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Walmart Inc. - Quarter Report: 2019 April (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended April 30, 2019.
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from              to             .
Commission File Number 001-6991
image2a22.jpg
WALMART INC.
(Exact name of registrant as specified in its charter)
Delaware
 
71-0415188
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
702 S.W. 8th Street
Bentonville, Arkansas
 
72716
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code: (479) 273-4000
Former name, former address and former fiscal year, if changed since last report: N/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  o

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.10 per share
1.900% Notes Due 2022
2.550% Notes Due 2026
 
 WMT
 
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 
ý
  
Accelerated Filer
 
o
Non-Accelerated Filer
 
o
  
Smaller Reporting Company
 
o
 
 
 
 
Emerging Growth Company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o  
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  ý
The registrant had 2,854,722,137 shares of common stock outstanding as of June 5, 2019.


Table of Contents

Walmart Inc.
Form 10-Q
For the Quarterly Period Ended April 30, 2019



Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



2

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Walmart Inc.
Condensed Consolidated Statements of Income
(Unaudited)
 
 
Three Months Ended April 30,
(Amounts in millions, except per share data)
 
2019
 
2018
Revenues:
 
 
 
 
Net sales
 
$
122,949

 
$
121,630

Membership and other income
 
976

 
1,060

Total revenues
 
123,925

 
122,690

Costs and expenses:
 
 
 
 
Cost of sales
 
93,034

 
91,707

Operating, selling, general and administrative expenses
 
25,946

 
25,829

Operating income
 
4,945

 
5,154

Interest:
 
 
 
 
Debt
 
588

 
437

Finance, capital lease and financing obligations
 
85

 
93

Interest income
 
(48
)
 
(43
)
Interest, net
 
625

 
487

Other (gains) and losses
 
(837
)
 
1,845

Income before income taxes
 
5,157

 
2,822

Provision for income taxes
 
1,251

 
546

Consolidated net income
 
3,906

 
2,276

Consolidated net income attributable to noncontrolling interest
 
(64
)
 
(142
)
Consolidated net income attributable to Walmart
 
$
3,842

 
$
2,134

 
 
 
 
 
Net income per common share:
 
 
 
 
Basic net income per common share attributable to Walmart
 
$
1.34

 
$
0.72

Diluted net income per common share attributable to Walmart
 
1.33

 
0.72

 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
Basic
 
2,869

 
2,950

Diluted
 
2,886

 
2,967

 
 
 
 
 
Dividends declared per common share
 
$
2.12

 
$
2.08

See accompanying notes.

3

Table of Contents

Walmart Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended April 30,
(Amounts in millions)
2019
 
2018
Consolidated net income
$
3,906

 
$
2,276

Consolidated net income attributable to noncontrolling interest
(64
)
 
(142
)
Consolidated net income attributable to Walmart
3,842

 
2,134

 
 
 
 
Other comprehensive income (loss), net of income taxes
 
 
 
Currency translation and other
507

 
1,465

Net investment hedges
108

 
68

Cash flow hedges
(131
)
 
(77
)
Minimum pension liability
1

 
43

Other comprehensive income (loss), net of income taxes
485

 
1,499

Other comprehensive (income) loss attributable to noncontrolling interest
(34
)
 
(163
)
Other comprehensive income (loss) attributable to Walmart
451

 
1,336

 
 
 
 
Comprehensive income, net of income taxes
4,391

 
3,775

Comprehensive (income) loss attributable to noncontrolling interest
(98
)
 
(305
)
Comprehensive income attributable to Walmart
$
4,293

 
$
3,470

See accompanying notes.

4

Table of Contents

Walmart Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
April 30,
 
January 31,
 
April 30,
(Amounts in millions)
 
2019
 
2019
 
2018
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
9,255

 
$
7,722

 
$
7,885

Receivables, net
 
5,342

 
6,283

 
4,568

Inventories
 
44,751

 
44,269

 
43,303

Prepaid expenses and other
 
2,391

 
3,623

 
3,486

Total current assets
 
61,739

 
61,897

 
59,242


 
 
 
 
 
 
Property and equipment, net
 
104,604

 
104,317

 
107,622

Operating lease right-of-use assets, net
 
16,833

 
—

 
—

Finance lease right-of-use assets, net
 
3,804

 
—

 
—

Property under capital lease and financing obligations, net
 
—

 
7,078

 
7,178

Goodwill
 
31,416

 
31,181

 
18,850

Other long-term assets
 
16,148

 
14,822

 
12,035

Total assets
 
$
234,544

 
$
219,295

 
$
204,927

 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Short-term borrowings
 
$
4,828

 
$
5,225

 
$
7,762

Accounts payable
 
45,110

 
47,060

 
44,612

Dividends payable
 
4,551

 
—

 
4,607

Accrued liabilities
 
21,023

 
22,159

 
20,782

Accrued income taxes
 
729

 
428

 
718

Long-term debt due within one year
 
1,464

 
1,876

 
1,576

Operating lease obligations due within one year
 
1,748


—


—

Finance lease obligations due within one year
 
435


—


—

Capital lease and financing obligations due within one year
 
—

 
729

 
700

Total current liabilities
 
79,888

 
77,477

 
80,757

 
 
 
 
 
 
 
Long-term debt
 
47,425

 
43,520

 
29,477

Long-term operating lease obligations
 
15,719


—


—

Long-term finance lease obligations
 
3,810


—


—

Long-term capital lease and financing obligations
 
—

 
6,683

 
6,828

Deferred income taxes and other
 
12,792

 
11,981

 
9,541

 
 
 
 
 
 
 
Commitments and contingencies
 

 

 

 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
Common stock
 
286

 
288

 
294

Capital in excess of par value
 
2,734

 
2,965

 
2,557

Retained earnings
 
76,276

 
80,785

 
82,982

Accumulated other comprehensive loss
 
(11,091
)
 
(11,542
)
 
(10,281
)
Total Walmart shareholders' equity
 
68,205

 
72,496

 
75,552

Noncontrolling interest
 
6,705

 
7,138

 
2,772

Total equity
 
74,910

 
79,634

 
78,324

Total liabilities and equity
 
$
234,544

 
$
219,295

 
$
204,927

See accompanying notes.

5

Table of Contents

Walmart Inc.
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)
 
 
 
 
 
 
 
 
 
Accumulated
 
Total
 
 
 
 
 
 
 
 
 
Capital in
 
 
 
Other
 
Walmart
 
 
 
 
(Amounts in millions)
Common Stock
 
Excess of
 
Retained
 
Comprehensive
 
Shareholders'
 
Noncontrolling
 
Total
Shares
 
Amount
 
Par Value
 
Earnings
 
Loss
 
Equity
 
Interest
 
Equity
Balances as of February 1, 2019
2,878

 
$
288

 
$
2,965

 
$
80,785

 
$
(11,542
)
 
$
72,496

 
$
7,138

 
$
79,634

Adoption of new accounting standards on February 1, 2019, net of income taxes
—

 
—

 
—

 
(266
)
 
—

 
(266
)
 
(34
)
 
(300
)
Consolidated net income
—

 
—

 
—

 
3,842

 
—

 
3,842

 
64

 
3,906

Other comprehensive income (loss), net of income taxes
—

 
—

 
—

 
—

 
451

 
451

 
34

 
485

Cash dividends declared ($2.12 per share)
—

 
—

 
—

 
(6,071
)
 
—

 
(6,071
)
 
—

 
(6,071
)
Purchase of Company stock
(21
)
 
(2
)
 
(73
)
 
(2,012
)
 
—

 
(2,087
)
 
—

 
(2,087
)
Cash dividend declared to noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
(481
)
 
(481
)
Other
5

 
—

 
(158
)
 
(2
)
 
—

 
(160
)
 
(16
)
 
(176
)
Balances as of April 30, 2019
2,862

 
$
286

 
$
2,734

 
$
76,276

 
$
(11,091
)
 
$
68,205

 
$
6,705

 
$
74,910

 
 
 
 
 
 
 
 
 
Accumulated
 
Total
 
 
 
 
 
 
 
 
 
Capital in
 
 
 
Other
 
Walmart
 
 
 
 
(Amounts in millions)
Common Stock
 
Excess of
 
Retained
 
Comprehensive
 
Shareholders'
 
Noncontrolling
 
Total
Shares
 
Amount
 
Par Value
 
Earnings
 
Loss
 
Equity
 
Interest
 
Equity
Balances as of February 1, 2018
2,952

 
$
295

 
$
2,648

 
$
85,107

 
$
(10,181
)
 
$
77,869

 
$
2,953

 
$
80,822

Adoption of new accounting standards on February 1, 2018, net of income taxes
—

 
—

 
—

 
2,361

 
(1,436
)
 
925

 
(1
)
 
924

Consolidated net income
—

 
—

 
—

 
2,134

 
—

 
2,134

 
142

 
2,276

Other comprehensive income (loss), net of income taxes
—

 
—

 
—

 
—

 
1,336

 
1,336

 
163

 
1,499

Cash dividends declared ($2.08 per share)
—

 
—

 
—

 
(6,135
)
 
—

 
(6,135
)
 
—

 
(6,135
)
Purchase of Company stock
(5
)
 
(1
)
 
(15
)
 
(492
)
 
—

 
(508
)
 
—

 
(508
)
Cash dividend declared to noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
(489
)
 
(489
)
Other
4

 
—

 
(76
)
 
7

 
—

 
(69
)
 
4

 
(65
)
Balances as of April 30, 2018
2,951

 
$
294

 
$
2,557

 
$
82,982

 
$
(10,281
)
 
$
75,552

 
$
2,772

 
$
78,324

See accompanying notes.

