20, 2019, the Company also entered into an Administrative Agreement with the U.S. Environmental Protection Agency (the "EPA") for a three-year term, which replaces the interim administrative agreement between the Company and the EPA dated May 28, 2013. The May 28, 2013 agreement arose as part of a settlement by the Company regarding certain hazardous waste materials matters with several governmental authorities. The new EPA agreement, among other things, resolved any debarment or suspension as to participation in federal government programs by the Company due to the NPA, the Plea Agreement, and the SEC Order, provided that the Company fulfills the terms and conditions of the new EPA agreement, which requires reporting by the Company to the EPA periodically during the three-year term, and requires a new, limited two-year monitorship. The monitor referenced above that has been engaged by the Company under the NPA will also monitor compliance with the new EPA agreement. If the DOJ monitorship is extended as referenced above, the EPA monitorship may also be extended for an additional year.
In addition, the Company expects to incur costs in implementing the settlement and may incur costs in responding to any new civil or regulatory actions. The Company does not presently believe that these matters will have a material adverse effect on its business, financial position, results of operations, or cash flows.
Note 11. Retirement-Related Benefits
The Company offers a 401(k) plan for associates in the U.S. under which eligible associates can begin contributing to the plan immediately upon hire. The Company also offers a 401(k) type plan for associates in Puerto Rico under which associates can begin to contribute generally after one year of employment. Under these plans, after one year of employment, 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.
Associates in international countries who are not U.S. citizens are covered by various defined contribution post-employment benefit arrangements. These plans are administered based upon the legislative and tax requirements in the countries in which they are established.
The following table summarizes the contribution expense related to the Company's defined contribution plans for fiscal 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
|
2018
|
Defined contribution plans:
|
|
|
|
|
|
|
U.S.
|
|
$
|
1,184
|
|
|
$
|
1,165
|
|
|
$
|
1,124
|
|
International
|
|
177
|
|
|
126
|
|
|
126
|
|
Total contribution expense for defined contribution plans
|
|
$
|
1,361
|
|
|
$
|
1,291
|
|
|
$
|
1,250
|
|
Additionally, the Company's subsidiaries in the United Kingdom and Japan have sponsored defined benefit pension plans. In October 2019, Asda, Walmart and the Trustee of the Asda Group Pension Scheme (the "Plan") entered into an agreement pursuant to which Asda made a cash contribution of $1.0 billion to the Plan (the "Asda Pension Contribution") which enabled the Plan to purchase a bulk annuity insurance contract for the benefit of Plan participants. The agreement between Asda, Walmart and the Trustee of the Plan contemplates that subsequent to the purchase of the bulk annuity insurance contract by the Plan, each of the Plan participants will be issued an individual annuity contract. The issuer of the individual annuity insurance contracts will be solely responsible for paying each participant’s benefits in full and will release the Plan and Asda from any future obligations. The Company expects the issuance of individual annuity contracts to the Plan participants to take place in late fiscal 2021 or early fiscal 2022, which will trigger a pension settlement that will result in all Plan balances, including accumulated pension components within other comprehensive income, being charged to expense.
The defined benefit pension plan in Japan was underfunded by $140 million and $175 million as of January 31, 2020 and 2019, respectively and recorded as a liability in the Company's Consolidated Balance Sheets in deferred income taxes and other. Certain other international operations also have defined benefit arrangements that are not significant.
Note 12. Disposals, Acquisitions and Related Items
The following material disposals, acquisitions and other items impact the Company's Walmart International segment. Other immaterial transactions have also occurred or been announced.
Walmart Brazil
In August 2018, the Company sold an 80 percent stake of Walmart Brazil to Advent International ("Advent"). Under the terms of the sale, Advent agreed to contribute additional capital to the business over a three-year period and Walmart agreed to indemnify Advent for certain matters.
As a result, the Company recorded a pre-tax net loss of $4.8 billion during fiscal 2019 in other gains and losses in the Company's Consolidated Statement of Income. Substantially all of this charge was recorded during the second quarter of fiscal 2019 upon meeting the held for sale criteria. In calculating the loss, the fair value of the disposal group was reduced by $0.8 billion related to an indemnity, for which a liability was recognized upon closing and is recorded in deferred income taxes and other in the Company's Consolidated Balance Sheets. Under the indemnity, the Company will indemnify Advent for certain pre-closing tax and legal contingencies and other matters for up to R$2.3 billion, adjusted for interest based on the Brazilian interbank deposit rate.
The Company deconsolidated the financial statements of Walmart Brazil during the third quarter of fiscal 2019 and began accounting for its remaining 20 percent ownership interest using the equity method of accounting. This equity method investment was determined to have no fair value and continues to have no carrying value.
Flipkart
In August 2018, the Company acquired 81 percent of the outstanding shares, or 77 percent of the diluted shares, of Flipkart, an Indian-based eCommerce marketplace, for cash consideration of approximately $16 billion. The acquisition increases the Company's investment in India, a large, growing economy. In the second quarter of fiscal 2020, the Company finalized the valuation of assets acquired and liabilities assumed for the Flipkart acquisition as follows:
|
|
•
|
Assets of $24.1 billion, which comprise primarily of $2.2 billion in cash and cash equivalents, $2.8 billion in other current assets, $5.0 billion in intangible assets and $13.5 billion in goodwill. Of the intangible assets, $4.7 billion represents the fair value of trade names, each with an indefinite life, which were estimated using the income approach based on Level 3 unobservable inputs. The remaining $0.3 billion of intangible assets primarily relate to acquired technology with a life of 3 years. The goodwill arising from the acquisition consists largely of anticipated synergies and economies of scale primarily related to procurement and logistics and is not expected to be deductible for tax purposes;
|
|
|
•
|
Liabilities of $3.7 billion, which comprise primarily of $1.8 billion of current liabilities and $1.7 billion of deferred income taxes; and
|
|
|
•
|
Noncontrolling interest of $4.3 billion, for which the fair value was estimated using the income approach based on Level 3 unobservable inputs.
|
The Company began consolidating the financial statements of Flipkart in the third quarter of fiscal 2019, using a one-month lag. To finance the acquisition, the Company used a combination of cash provided by long-term debt as discussed in Note 6 and cash on hand. The Flipkart results of operations since acquisition and the pro forma financial information are immaterial.
Note 13. Segments and Disaggregated Revenue
Segments
The Company is engaged in the operation of retail, wholesale and other units, as well as eCommerce websites, located throughout the U.S., Africa, Argentina, Canada, Central America, Chile, China, India, Japan, Mexico and the United Kingdom. The Company previously operated in Brazil prior to the sale of the majority stake of Walmart Brazil in fiscal 2019 discussed in Note 12. The Company's operations are conducted in three reportable segments: Walmart U.S., Walmart International and Sam's Club. The Company defines its segments as those operations whose results the chief operating decision maker ("CODM") regularly reviews to analyze performance and allocate resources. The Company sells similar individual products and services in each of its segments. It is impracticable to segregate and identify revenues for each of these individual products and services.
The Walmart U.S. segment includes the Company's mass merchant concept in the U.S., as well as eCommerce and omni-channel initiatives. The Walmart International segment consists of the Company's operations outside of the U.S., as well as eCommerce and omni-channel initiatives. The Sam's Club segment includes the warehouse membership clubs in the U.S., as well as samsclub.com and omni-channel initiatives. Corporate and support consists of corporate overhead and other items not allocated to any of the Company's segments.
The Company measures the results of its segments using, among other measures, each segment's net sales and operating income, which includes certain corporate overhead allocations. From time to time, the Company revises the measurement of each segment's operating income, including any corporate overhead allocations, as determined by the information regularly reviewed by its CODM. Information for the Company's segments, as well as for Corporate and support, including the reconciliation to income before income taxes, is provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
Walmart U.S.