6

Table of Contents

Walmart Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended April 30,
(Amounts in millions)
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Consolidated net income
 
$
3,906

 
$
2,276

Adjustments to reconcile consolidated net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
2,714

 
2,678

Unrealized (gains) and losses
 
(783
)
 
1,845

Deferred income taxes
 
124

 
(50
)
Other operating activities
 
75

 
265

Changes in certain assets and liabilities, net of effects of acquisitions:
 
 
 
 
Receivables, net
 
970

 
1,134

Inventories
 
(421
)
 
547

Accounts payable
 
(1,854
)
 
(1,770
)
Accrued liabilities
 
(1,514
)
 
(1,813
)
Accrued income taxes
 
346

 
49

Net cash provided by operating activities
 
3,563

 
5,161

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Payments for property and equipment
 
(2,205
)
 
(1,818
)
Proceeds from the disposal of property and equipment
 
42

 
198

Proceeds from the disposal of certain operations
 
833

 
—

Payments for business acquisitions, net of cash acquired
 
(56
)
 
—

Other investing activities
 
251

 
(62
)
Net cash used in investing activities
 
(1,135
)
 
(1,682
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Net change in short-term borrowings
 
(399
)
 
2,501

Proceeds from issuance of long-term debt
 
3,978

 
—

Repayments of long-term debt
 
(364
)
 
(2,521
)
Dividends paid
 
(1,520
)
 
(1,533
)
Purchase of Company stock
 
(2,135
)
 
(539
)
Dividends paid to noncontrolling interest
 
(96
)
 
(66
)
Other financing activities
 
(310
)
 
(328
)
Net cash used in financing activities
 
(846
)
 
(2,486
)
 
 
 
 
 
Effect of exchange rates on cash, cash equivalents and restricted cash
 
(46
)
 
143

 
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
 
1,536

 
1,136

Cash, cash equivalents and restricted cash at beginning of year
 
7,756

 
7,014

Cash, cash equivalents and restricted cash at end of period
 
$
9,292

 
$
8,150

See accompanying notes.

7

Table of Contents

Walmart Inc.
Notes to Condensed Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The Condensed Consolidated Financial Statements of Walmart Inc. and its subsidiaries ("Walmart" or the "Company") and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2019 ("fiscal 2019"). Therefore, the interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K.
The Company's Consolidated Financial Statements are based on a fiscal year ending 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 April related to the operations consolidated using a lag that materially affected the Condensed Consolidated Financial Statements.
The Company's business is seasonal to a certain extent due to calendar events and national and religious holidays, as well as weather patterns. Historically, the Company's highest sales volume and operating income have occurred in the fiscal quarter ending January 31.
Restricted Cash
Restricted cash held outside of cash and cash equivalents was $37 million and $34 million as of April 30, 2019 and January 31, 2019, respectively, and was primarily recorded in prepaid expenses and other in the Condensed Consolidated Balance Sheets. Restricted cash held outside of cash and cash equivalents was $300 million as of April 30, 2018 and January 31, 2018, respectively, and was primarily recorded in other long-term assets in the Condensed Consolidated Balance Sheets.
Inventories
At April 30, 2019 and January 31, 2019, the Company's inventories valued at LIFO approximated those inventories as if they were valued at FIFO.
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 as of April 30, 2019. 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 Condensed 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 Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows were immaterially impacted. Updated accounting policies as a result of the adoption of this ASU are described below. Note 10 provides 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 minimum 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.

8

Table of Contents

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.
Revenue Recognition
Contract Balances
Contract balances as a result of transactions with customers primarily consist of receivables included in receivables, net, and deferred gift card revenue included in accrued liabilities in the Company's Condensed Consolidated Balance Sheets. The following table provides the Company's receivables and deferred gift card revenue from transactions with customers:
(Amounts in millions)
 
April 30, 2019
 
January 31, 2019
Assets:
 
 
 
 
Receivables from transactions with customers, net
 
$
2,566

 
$
2,538

 
 
 
 
 
Liabilities:
 
 
 
 
Deferred gift card revenue
 
$
1,899

 
$
1,932

Derivatives
In fiscal 2020, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The adoption of the standard had no current or historical impact on the Company's Condensed Consolidated Financial Statements. The Company continues to use qualitative methods to assess the effectiveness of its designated hedging relationships. Upon adopting ASU 2017-12, the Company modified its existing hedge documentation to use a quantitative method for assessing effectiveness when the hedge is subsequently determined to be ineffective under the qualitative method. There were no other significant changes to the Company's accounting policies for derivatives.
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 will adopt this ASU on February 1, 2020. Management is currently evaluating this ASU to determine its 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 anti-dilutive and not included in the calculation of diluted net income per common share attributable to Walmart for the three months ended April 30, 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:
 
 
Three Months Ended April 30,
(Amounts in millions, except per share data)
 
2019
 
2018
Numerator
 
 
 
 
Consolidated net income
 
$
3,906

 
$
2,276

Consolidated net income attributable to noncontrolling interest
 
(64
)
 
(142
)
Consolidated net income attributable to Walmart
 
$
3,842

 
$
2,134

 
 
 
 
 
Denominator
 
 
 
 
Weighted-average common shares outstanding, basic
 
2,869

 
2,950

Dilutive impact of share-based awards
 
17

 
17

Weighted-average common shares outstanding, diluted
 
2,886

 
2,967

 
 
 
 
 
Net income per common share attributable to Walmart
 
 
 
 
Basic
 
$
1.34

 
$
0.72

Diluted
 
1.33

 
0.72


9

Table of Contents

Note 3. Accumulated Other Comprehensive Loss
The following table provides the changes in the composition of total accumulated other comprehensive loss for the three months ended April 30, 2019:
(Amounts in millions and net of income taxes)
 
Currency 
Translation and Other
 
Unrealized Gain on Available-for-Sale Securities
 
Net Investment Hedges
 
Cash Flow Hedges
 
Minimum
Pension 
Liability
 
Total
Balances as of February 1, 2019
 
$
(12,085
)
 
$
—

 
$
1,395

 
$
(140
)
 
$
(712
)
 
$
(11,542
)
Other comprehensive income (loss) before reclassifications, net(1)
 
496

 
—

 
108

 
(145
)
 
(7
)
 
452

Reclassifications to income, net(1)
 
(23
)
 
—

 
—

 
14

 
8

 
(1
)
Balances as of April 30, 2019
 
$
(11,612
)
 
$
—

 
$
1,503

 
$
(271
)
 
$
(711
)
 
$
(11,091
)
(1) Income tax impact is immaterial
The following table provides the changes in the composition of total accumulated other comprehensive loss for the three months ended April 30, 2018:
(Amounts in millions and net of income taxes)
 
Currency 
Translation and Other
 
Unrealized Gain on Available-for-Sale Securities
 
Net Investment Hedges
 
Cash Flow Hedges
 
Minimum
Pension 
Liability
 
Total
Balances as of February 1, 2018
 
$
(12,136
)
 
$
1,646

 
$
1,030

 
$
122

 
$
(843
)
 
$
(10,181
)
Adoption of new accounting standards on February 1, 2018, net(1) (2)
 
89

 
(1,646
)
 
93

 
28

 
—

 
(1,436
)
Other comprehensive income (loss) before reclassifications, net(1)
 
1,302

 
—

 
68

 
(86
)
 
32

 
1,316

Reclassifications to income, net(1)
 
—

 
—

 
—

 
9

 
11

 
20

Balances as of April 30, 2018
 
$
(10,745
)
 
$
—

 
$
1,191

 
$
73

 
$
(800
)
 
$
(10,281
)
(1) Income tax impact is immaterial
(2) Primarily relates to the adoption of ASU 2016-01, Financial Instruments–Overall and ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
Amounts reclassified from accumulated other comprehensive loss to net income for derivative instruments are recorded in interest, net, in the Company's Condensed Consolidated Statements of Income. Amounts reclassified from accumulated other comprehensive loss to net income 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 Condensed Consolidated Statements of Income.

Note 4. Long-term Debt
The following table provides the changes in the Company's long-term debt for the three months ended April 30, 2019:
(Amounts in millions)
 
Long-term debt due within one year
 
Long-term debt
 
Total
Balances as of February 1, 2019
 
$
1,876


$
43,520


$
45,396

Proceeds from issuance of long-term debt
 
—


3,978


3,978

Repayments of long-term debt
 
(364
)

—


(364
)
Other
 
(48
)

(73
)

(121
)
Balances as of April 30, 2019
 
$
1,464


$
47,425


$
48,889


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Table of Contents

Debt Issuances
Information on long-term debt issued during the three months ended April 30, 2019 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 USD
 
July 8, 2024
 
Fixed
 
2.850%
 
$
1,493

April 23, 2019
 
1,250 USD
 
July 8, 2026
 
Fixed
 
3.050%
 
1,242

April 23, 2019
 
1,250 USD
 
July 8, 2029
 
Fixed
 
3.250%
 
1,243

Total
 
 
 
 
 
 
 
 
 
$
3,978

These 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 and do not restrict the Company's ability to pay dividends or repurchase company stock.
Maturities
The following table provides details of debt repayments during the three months ended April 30, 2019:
(Amounts in millions)
 
 
 
 
 
 
 
 
Maturity Date
 
Original Amount
 
Fixed vs. Floating
 
Interest Rate
 
Repayment
February 1, 2019
 
500 USD
 
Fixed
 
4.125%
 
$
364

Total repayment of matured debt
 
 
 
 
 
 
 
$
364


Note 5. 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 has equity investments, primarily its investment in JD.com, Inc. ("JD"), measured at fair value on a recurring basis included in other long-term assets in the accompanying Condensed Consolidated Balance Sheet as follows:
•
The purchased portion of the investment in JD measured using Level 1 inputs, and
•
The portion of the investment in JD received in exchange for selling certain assets related to Yihaodian, the Company's former eCommerce operations in China, measured using Level 2 inputs. Fair value is determined primarily using quoted prices in active markets for similar assets.
Information for the fair value of the Company's investment in JD is as follows:
(Amounts in millions)
 
Fair Value as of April 30, 2019
 
Fair Value as of January 31, 2019
Investment in JD measured using Level 1 inputs
 
$
2,181

 
$
1,791

Investment in JD measured using Level 2 inputs
 
2,185

 
1,792

Total
 
$
4,366

 
$
3,583

The changes in fair value for the Company's investment in JD is included in other gains and losses in the Company's Condensed Consolidated Statements of Income.

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The Company also holds derivative instruments. 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 yield and foreign currency forward curves. As of April 30, 2019 and January 31, 2019, the notional amounts and fair values of these derivatives were as follows:
 
April 30, 2019
 
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

 
$
(42
)
 
$
4,000

 
$
(78
)
Receive fixed-rate, pay fixed-rate cross-currency swaps designated as net investment hedges
2,250

 
392

 
2,250

 
334

Receive fixed-rate, pay fixed-rate cross-currency swaps designated as cash flow hedges
4,090

 
(408
)
 
4,173

 
(272
)
Total
$
10,340

 
$
(58
)
 
$
10,423

 
$
(16
)
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, fair value measurements on a nonrecurring basis are required as a result of impairment charges or business acquisitions. The Company did not have any material assets or liabilities subject to nonrecurring fair value measurements as of April 30, 2019 or January 31, 2019, respectively.
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 April 30, 2019 and January 31, 2019, are as follows: 
 
 
April 30, 2019
 
January 31, 2019
(Amounts in millions)
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Long-term debt, including amounts due within one year
 
$
48,889

 
$
53,707

 
$
45,396

 
$
49,570


Note 6. Derivative Financial Instruments
In connection with various derivative agreements, including master netting arrangements, the Company held cash collateral from counterparties of $209 million and $220 million at April 30, 2019 and January 31, 2019, respectively. Furthermore, as part of the master netting arrangements with each of these counterparties, the Company is also required to post collateral with a counterparty if the Company's net derivative liability position exceeds $150 million with such counterparties. The Company did not have any cash collateral posted with counterparties at April 30, 2019 or January 31, 2019, respectively.
At April 30, 2019 and January 31, 2019, the Company had ¥180 billion of outstanding long-term debt designated as a hedge of its net investment in Japan, as well as outstanding long-term debt of £1.7 billion at April 30, 2019 and January 31, 2019, that was designated as a hedge of its net investment in the United Kingdom. These nonderivative net investment hedges will mature on dates ranging from July 2020 to January 2039.
The Company's derivative instruments, as well as its nonderivative debt instruments designated and qualifying as net investment hedges, were classified as follows in the Company's Condensed Consolidated Balance Sheets:
 
April 30, 2019
 
January 31, 2019
(Amounts in millions)
Fair Value
Instruments
 
Net Investment
Instruments
 
Cash Flow
Instruments
 
Fair Value
Instruments
 
Net Investment
Instruments
 
Cash Flow
Instruments
Derivative instruments
 
 
 
 
 
 
 
 
 
 
 
Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
Other long-term assets
$
—

 
$
392

 
$
41

 
$
—

 
$
334

 
$
78

 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes and other
42

 
—

 
449

 
78

 
—

 
350

 
 
 
 
 
 
 
 
 
 
 
 
Nonderivative hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
—

 
3,794

 
—

 
—

 
3,863

 
—

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.


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Note 7. 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 Condensed 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 or results of operations.
ASDA Equal Value Claims
ASDA Stores Ltd. ("Asda"), a wholly-owned subsidiary of the Company, is a defendant in over 30,000 equal value ("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 female 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 male employees working in Asda's warehouse and distribution facilities, and that the disparity in pay between these different job positions is not objectively justified. As a result, 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 March 2015, Asda asked the Employment Tribunal to stay all proceedings and to "strike out" substantially all of the claims because the claimants had not adhered to the Tribunal's procedural rule for including multiple claimants on the same claim form. In July 2015, the Employment Tribunal denied Asda's requests. Following additional proceedings, in June 2017 the Employment Appeal Tribunal ruled in favor of Asda on the "strike out" issue and remitted the matter to the Employment Tribunal to determine whether the improperly filed claims should be struck out. In October 2018, claimants appealed this ruling to the Court of Appeals and in January 2019, the Court of Appeals declined to strike out any claims relying on the Employment Tribunal’s finding that claimants had not deliberately disregarded the Tribunal’s procedural rule.
As to the initial phase of the Equal Value claims, 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. In August 2017, the Employment Appeal Tribunal affirmed the Employment Tribunal's ruling and also granted permission for Asda to appeal substantially all of its findings. Asda sought permission to appeal the remainder of the Employment Appeal Tribunal's findings to the Court of Appeals and a hearing before the Court of Appeals on the comparability findings was held in October 2018. The Court of Appeals upheld the Employment Tribunal’s findings. Asda sought permission to appeal the Court of Appeals decision to the Supreme Court on February 27, 2019 and is awaiting a decision on its application.
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. 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.

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Table of Contents

FCPA Investigation and Related Matters
The Audit Committee (the "Audit Committee") of the Board of Directors of the Company has been conducting an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act ("FCPA") and other alleged crimes or misconduct in connection with foreign subsidiaries, including Wal-Mart de México, S.A.B. de C.V. ("Walmex"), and whether prior allegations of such violations and/or misconduct were appropriately handled by the Company. The Audit Committee and the Company engaged outside counsel from a number of law firms and other advisors who assisted in the investigation of these matters.
The Company also conducted a voluntary global review of its policies, practices and internal controls for anti-corruption compliance and, as part of that review, strengthened and enhanced its global anti-corruption compliance program through appropriate remedial anti-corruption measures.  In November 2011, the Company voluntarily disclosed that investigative activity to the U.S. Department of Justice (the "DOJ") and the Securities and Exchange Commission (the "SEC"). Since the implementation of the global review and the enhanced anti-corruption compliance program, the Audit Committee and the Company identified or were made aware of additional allegations regarding potential violations of the FCPA. When such allegations were reported or identified, the Audit Committee and the Company, together with their third-party advisors, conducted inquiries and investigations. Inquiries or investigations regarding allegations of potential FCPA violations were conducted in a number of foreign markets where the Company operates or has operated, including, but not limited to, Brazil, China and India.
As previously disclosed, the Company is under investigation by the DOJ and the SEC regarding possible violations of the FCPA. The Company has been cooperating with the agencies and discussions have been ongoing regarding the resolution of these matters. These discussions progressed to a point that, in fiscal 2018, the Company reasonably estimated a probable loss and recorded an aggregate accrual of $283 million with respect to these matters (the "Accrual"). While the Company believes the final resolution of these matters is nearing a conclusion, there can be no assurance as to the timing or the terms of the final resolution of these matters.
A number of federal and local government agencies in Mexico also investigated these matters.  Walmex cooperated with the Mexican governmental agencies that conducted these investigations. 
Furthermore, lawsuits relating to the matters under investigation were filed by several of the Company's shareholders against Walmart, certain current and former directors and former officers and certain of Walmex's former officers.  These matters have been resolved.
Existing lawsuits relating to the allegations have been resolved, but the Company could be exposed to a variety of negative consequences as a result of the matters noted above. There could be one or more enforcement actions or lawsuits in respect of the matters that are the subject of some or all of the on-going government investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders, debarment or other relief, criminal convictions and/or penalties. The Company expects that there will be on-going media and governmental interest, including additional news articles on these matters, which could impact the perception among certain audiences of the Company's role as a corporate citizen.
In addition, the Company has incurred and expects to continue to incur costs in responding to requests for information or subpoenas seeking documents, testimony and other information in connection with the government investigations and in conducting the investigations. These costs will be expensed as incurred. For the three months ended April 30, 2019 and 2018, the Company incurred the following third-party expenses in connection with the FCPA investigation and related matters:
 
 
Three Months Ended April 30,
(Amounts in millions)
 
2019
 
2018
Ongoing inquiries and investigations
 
$
2

 
$
4

Global compliance program and organizational enhancements
 
2

 
3

Total
 
$
4

 
$
7

The Company does not presently believe that these matters, including the payment of the Accrual at some point-in-time in the future, will have a material adverse effect on its business, financial position, results of operations or cash flows, although given the inherent uncertainties in such situations, the Company can provide no assurance that these matters will not be material to its business, financial position, results of operations or cash flows in the future.