|
|
Walmart International
|
|
Sam's Club
|
|
Corporate and support
|
|
Consolidated
|
Fiscal Year Ended January 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
341,004
|
|
|
$
|
120,130
|
|
|
$
|
58,792
|
|
|
$
|
—
|
|
|
$
|
519,926
|
|
Operating income (loss)
|
|
17,380
|
|
|
3,370
|
|
|
1,642
|
|
|
(1,824
|
)
|
|
20,568
|
|
Interest, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,410
|
)
|
Other gains and (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,958
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,116
|
|
Total assets
|
|
$
|
110,353
|
|
|
$
|
105,811
|
|
|
$
|
13,494
|
|
|
$
|
6,837
|
|
|
$
|
236,495
|
|
Depreciation and amortization
|
|
6,408
|
|
|
2,682
|
|
|
605
|
|
|
1,292
|
|
|
10,987
|
|
Capital expenditures
|
|
6,315
|
|
|
2,801
|
|
|
525
|
|
|
1,064
|
|
|
10,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
331,666
|
|
|
$
|
120,824
|
|
|
$
|
57,839
|
|
|
$
|
—
|
|
|
$
|
510,329
|
|
Operating income (loss)
|
|
17,386
|
|
|
4,883
|
|
|
1,520
|
|
|
(1,832
|
)
|
|
21,957
|
|
Interest, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,129
|
)
|
Other gains and (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,368
|
)
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,460
|
|
Total assets
|
|
$
|
105,114
|
|
|
$
|
97,066
|
|
|
$
|
12,893
|
|
|
$
|
4,222
|
|
|
$
|
219,295
|
|
Depreciation and amortization
|
|
6,201
|
|
|
2,590
|
|
|
639
|
|
|
1,248
|
|
|
10,678
|
|
Capital expenditures
|
|
6,034
|
|
|
2,661
|
|
|
450
|
|
|
1,199
|
|
|
10,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
318,477
|
|
|
$
|
118,068
|
|
|
$
|
59,216
|
|
|
$
|
—
|
|
|
$
|
495,761
|
|
Operating income (loss)
|
|
16,995
|
|
|
5,229
|
|
|
915
|
|
|
(2,702
|
)
|
|
20,437
|
|
Interest, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,178
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
(3,136
|
)
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,123
|
|
Total assets
|
|
$
|
104,347
|
|
|
$
|
81,549
|
|
|
$
|
13,418
|
|
|
$
|
5,208
|
|
|
$
|
204,522
|
|
Depreciation and amortization
|
|
6,005
|
|
|
2,601
|
|
|
698
|
|
|
1,225
|
|
|
10,529
|
|
Capital expenditures
|
|
5,680
|
|
|
2,607
|
|
|
626
|
|
|
1,138
|
|
|
10,051
|
|
Total revenues, consisting of net sales and membership and other income, and long-lived assets, consisting primarily of property and equipment, net and lease right-of-use assets, aggregated by the Company's U.S. and non-U.S. operations for fiscal 2020, 2019 and 2018, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended January 31,
|
(Amounts in millions)
|
|
2020
|
|
2019
|
|
2018
|
Revenues
|
|
|
|
|
|
|
U.S. operations
|
|
$
|
402,532
|
|
|
$
|
392,265
|
|
|
$
|
380,580
|
|
Non-U.S. operations
|
|
121,432
|
|
|
122,140
|
|
|
119,763
|
|
Total revenues
|
|
$
|
523,964
|
|
|
$
|
514,405
|
|
|
$
|
500,343
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
|
|
|
|
U.S. operations
|
|
$
|
86,944
|
|
|
$
|
81,144
|
|
|
$
|
81,478
|
|
Non-U.S. operations
|
|
40,105
|
|
|
30,251
|
|
|
33,340
|
|
Total long-lived assets
|
|
$
|
127,049
|
|
|
$
|
111,395
|
|
|
$
|
114,818
|
|
No individual country outside of the U.S. had total revenues or long-lived assets that were material to the consolidated totals. Additionally, the Company did not generate material total revenues from any single customer.
Disaggregated Revenues
In the following tables, segment net sales are disaggregated by either merchandise category or market. In addition, net sales related to eCommerce are provided for each segment, which include omni-channel sales, where a customer initiates an order online and the order is fulfilled through a store or club.
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
Fiscal Years Ended January 31,
|
Walmart U.S. net sales by merchandise category
|
|
2020
|
|
2019
|
Grocery
|
|
$
|
190,550
|
|
|
$
|
184,202
|
|
General merchandise
|
|
109,600
|
|
|
108,739
|
|
Health and wellness
|
|
37,507
|
|
|
35,788
|
|
Other categories
|
|
3,347
|
|
|
2,937
|
|
Total
|
|
$
|
341,004
|
|
|
$
|
331,666
|
|
Of Walmart U.S.'s total net sales, approximately $21.5 billion and $15.7 billion related to eCommerce for fiscal 2020 and fiscal 2019, respectively.
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
Fiscal Years Ended January 31,
|
Walmart International net sales by market
|
|
2020
|
|
2019
|
Mexico and Central America
|
|
$
|
33,350
|
|
|
$
|
31,790
|
|
United Kingdom
|
|
29,243
|
|
|
30,547
|
|
Canada
|
|
18,420
|
|
|
18,613
|
|
China
|
|
10,671
|
|
|
10,702
|
|
Other
|
|
28,446
|
|
|
29,172
|
|
Total
|
|
$
|
120,130
|
|
|
$
|
120,824
|
|
Of International's total net sales, approximately $11.8 billion and $6.7 billion related to eCommerce for fiscal 2020 and fiscal 2019, respectively.