14

Table of Contents


Note 8. Disposals, Acquisitions and Related Items
The following disposals, acquisitions and related items pertain to the Company's Walmart International segment. Other immaterial transactions have also occurred or have been announced.
Walmart Brazil
In August 2018, the Company sold an 80 percent stake of Walmart Brazil to Advent International ("Advent"). Under the terms, Advent agreed to contribute additional capital to the business over a three-year period and Walmart agreed to indemnify Advent for certain matters. Additionally, the Company may receive up to approximately $250 million in contingent consideration. 
As a result, the Company recorded a pre-tax net loss of $4.8 billion during the second quarter of fiscal 2019 in other gains and losses in the Company's Condensed Consolidated Statement of Income. 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 Condensed Consolidated Balance Sheets. The Company indemnified 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. The purchase price allocation, which is still preliminary primarily due to certain tax items, is 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 $1.8 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. 
Asda
In April 2019, the Company announced the termination of a previously announced merger agreement that would have provided for the combination of J Sainsbury plc and Asda Group Limited, the Company's U.K. subsidiary. As the proposed transaction had not yet met the held for sale criteria, the announcement of its termination had no impact on the Company's Condensed Consolidated Financial Statements.



15

Table of Contents

Note 9. 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, as well as Brazil until the sale of the majority stake discussed in Note 8. 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 impractical 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. When the measurement of a segment changes, previous period amounts and balances are reclassified to be comparable to the current period's presentation.
Net sales by segment are as follows:
 
 
Three Months Ended April 30,
(Amounts in millions)
 
2019

2018
Net sales:
 
 
 
 
Walmart U.S.
 
$
80,344

 
$
77,748

Walmart International
 
28,775

 
30,260

Sam's Club
 
13,830

 
13,622

Net sales
 
$
122,949

 
$
121,630

Operating income by segment, as well as operating loss for corporate and support, interest, net and other gains and losses are as follows:
 
 
Three Months Ended April 30,
(Amounts in millions)
 
2019
 
2018
Operating income (loss):
 
 
 
 
Walmart U.S.
 
$
4,142

 
$
3,927

Walmart International
 
738

 
1,265

Sam's Club
 
451

 
325

Corporate and support
 
(386
)
 
(363
)
Operating income
 
4,945

 
5,154

Interest, net
 
625

 
487

Other (gains) and losses
 
(837
)
 
1,845

Income before income taxes
 
$
5,157

 
$
2,822


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Table of Contents

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)
 
Three Months Ended April 30,
Walmart U.S. net sales by merchandise category
 
2019
 
2018
Grocery
 
$
45,404

 
$
43,860

General merchandise
 
24,607

 
24,174

Health and wellness
 
9,518

 
9,128

Other categories
 
815

 
586

Total
 
$
80,344

 
$
77,748

Of Walmart U.S.'s total net sales, approximately $4.3 billion and $3.2 billion related to eCommerce for the three months ended April 30, 2019 and 2018, respectively.
(Amounts in millions)
 
Three Months Ended April 30,
Walmart International net sales by market
 
2019
 
2018
Mexico and Central America
 
$
7,837

 
$
7,684

United Kingdom
 
7,077

 
7,515

Canada
 
4,122

 
4,254

China
 
3,063

 
3,205

Other
 
6,676

 
7,602

Total
 
$
28,775

 
$
30,260

Of International's total net sales, approximately $2.5 billion and $1.0 billion related to eCommerce for the three months ended April 30, 2019 and 2018, respectively.
(Amounts in millions)
 
Three Months Ended April 30,
Sam’s Club net sales by merchandise category
 
2019
 
2018
Grocery and consumables
 
$
8,373

 
$
8,012

Fuel, tobacco and other categories
 
2,777

 
2,919

Home and apparel
 
1,178

 
1,202

Health and wellness
 
827

 
801

Technology, office and entertainment
 
675

 
688

Total
 
$
13,830

 
$
13,622

Of Sam's Club's total net sales, approximately $0.7 billion and $0.6 billion related to eCommerce for the three months ended April 30, 2019 and 2018, respectively.
Note 10. 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 cost consists of the following:
(Amounts in millions)
 
Three Months Ended April 30, 2019
Operating lease cost
 
$
636

Finance lease cost
 


   Amortization of right-of-use assets
 
111

   Interest on lease obligations
 
77

Variable lease cost
 
167



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Table of Contents

Other lease information is as follows:
(Dollar amounts in millions)
 
Three Months Ended April 30, 2019
Cash paid for amounts included in measurement of lease obligations:
 
 
Operating cash flows from operating leases
 
$
639

Operating cash flows from finance leases
 
49

Financing cash flows from finance leases
 
134

Assets obtained in exchange for operating lease obligations
 
189

Assets obtained in exchange for finance lease obligations
 
95

Weighted-average remaining lease term - operating leases
 
15.8 years

Weighted-average remaining lease term - finance leases
 
14.4 years

Weighted-average discount rate - operating leases
 
5.3
%
Weighted-average discount rate - finance leases
 
9.5
%

The aggregate annual lease obligations at April 30, 2019 are as follows:
(Amounts in millions)
 
 
 
 
Fiscal Year
 
Operating Leases
 
Finance Leases
Remainder of 2020
 
$
1,819

 
$
533

2021
 
2,346

 
676

2022
 
2,105

 
621

2023
 
1,903

 
506

2024
 
1,718

 
447

Thereafter
 
15,699

 
5,367

Total undiscounted lease obligations
 
25,590

 
8,150

Less imputed interest
 
(8,123
)
 
(3,905
)
Net lease obligations
 
$
17,467

 
$
4,245

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.

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Table of Contents


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
This discussion, which presents Walmart Inc.'s ("Walmart," the "Company," "our," or "we") results for periods occurring in the fiscal year ending January 31, 2020 ("fiscal 2020") and the fiscal year ended January 31, 2019 ("fiscal 2019"), should be read in conjunction with our Condensed Consolidated Financial Statements as of and for the three months ended April 30, 2019 and 2018, and the accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Consolidated Financial Statements as of and for the year ended January 31, 2019, the accompanying notes and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the year ended January 31, 2019 incorporated by reference.
We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion provides information about the financial results of each of the three segments of our business to provide a better understanding of how each of those segments and its results of operations affect the financial condition and results of operations of the Company as a whole.
Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, we discuss segment operating income, comparable store and club sales and other measures. Management measures the results of the Company's segments using each segment's operating income, including certain corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income and other measures as determined by the information regularly reviewed by our chief operating decision maker.
Comparable store and club sales, or comparable sales, is a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, including eCommerce sales, for a particular period from the corresponding period in the previous year. Walmart's definition of comparable sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as eCommerce sales. We measure the eCommerce sales impact by including all sales initiated online or through mobile applications, including omni-channel transactions which are fulfilled through our stores and clubs. Sales at a store that has changed in format are excluded from comparable sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's retail square feet of more than five percent. Additionally, sales related to acquisitions are excluded until such acquisitions have been owned for 12 months. Comparable sales are also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable sales varies across the retail industry. As a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other companies.
In the first quarter of the current fiscal year, we updated our definition of what was previously referred to as traffic (a component, along with ticket, of comparable sales). Traffic will now be referred to "transactions" and measures a percentage change in all sales transactions in our comparable stores, as well as for comparable eCommerce activity.
In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for countries where the functional currency is not the U.S. dollar into U.S. dollars or for countries experiencing hyperinflation. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. Additionally, no currency exchange rate fluctuations are calculated for non-USD acquisitions until owned for 12 months. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company and the Walmart International segment in the future.
Each of our segments contribute to the Company's operating results differently. Each, however, has generally maintained a consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for the Walmart International segment due to fluctuations in currency exchange rates. We recently took some strategic actions to further position our portfolio for long-term growth, including:
•
Acquisition of 81 percent of the outstanding shares, or 77 percent of the diluted shares, of Flipkart Private Limited ("Flipkart") in August 2018.  
•
Divestiture of 80 percent of Walmart Brazil to Advent International ("Advent") in August 2018, for which we recorded a pre-tax loss of $4.8 billion in fiscal 2019, substantially all of which was recorded during the second quarter of fiscal 2019.
•
Divestiture of banking operations in Walmart Chile and Walmart Canada in December 2018 and April 2019, respectively.

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In April 2019, we announced the termination of the previously announced merger agreement that would have provided for the combination of J Sainsbury plc and ASDA Group Limited, our U.K. subsidiary.
The Retail Industry
We operate in the highly competitive omni-channel retail industry in all of the markets we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as eCommerce businesses. Many of these competitors are national, regional or international chains or have a national or international omni-channel or eCommerce presence. We compete with a number of companies for attracting and retaining quality employees ("associates"). We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, weather, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, cost of goods, currency exchange rate fluctuations, customer preferences, deflation, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment.
Company Performance Metrics
We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs.  At times, we adjust our business strategies to maintain and strengthen our competitive positions in the countries in which we operate.  We define our financial framework as:
•
strong, efficient growth;
•
consistent operating discipline; and
•
strategic capital allocation.
As we execute on this financial framework, we believe our returns on capital will improve over time.
Strong, Efficient Growth
Our objective of prioritizing strong, efficient growth means we will focus on the most productive growth opportunities, increasing comparable store and club sales, accelerating eCommerce sales growth and expansion of omni-channel initiatives while slowing the rate of growth of new stores and clubs. At times, we make strategic investments which are focused on the long-term growth of the Company.
Comparable sales is a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, including eCommerce sales, for a particular period over the corresponding period in the previous year. The retail industry generally reports comparable sales using the retail calendar (also known as the 4-5-4 calendar). To be consistent with the retail industry, we provide comparable sales using the retail calendar in our quarterly earnings releases. However, when we discuss our comparable sales below, we are referring to our calendar comparable sales calculated using our fiscal calendar. As our fiscal calendar differs from the retail calendar, our fiscal calendar comparable sales also differ from the retail calendar comparable sales provided in our quarterly earnings releases. Calendar comparable sales, as well as the impact of fuel, for the three months ended April 30, 2019 and 2018, were as follows:
 
 
Three Months Ended April 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
With Fuel
 
Fuel Impact
Walmart U.S.
 
3.3
%
 
2.4
%
 
0.0
%
 
0.1
%
Sam's Club
 
1.4
%
 
5.3
%
 
0.9
%
 
1.4
%
Total U.S.
 
3.0
%
 
2.8
%
 
0.1
%
 
0.3
%
The Walmart U.S. segment had growth of 3.3% and 2.4% for the three months ended April 30, 2019 and 2018, respectively, driven by growth in ticket and transactions. For the three months ended April 30, 2019 and 2018, the Walmart U.S. segment's eCommerce sales positively contributed approximately 1.4% and 1.0% to comparable sales, respectively. Comparable sales at the Sam's Club segment were 1.4% and 5.3% for the three months ended April 30, 2019 and 2018, respectively. The Sam's Club segment's comparable sales benefited from increased transactions and higher fuel sales, which were partially offset by lower ticket. The Sam's Club segment's eCommerce sales positively contributed approximately 1.1% and 0.8% to comparable sales, respectively, for the three months ended April 30, 2019 and 2018. The increase in comparable sales at the Sam's Club segment was partially offset by reduced tobacco sales due to our decision to remove tobacco from certain locations.

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Consistent Operating Discipline
We operate with discipline by managing expenses and optimizing the efficiency of how we work and creating an environment in which we have sustainable lowest cost to serve. We invest in technology and process improvements to increase productivity, manage inventory and reduce costs. We measure operating discipline through expense leverage, which we define as net sales growing at a faster rate than operating, selling, general and administrative ("operating") expenses.
 
 
Three Months Ended April 30,
(Amounts in millions)
 
2019
 
2018
Net sales
 
$
122,949

 
$
121,630

Percentage change from comparable period
 
1.1
%
 
4.4
%
Operating, selling, general and administrative expenses
 
$
25,946

 
$
25,829

Percentage change from comparable period
 
0.5
%
 
4.9
%
Operating, selling, general and administrative expenses as a percentage of net sales
 
21.1
%
 
21.2
%

For the three months ended April 30, 2019 we leveraged operating expenses, decreasing operating expenses as a percentage of net sales by 14 basis points when compared to the same period in the previous fiscal year. The primary drivers of the expense leverage for the three months ended April 30, 2019 were strong sales performance in conjunction with productivity improvements in our Walmart U.S. segment. Our International and Sam's Club segments also leveraged expenses when compared to the same period in the previous fiscal year.
Strategic Capital Allocation
We are allocating more capital to store remodels, eCommerce, technology and supply chain and less to new store and club openings, when compared to prior years. This allocation aligns with our initiatives of improving our customer proposition in stores and clubs and integrating digital and physical shopping and is consistent with the capital expenditure detail provided in the following table:
(Amounts in millions)
 
Three Months Ended April 30,
Allocation of Capital Expenditures
 
2019
 
2018
eCommerce, technology, supply chain and other
 
$
1,003

 
$
805

Remodels
 
595

 
475

New stores and clubs, including expansions and relocations
 
23

 
103

Total U.S.
 
1,621

 
1,383

Walmart International
 
584

 
435

Total capital expenditures
 
$
2,205

 
$
1,818


Returns
As we execute our financial framework, we believe our return on capital will improve over time. We measure return on capital with our return on investment and free cash flow metrics. In addition, we provide returns in the form of share repurchases and dividends, which are discussed in the Liquidity and Capital Resources section.
Return on Assets and Return on Investment
We include Return on Assets ("ROA"), the most directly comparable measure based on our financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), and Return on Investment ("ROI") as metrics to assess returns on assets. While ROI is considered a non-GAAP financial measure, management believes ROI is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term strategic initiatives with possible short-term impacts. ROA was 4.0% and 4.8% for the trailing twelve months ended April 30, 2019 and 2018, respectively. The decline in ROA was primarily due to the decrease in consolidated net income over the trailing twelve months, primarily resulting from the $4.5 billion net loss in fiscal 2019 related to the sale of the majority stake in Walmart Brazil and net unrealized losses on our JD.com investment. ROI was 14.5% and 13.9% for the trailing twelve months ended April 30, 2019 and 2018, respectively. The increase in ROI was due to the increase in operating income over the trailing twelve months primarily as a result of lapping the restructuring and impairment charges in the fourth quarter of fiscal 2018. The denominator remained relatively flat as the increase in average total assets due to the Flipkart Acquisition was primarily offset by the decrease in average invested capital resulting from the removal of the eight times rent factor upon adoption of ASU 2016-02, Leases ("ASU 2016-02") as operating lease right-of-use assets are now included in total assets.

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We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing 12 months divided by average invested capital during that period. We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and average amortization, less average accounts payable and average accrued liabilities for that period. Upon adoption of ASU 2016-02, rent for the trailing 12 months multiplied by a factor of 8 is no longer included in the calculation of ROI on a prospective basis as operating lease assets are now capitalized. For fiscal 2020, lease related assets and associated accumulated amortization are included in the denominator at their carrying amount as of the current balance sheet date, rather than averaged, because they are no longer directly comparable to the prior year calculation which included rent for the trailing 12 months multiplied by a factor of 8. A two-point average will be used for leased assets beginning in fiscal 2021, after one full year from the date of adoption of the new lease standard. Further, beginning prospectively in fiscal 2020, rent expense in the numerator excludes short-term and variable lease costs as these costs are not included in the operating lease right-of-use asset balance.
Prior to adoption of ASU 2016-02, we defined ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing 12 months divided by average invested capital during that period. We considered average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and average amortization, less average accounts payable and average accrued liabilities for that period, plus a rent factor equal to the rent for the fiscal year or trailing 12 months multiplied by a factor of 8, which estimated the hypothetical capitalization of our operating leases. Because the new lease standard was adopted under the modified retrospective approach as of February 1, 2019, our calculation of ROI for the comparable fiscal 2019 period was not revised.
Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable GAAP financial measure. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. As mentioned above, we consider ROA to be the financial measure computed in accordance with generally accepted accounting principles most directly comparable to our calculation of ROI. ROI differs from ROA (which is consolidated net income for the period divided by average total assets for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; adjusts total assets for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities to arrive at total invested capital. Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA. Although ROI is a standard financial measure, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI.

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The calculation of ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP financial measure, is as follows:
 
 
For the Trailing Twelve Months Ending April 30,
(Amounts in millions)
 
2019
 
2018
CALCULATION OF RETURN ON ASSETS
Numerator
 
 
 
 
Consolidated net income
 
$
8,809

 
$
9,647

Denominator
 
 
 
 
Average total assets(1)
 
$
219,736

 
$
202,323

Return on assets (ROA)
 
4.0
%
 
4.8
%
 
 
 
 
 
CALCULATION OF RETURN ON INVESTMENT
Numerator
 
 
 
 
Operating income
 
$
21,748

 
$
20,354

+ Interest income
 
222

 
160

+ Depreciation and amortization
 
10,714

 
10,656

+ Rent
 
2,866

 
3,036

= Adjusted operating income
 
$
35,550

 
$
34,206

 
 
 
 
 
Denominator
 
 
 
 
Average total assets(1),(2)
 
$
226,465

 
$
202,323

+ Average accumulated depreciation and amortization(1) ,(2)
 
84,960

 
81,862

- Average accounts payable(1)
 
44,861

 
42,990

- Average accrued liabilities(1)
 
20,903

 
20,245

+ Rent x 8
 
                N/A

 
24,288

= Average invested capital
 
$
245,661

 
$
245,238

Return on investment (ROI)
 
14.5
%
 
13.9
%
 
 
 
As of April 30,
 
 
2019
 
2018
 
2017
Certain Balance Sheet Data
 
 
 
 
 
 
Total assets
 
$
234,544

 
$
204,927

 
$
199,718

Leased assets, net
 
20,637

 
7,178

 
NP

Total assets without leased assets, net
 
213,907

 
197,749

 
NP

Accumulated depreciation and amortization
 
87,426

 
84,964

 
78,760

Accumulated amortization on leased assets
 
3,085

 
5,556

 
NP

Accumulated depreciation and amortization, without leased assets
 
84,341

 
79,408

 
NP

Accounts payable
 
45,110

 
44,612

 
41,367

Accrued liabilities
 
21,023

 
20,782

 
19,708

 
(1) The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2. Average total assets as used in ROA includes the average impact of the adoption of ASU 2016-02.
(2) For the twelve months ended April 30, 2019, as a result of adopting ASU 2016-02, average total assets is based on the average of total assets without leased assets, net plus leased assets, net as of April 30, 2019. Average accumulated depreciation and amortization is based on the average of accumulated depreciation and amortization, without leased assets plus accumulated amortization on leased assets as of April 30, 2019.
NP = Not provided.