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
|
Fiscal Year Ended January 31, 2020
|
Sam’s Club net sales by merchandise category
|
|
2020
|
|
2019
|
Grocery and consumables
|
|
$
|
35,328
|
|
|
$
|
33,708
|
|
Fuel, tobacco and other categories
|
|
11,296
|
|
|
12,110
|
|
Home and apparel
|
|
5,478
|
|
|
5,452
|
|
Health and wellness
|
|
3,371
|
|
|
3,181
|
|
Technology, office and entertainment
|
|
3,319
|
|
|
3,388
|
|
Total
|
|
$
|
58,792
|
|
|
$
|
57,839
|
|
Of Sam's Club's total net sales, approximately $3.6 billion and $2.7 billion related to eCommerce for fiscal 2020 and fiscal 2019, respectively.
Note 14. Subsequent Event
Dividends Declared
The Board of Directors approved, effective February 18, 2020, the fiscal 2021 annual dividend of $2.16 per share, an increase over the fiscal 2020 dividend of $2.12 per share. For fiscal 2021, the annual dividend will be paid in four quarterly installments of $0.54 per share, according to the following record and payable dates:
|
|
|
|
Record Date
|
|
Payable Date
|
March 20, 2020
|
|
April 6, 2020
|
May 8, 2020
|
|
June 1, 2020
|
August 14, 2020
|
|
September 8, 2020
|
December 11, 2020
|
|
January 4, 2021
|
Note 15. Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2020
|
(Amounts in millions, except per share data)
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Total
|
Total revenues
|
|
$
|
123,925
|
|
|
$
|
130,377
|
|
|
$
|
127,991
|
|
|
$
|
141,671
|
|
|
$
|
523,964
|
|
Net sales
|
|
122,949
|
|
|
129,388
|
|
|
126,981
|
|
|
140,608
|
|
|
519,926
|
|
Cost of sales
|
|
93,034
|
|
|
97,923
|
|
|
95,900
|
|
|
107,748
|
|
|
394,605
|
|
Consolidated net income
|
|
3,906
|
|
|
3,680
|
|
|
3,321
|
|
|
4,294
|
|
|
15,201
|
|
Consolidated net income attributable to Walmart
|
|
3,842
|
|
|
3,610
|
|
|
3,288
|
|
|
4,141
|
|
|
14,881
|
|
Basic net income per common share attributable to Walmart(1)
|
|
1.34
|
|
|
1.27
|
|
|
1.16
|
|
|
1.46
|
|
|
5.22
|
|
Diluted net income per common share attributable to Walmart(1)
|
|
1.33
|
|
|
1.26
|
|
|
1.15
|
|
|
1.45
|
|
|
5.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2019
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Total
|
Total revenues
|
|
$
|
122,690
|
|
|
$
|
128,028
|
|
|
$
|
124,894
|
|
|
$
|
138,793
|
|
|
$
|
514,405
|
|
Net sales
|
|
121,630
|
|
|
127,059
|
|
|
123,897
|
|
|
137,743
|
|
|
510,329
|
|
Cost of sales
|
|
91,707
|
|
|
95,571
|
|
|
93,116
|
|
|
104,907
|
|
|
385,301
|
|
Consolidated net income (loss)
|
|
2,276
|
|
|
(727
|
)
|
|
1,817
|
|
|
3,813
|
|
|
7,179
|
|
Consolidated net income (loss) attributable to Walmart
|
|
2,134
|
|
|
(861
|
)
|
|
1,710
|
|
|
3,687
|
|
|
6,670
|
|
Basic net income (loss) per common share attributable to Walmart(1)
|
|
0.72
|
|
|
(0.29
|
)
|
|
0.58
|
|
|
1.27
|
|
|
2.28
|
|
Diluted net income (loss) per common share attributable to Walmart(1)
|
|
0.72
|
|
|
(0.29
|
)
|
|
0.58
|
|
|
1.27
|
|
|
2.26
|
|
|
|
(1)
|
The sum of quarterly amounts may not agree to annual amount due to rounding and the impact of a decreasing amount of shares outstanding during the year.
|