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Table of Contents

Free Cash Flow
Free cash flow is considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See Liquidity and Capital Resources for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities.
We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. We had net cash provided by operating activities of $3.6 billion for the three months ended April 30, 2019, which declined when compared to $5.2 billion for the three months ended April 30, 2018 primarily due to an increase in inventory related to accelerated buying in certain categories, the timing of sell through for summer seasonal merchandise and increased eCommerce fulfillment center mirroring, as well as the timing of payments. We generated free cash flow of $1.4 billion for the three months ended April 30, 2019, which declined when compared to $3.3 billion for the three months ended April 30, 2018 due to the same reasons as the decline in net cash provided by operating activities, as well as $0.4 billion in increased capital expenditures.
Walmart's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Condensed Consolidated Statements of Cash Flows.
Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.
The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities.
 
 
Three Months Ended April 30,
(Amounts in millions)
 
2019
 
2018
Net cash provided by operating activities
 
$
3,563

 
$
5,161

Payments for property and equipment
 
(2,205
)
 
(1,818
)
Free cash flow
 
$
1,358

 
$
3,343

 
 
 
 
 
Net cash used in investing activities(1)
 
$
(1,135
)
 
$
(1,682
)
Net cash used in financing activities
 
(846
)
 
(2,486
)
(1) "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.

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Table of Contents

Results of Operations
Consolidated Results of Operations
 
 
Three Months Ended April 30,
(Amounts in millions, except unit counts)
 
2019
 
2018
Total revenues
 
$
123,925

 
$
122,690

Percentage change from comparable period
 
1.0
%

4.4
%
Net sales
 
$
122,949

 
$
121,630

Percentage change from comparable period
 
1.1
%

4.4
%
Total U.S. calendar comparable sales increase
 
3.0
%
 
2.8
%
Gross profit margin as a percentage of net sales
 
24.3
%
 
24.6
%
Operating income
 
$
4,945

 
$
5,154

Operating income as a percentage of net sales
 
4.0
%
 
4.2
%
Other (gains) and losses
 
$
(837
)
 
$
1,845

Consolidated net income
 
$
3,906

 
$
2,276

Unit counts at period end
 
11,368


11,717

Retail square feet at period end
 
1,128


1,157

Our total revenues, which are mostly comprised of net sales, but also include membership and other income, increased $1.2 billion or 1.0% for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The increase in revenues was due to an increase in net sales, which was primarily due to overall positive comparable sales for the Walmart U.S. and Sam's Club segments, the addition of Flipkart's net sales, and positive comparable sales in the majority of our International markets. These increases were partially offset by a $1.8 billion negative impact of fluctuations in currency exchange rates and our sale of the majority stake in Walmart Brazil.
Our gross profit rate decreased 27 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The decrease was primarily due to the addition of Flipkart and price investment in the Walmart U.S. segment, partially offset by favorable merchandise mix and less pressure from transportation costs in the Walmart U.S. segment.
Operating expenses as a percentage of net sales decreased 14 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The primary drivers of the expense leverage were strong sales performance in conjunction with productivity improvements in our Walmart U.S. segment. Our International and Sam's Club segments also leveraged expenses when compared to the same period in the previous fiscal year.
Other (gains) and losses increased $2.7 billion for the three months ended April 30, 2019 due to fair value changes of our investment in JD.com.
Our effective income tax rate was 24.3% for the three months ended April 30, 2019, compared to 19.3% for the same period in the previous fiscal year. The increase in the effective tax rate for the three months ended April 30, 2019 was primarily due to a favorable, provisional amount recognized related to the Tax Cuts and Jobs Act of 2017 during the three months ended April 30, 2018. Our effective income tax rate may fluctuate from quarter to quarter as a result of factors including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix and size of earnings among our U.S. operations and international operations, which are subject to statutory rates that may be higher than the U.S. statutory rate.
As a result of the factors discussed above, consolidated net income increased $1.6 billion for the three months ended April 30, 2019 when compared to the same period in the previous fiscal year. Accordingly, diluted net income per common share attributable to Walmart was $1.33 for the three months ended April 30, 2019, which represents an increase of $0.61 when compared to the same period in the previous fiscal year.


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Table of Contents

Walmart U.S. Segment
 
 
Three Months Ended April 30,
(Amounts in millions, except unit counts)
 
2019
 
2018
Net sales
 
$
80,344

 
$
77,748

Percentage change from comparable period
 
3.3
%

3.1
%
Calendar comparable sales increase
 
3.3
%
 
2.4
%
Operating income
 
$
4,142

 
$
3,927

Operating income as a percentage of net sales
 
5.2
%
 
5.1
%
Unit counts at period end
 
4,763


4,761

Retail square feet at period end
 
704


705

Net sales for the Walmart U.S. segment increased $2.6 billion or 3.3% for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The increase in net sales was due to comparable sales of 3.3% driven by growth in ticket and transactions. Walmart U.S. eCommerce sales positively contributed approximately 1.4% to comparable sales during the three months ended April 30, 2019 and were driven by online grocery and ship-to-home.
Gross profit rate increased 6 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The improvement was due to favorable merchandise mix and less pressure from transportation costs, partially offset by price investments. The merchandise mix improvement was the result of strong private brands penetration and eCommerce performance in the home and apparel categories.
Operating expenses as a percentage of net sales decreased 10 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year, primarily due to strong sales and productivity improvements, partially offset by continued investments in eCommerce.
As a result of the factors discussed above, operating income increased $215 million for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year.

Walmart International Segment
 
 
Three Months Ended April 30,
(Amounts in millions, except unit counts)
 
2019
 
2018
Net sales
 
$
28,775

 
$
30,260

Percentage change from comparable period
 
(4.9
)%
 
11.7
%
Operating income
 
$
738

 
$
1,265

Operating income as a percentage of net sales
 
2.6
 %
 
4.2
%
Unit counts at period end
 
6,006


6,359

Retail square feet at period end
 
344


372

Net sales for the Walmart International segment decreased $1.5 billion or 4.9% for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. This decrease was due to $1.8 billion of negative fluctuations in currency exchange rates and a reduction in net sales due to our sale of the majority stake in Walmart Brazil, partially offset by the addition of Flipkart's net sales and positive comparable sales growth in the majority of our markets.
Gross profit rate decreased 172 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The decrease was primarily due to the addition of Flipkart, as well as a change in merchandise mix in certain other markets.
Operating expenses as a percentage of net sales decreased 30 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year primarily due to the prior year charge related to the divestiture of our Canada banking operations of approximately $81 million and the prior year wind down of the first party Brazil eCommerce operations.
As a result of the factors discussed above, operating income decreased $527 million for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year.



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Table of Contents

Sam's Club Segment
 
 
Three Months Ended April 30,
(Amounts in millions, except unit counts)
 
2019
 
2018
Including Fuel
 
 
 
 
Net sales
 
$
13,830

 
$
13,622

Percentage change from comparable period
 
1.5
%
 
(2.7
)%
Calendar comparable sales increase
 
1.4
%
 
5.3
 %
Operating income
 
$
451

 
$
325

Operating income as a percentage of net sales
 
3.3
%
 
2.4
 %
Unit counts at period end
 
599


597

Retail square feet at period end
 
80


80

 
 
 
 
 
Excluding Fuel (1)
 
 
 
 
Net sales
 
$
12,453

 
$
12,380

Percentage change from comparable period
 
0.6
%
 
(4.1
)%
Operating income
 
$
443

 
$
313

Operating income as a percentage of net sales
 
3.6
%
 
2.5
 %
(1) We believe the "Excluding Fuel" information is useful to investors because it permits investors to understand the effect of the Sam's Club segment's fuel sales on its results of operations, which are impacted by the volatility of fuel prices. Volatility in fuel prices may continue to impact the operating results of the Sam's Club segment in the future.
Net sales for the Sam's Club segment increased $0.2 billion or 1.5% for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The increase was due to comparable sales of 1.4%. Sam's Club eCommerce sales positively contributed approximately 1.1% to comparable sales. In addition, higher fuel sales of $135 million also contributed to the comparable sales growth. These increases were partially offset by a reduction in tobacco sales due to our decision to remove tobacco from certain locations.
Gross profit rate increased 47 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The gross profit rate benefited from decreased tobacco sales, which have lower margins, and lapping inventory exit costs associated with closed clubs. These benefits were partially offset by increased eCommerce fulfillment and shipping costs.
Membership and other income increased 4.7% for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. The increase was primarily due to gains recognized on asset sales and increased Plus Members penetration.
Operating expenses as a percentage of segment net sales decreased 32 basis points for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year. This decrease was primarily the result of a charge of approximately $50 million related to lease exit costs in the prior comparable period, partially offset by a reduction in tobacco sales.
As a result of the factors discussed above, operating income increased $126 million for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year.



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Table of Contents

Liquidity and Capital Resources
Liquidity
The strength and stability of our operations have historically supplied us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. Generally, some or all of the remaining available cash flow has been used to fund the dividends on our common stock and share repurchases. We believe our sources of liquidity will continue to be adequate to fund operations, finance our global investment and expansion activities, pay dividends and fund our share repurchases for the foreseeable future.
Net Cash Provided by Operating Activities
 
 
Three months ended April 30,
(Amounts in millions)
 
2019
 
2018
Net cash provided by operating activities
 
$
3,563

 
$
5,161

Net cash provided by operating activities was $3.6 billion and $5.2 billion for the three months ended April 30, 2019 and 2018, respectively. The decrease in cash provided by operating activities was primarily due to an increase in inventory related to accelerated buying in certain categories, the timing of sell through for summer seasonal merchandise and increased eCommerce fulfillment center mirroring, as well as the timing of payments.
Cash Equivalents and Working Capital
Cash and cash equivalents were $9.3 billion and $7.9 billion at April 30, 2019 and 2018, respectively. Our working capital deficit was $18.1 billion and $21.5 billion at April 30, 2019 and 2018, respectively. We generally operate with a working capital deficit due to our efficient use of cash in funding operations, consistent access to the capital markets and returns provided to our shareholders in the form of payments of cash dividends and share repurchases. The decreased working capital deficit at April 30, 2019 compared to April 30, 2018 was primarily due to higher current assets as a result of the consolidation of Flipkart.
We use 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. Additionally, from time-to-time, we repatriate earnings and related cash from jurisdictions outside of the U.S. We are awaiting anticipated technical guidance from the IRS and the U.S. Treasury Department. We do not expect current local laws, other existing limitations or potential taxes on anticipated future repatriations of cash amounts held outside the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.
As of April 30, 2019 and January 31, 2019, cash and cash equivalents of $2.7 billion and $2.8 billion, respectively, may not be freely transferable to the U.S. due to local laws or other restrictions. Of the $2.7 billion at April 30, 2019, approximately $1.2 billion can only be accessed through dividends or intercompany financing arrangements subject to approval of the Flipkart minority shareholders; however, this cash is expected to be utilized to fund the operations of Flipkart.

Net Cash Used in Investing Activities
 
 
Three months ended April 30,
(Amounts in millions)
 
2019
 
2018
Net cash used in investing activities
 
$
(1,135
)
 
$
(1,682
)
Net cash used in investing activities was $1.1 billion and $1.7 billion for the three months ended April 30, 2019 and 2018, respectively. Net cash used in investing activities decreased $0.5 billion for the three months ended April 30, 2019, primarily as a result of proceeds received from the sale of our Canada bank. These proceeds were partially offset by an increase in investments in eCommerce, technology and supply chain as well as payments to remodel existing stores and clubs.

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Net Cash Used in Financing Activities
 
 
Three months ended April 30,
(Amounts in millions)
 
2019
 
2018
Net cash used in financing activities
 
$
(846
)
 
$
(2,486
)
Net cash used in financing activities generally consists of transactions related to our short-term and long-term debt, dividends paid and the repurchase of Company stock. Transactions with noncontrolling interest shareholders are also classified as cash flows from financing activities. Net cash used in financing activities decreased $1.6 billion for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year, primarily due to $4.0 billion of net proceeds received from the issuance of long-term debt to fund general business operations, along with a reduction in the repayment of long-term debt. This decrease in net cash used in financing activities was partially offset by cash outflows related to changes in short term borrowings and an increase in share repurchases, due to the prior year suspension of repurchases in anticipation of the Flipkart announcement.
Additionally, the Company has committed lines of credit in the U.S. of $15.0 billion as of April 30, 2019 and January 31, 2019, respectively, all undrawn.
Long-term Debt
The following table provides the changes in our long-term debt for the three months ended April 30, 2019:
(Amounts in millions)
 
Long-term debt due within one year
 
Long-term debt
 
Total
Balances as of February 1, 2019
 
$
1,876

 
$
43,520

 
$
45,396

Proceeds from issuance of long-term debt
 
—

 
3,978

 
3,978

Repayments of long-term debt
 
(364
)
 
—

 
(364
)
Other
 
(48
)
 
(73
)
 
(121
)
Balances as of April 30, 2019
 
$
1,464

 
$
47,425

 
$
48,889

Our total outstanding long-term debt balance increased $3.5 billion for the three months ended April 30, 2019, primarily due to the net proceeds from issuance of long-term debt to fund general business operations.
Dividends
On February 19, 2019, the Board of Directors approved the fiscal 2020 annual dividend of $2.12 per share, an increase over the fiscal 2019 annual dividend of $2.08 per share. For fiscal 2020, the annual dividend will be paid in four quarterly installments of $0.53 per share, according to the following record and payable dates:
Record Date
  
Payable Date
March 15, 2019
  
April 1, 2019
May 10, 2019
  
June 3, 2019
August 9, 2019
  
September 3, 2019
December 6, 2019
  
January 2, 2020
The dividend installments payable on April 1, 2019 and June 3, 2019 were paid as scheduled.
Company 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 the three months ended April 30, 2019, were made under the current $20 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 April 30, 2019, authorization for $9.2 billion of share repurchases remained under the share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status.

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We regularly review share repurchase activity and consider several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings, our results of operations and the market price of our common stock. We anticipate that a majority of the ongoing share repurchase program will be funded through the Company's free cash flow. 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 the three months ended April 30, 2019 and 2018:
 
 
Three months ended April 30,
(Amounts in millions, except per share data)
 
2019
 
2018
Total number of shares repurchased
 
21.7

 
5.5

Average price paid per share
 
$
98.22

 
$
97.75

Total amount paid for share repurchases
 
$
2,135

 
$
539

Share repurchases increased $1.6 billion for the three months ended April 30, 2019, when compared to the same period in the previous fiscal year, due to the prior year suspension of repurchases in anticipation of the Flipkart announcement.
Capital Resources
We believe cash flows from operations, our current cash position and access to capital markets will continue to be sufficient to meet our anticipated operating cash needs, which include funding seasonal buildups in merchandise inventories and funding our capital expenditures, acquisitions, dividend payments and share repurchases.
We have strong commercial paper and long-term debt ratings that have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in capital markets. At April 30, 2019, the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows:
Rating agency
  
Commercial paper
  
Long-term debt
Standard & Poor's
  
A-1+
  
AA
Moody's Investors Service
  
P-1
  
Aa2
Fitch Ratings
  
F1+
  
AA
Credit rating agencies review their ratings periodically and, therefore, the credit ratings assigned to us by each agency may be subject to revision at any time. Accordingly, we are not able to predict whether our current credit ratings will remain consistent over time. Factors that could affect our credit ratings include changes in our operating performance, the general economic environment, conditions in the retail industry, our financial position, including our total debt and capitalization, and changes in our business strategy. Any downgrade of our credit ratings by a credit rating agency could increase our future borrowing costs or impair our ability to access capital and credit markets on terms commercially acceptable to us. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper markets with the same flexibility that we have experienced historically, potentially requiring us to rely more heavily on more expensive types of debt financing. The credit rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies.
Other Matters
In Note 7 to our Condensed Consolidated Financial Statements, which is captioned "Contingencies" and appears in Part I of this Quarterly Report on Form 10-Q under the caption "Item 1. Financial Statements," we discuss, under the sub-caption "FCPA Investigation and Related Matters," our existing FCPA investigation and related matters and possible effects of those matters on Walmart's business including certain risks arising therefrom. In that Note 7, we also discuss, under the sub-caption "ASDA Equal Value Claims," certain existing employment claims against ASDA including certain risks arising therefrom. Further, in that Note 7, we also discuss, under the sub-caption "National Prescription Opiate Litigation and Related Matters," the National Prescription Opiate Litigation and related matters including certain risks arising therefrom. We also discuss various legal proceedings related to the FCPA investigation, ASDA Equal Value Claims, and National Prescription Opiate Litigation in Part II of this Quarterly Report on Form 10-Q under the caption "Item 1. Legal Proceedings," under the sub-caption "II. Certain Other Proceedings." The foregoing matters and other matters described elsewhere in this Quarterly Report on Form 10-Q represent contingent liabilities of the Company that may or may not result in the incurrence of a material liability by the Company upon their final resolution.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risks relating to our operations result primarily from changes in interest rates, currency exchange rates or the market value of our investments. Our market risks at April 30, 2019 are similar to those disclosed in our Form 10-K for the fiscal year ended January 31, 2019. The information concerning market risk set forth in Part II, Item 7A. of our Annual Report on Form 10-K for the fiscal year ended January 31, 2019, as filed with the SEC on March 28, 2019, under the caption "Quantitative and Qualitative Disclosures About Market Risk," is hereby incorporated by reference into this Quarterly Report on Form 10-Q.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. In designing and evaluating such controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management is necessarily required to use judgment in evaluating controls and procedures. Also, we have investments in unconsolidated entities. Since we do not control or manage those entities, our controls and procedures with respect to those entities are substantially more limited than those we maintain with respect to our consolidated subsidiaries.
In the ordinary course of business, we review our internal control over financial reporting and make changes to our systems and processes to improve such controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, updating existing systems, automating manual processes, standardizing controls globally, migrating certain processes to our shared services organizations and increasing monitoring controls. In the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and implemented new systems and internal controls in conjunction with the new lease standard. These changes have not materially affected, and are not reasonably likely to materially affect, the Company's internal control over financial reporting and they allow us to continue to enhance our internal controls over financial reporting and ensure that they remain effective.
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms.
There has been no change in the Company's internal control over financial reporting during the most recently completed fiscal quarter, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
I. SUPPLEMENTAL INFORMATION: We discuss certain legal proceedings in Part I of this Quarterly Report on Form 10-Q under the caption "Item 1. Financial Statements," in Note 7 to our Condensed Consolidated Financial Statements, which is captioned "Contingencies," under the sub-caption "Legal Proceedings." We refer you to that discussion for important information concerning those legal proceedings, including the basis for such actions and, where known, the relief sought. We provide the following additional information concerning those legal proceedings, including the name of the lawsuit, the court in which the lawsuit is pending, and the date on which the petition commencing the lawsuit was filed.
ASDA Equal Value Claims: Ms S Brierley & Others v ASDA Stores Ltd (2406372/2008 & Others - Manchester Employment Tribunal); ASDA Stores Ltd v Brierley & Ors (A2/2016/0973 - United Kingdom Court of Appeal); ASDA Stores Ltd v Ms S Brierley & Others (UKEAT/0059/16/DM - United Kingdom Employment Appeal Tribunal); ASDA Stores Ltd v Ms S Brierley & Others (UKEAT/0009/16/JOJ - United Kingdom Employment Appeal Tribunal).
National Prescription Opiate Litigation: In re National Prescription Opiate Litigation (MDL No. 2804) (the "MDL"). The MDL is pending in the U.S. District Court for the Northern District of Ohio and includes over 1,200 cases as of May 30, 2019; approximately 20 cases are in the process of being transferred to the MDL or have remand motions pending; and there are over 100 additional state cases pending as of May 30, 2019. The case citations for the state cases are listed on Exhibit 99.1 to this Form 10-Q.
II. CERTAIN OTHER PROCEEDINGS: The class action captioned City of Pontiac General Employees Retirement System v. Wal-Mart Stores, Inc., USDC, Western Dist. of AR, asserted violations of the Securities Exchange Act of 1934, as amended, relating to certain prior disclosures made by the Company in connection with its investigation of alleged violations of the U.S. Foreign Corrupt Practices Act. On October 26, 2018, the parties filed a motion asking the court to approve a proposed settlement under which the Company would pay $160 million (the “Settlement Amount”) to resolve the claims of all class members. By order dated April 8, 2019, the court granted final approval of the settlement. The settlement does not include or constitute an admission, concession, or finding of any fault, liability, or wrongdoing by the Company or any defendant. The Settlement Amount was expensed in the Company’s fiscal 2019 financial statements and has been paid by the Company.
Securities Class Action: City of Pontiac General Employees Retirement System v. Wal-Mart Stores, Inc., USDC, Western Dist. of AR; 5/7/12.
III. ENVIRONMENTAL MATTERS: Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters. The following matters are disclosed in accordance with that requirement. For the matters listed below, management does not believe any possible loss or the range of any possible loss that may be incurred in connection with each matter, individually or in the aggregate, will be material to the Company's financial condition or results of operations.
In September 2018, the United States Environmental Protection Agency (the “EPA”) notified the Company that it had initiated an administrative penalty action by issuing a Draft Consent Agreement and Final Order. The letter accompanying the Draft Consent Agreement and Final Order alleges that the Company distributed and/or sold three unregistered pesticide products from March to June 2017. The EPA is seeking a penalty of $960,000. The manufacturer of the product is responsible for ensuring that a FIFRA-regulated product is properly registered prior to its sale. The Company is cooperating with the EPA.
In January 2018, the Environmental Prosecutor of the State of Chiapas (Procuraduría Ambiental del Estado de Chiapas) in Mexico imposed a fine of $163,000 for the absence of an Environmental Impact Authorization License related to the store Mi Bodega Las Rosas. The Company is challenging the fine and denies any wrongdoing.
In April 2017, the California Air Resources Board ("ARB") notified the Company that it had taken the position that retailers are required to use unclaimed deposits collected on sales of small containers of automotive refrigerant to fund certain consumer education programs. The ARB alleged that the Company had improperly retained approximately $4.2 million in unclaimed deposits and has sought reimbursement. The Company has denied any wrongdoing.
In April 2013, a subsidiary of the Company, Corporacion de Compañias Agroindustriales, operating in Costa Rica, became aware that the Municipality of Curridabat is seeking a penalty of approximately $380,000 in connection with the construction of a retaining wall for a perishables distribution center that is situated along a protected river bank. The subsidiary obtained permits from the Municipality and the Secretaria Técnica Nacional Ambiental at the time of construction, but the Municipality now alleges that the wall is non-conforming.

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Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended January 31, 2019, which risks could materially and adversely affect our business, results of operations, financial condition, and liquidity. No material change in the risk factors discussed in such Form 10-K has occurred. Such risk factors do not identify all risks that we face because our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. Our business operations could also be affected by additional factors that apply to all companies operating in the U.S. and globally.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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 the three months ended April 30, 2019, 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 April 30, 2019, authorization for $9.2 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 its 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 and the market price of its common stock. Share repurchase activity under our share repurchase program, on a trade date basis, for the three months ended April 30, 2019, was as follows:
Fiscal Period
 
Total
Number of
Shares
Purchased
 
Average
Price Paid
per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs
 
Approximate Dollar 
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs(1)
(billions)
February 1 - 28, 2019
 
7,128,747

 
$
96.64

 
7,128,747

 
$
10.6

March 1 - 31, 2019
 
7,403,068

 
98.29

 
7,403,068

 
9.9

April 1 - 30, 2019
 
6,670,955

 
100.62

 
6,670,955

 
9.2

Total
 
21,202,770

 
 
 
21,202,770

 
 
(1) Represents approximate dollar value of shares that could have been purchased under the plan in effect at the end of the month.
Item 5. Other Information
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that Walmart believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act.
Forward-looking Statements
The forward-looking statements in this report include:
•
statements in Note 1 to Walmart's Condensed Consolidated Financial Statements as of and for the three months ended April 30, 2019 and 2018, regarding management's determinations regarding the materiality of the impact of, certain ASUs issued by the FASB; statements in Note 6 to those Condensed Consolidated Financial Statements regarding the expected insignificance of the amounts relating to certain net investment and cash flow derivative financial instruments to which Walmart is a party that are expected to be reclassified from accumulated other comprehensive loss to net income in the next 12 months; statements in Note 7 to those Condensed Consolidated Financial Statements regarding the possible outcome of, and future effect on Walmart's financial condition and results of operations of, certain litigation and other proceedings to which Walmart is a party, the possible outcome of, and future effect on Walmart's business of, certain other matters to which Walmart is subject, including Walmart's existing FCPA matters, ASDA Equal Value Claims and the National Opiate Litigation and related matters, and the liabilities, losses, expenses and costs that Walmart may incur in connection with such matters; and statements in Note 8 to the anticipated impact to the operations of the Company and its Walmart International segment of the Walmart Brazil and Flipkart transactions;


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•
in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations": statements under the caption "Overview" relating to the possible impact of volatility in currency exchange rates on the results, including net sales and operating income, of Walmart and the Walmart International segment; statements regarding the provisional allocation of the purchase price for Flipkart; statements under the caption "Company Performance Metrics - Strong, Efficient Growth" regarding the focus of our investments and the impact of such investments; statements under the caption "Company Performance Metrics", and the "- Returns" sub-heading under that caption, regarding our belief that returns on capital will improve as we execute on our strategic framework; statements under the caption "Results of Operations - Consolidated Results of Operations" regarding the possibility of fluctuations in Walmart's effective income tax rate from quarter to quarter and the factors that may cause those fluctuations; a statement under the caption "Results of Operations - Sam's Club Segment" relating to the possible continuing impact of volatility in fuel prices on the future operating results of the Sam's Club segment; a statement under the caption "Liquidity and Capital Resources - Liquidity" that Walmart's sources of liquidity will be adequate to fund its operations, finance its global investment and expansion activities, pay dividends and fund share repurchases; statements under the caption "Liquidity and Capital Resources - Liquidity - Net Cash Provided by Operating Activities - Cash Equivalents and Working Capital" regarding management's expectation that cash in market will be utilized to fund Flipkart's operations; a statement under the caption "Liquidity and Capital Resources Liquidity - Net Cash Used in Financing Activities - Dividends" regarding the payment of dividends in fiscal 2019; a statement under the caption "Liquidity and Capital Resources Liquidity - Net Cash Used in Financing Activities - Company Share Repurchase Program" regarding funding of the ongoing share repurchase program; and statements under the caption "Liquidity and Capital Resources - Capital Resources" regarding management's expectations regarding the Company's cash flows from operations, current cash position and access to capital markets continuing to be sufficient to meet its anticipated operating cash needs, the Company's commercial paper and long-term debt ratings continuing to enable it to refinance its debts at favorable rates, factors that could affect its credit ratings, and the effect that lower credit ratings would have on its access to capital and credit markets and borrowing costs;
•
in Part I, Item 4 "Controls and Procedures": the statements regarding the effect of changes to systems and processes on our internal control over financial reporting; and
•
statements in Part II, Item 1 "Legal Proceedings" regarding the effect that possible losses or the range of possible losses that might be incurred in connection with the legal proceedings and other matters discussed therein may have on our financial condition or results of operations.

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Risks, Factors and Uncertainties Regarding our Business
These forward-looking statements are subject to risks, uncertainties and other factors, domestically and internationally, including:
Economic Factors
•
economic, geo-political, capital markets and business conditions, trends and events around the world and in the markets in which Walmart operates;
•
currency exchange rate fluctuations;
•
changes in market rates of interest;
•
changes in market levels of wages;
•
changes in the size of various markets, including eCommerce markets;
•
unemployment levels;
•
inflation or deflation, generally and in certain product categories;
•
transportation, energy and utility costs;
•
commodity prices, including the prices of oil and natural gas;
•
consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels, and demand for certain merchandise;
•
trends in consumer shopping habits around the world and in the markets in which Walmart operates;
•
consumer enrollment in health and drug insurance programs and such programs' reimbursement rates and drug formularies; and
•
initiatives of competitors, competitors' entry into and expansion in Walmart's markets, and competitive pressures;
Operating Factors
•
the amount of Walmart's net sales and operating expenses denominated in U.S. dollar and various foreign currencies;
•
the financial performance of Walmart and each of its segments, including the amounts of Walmart's cash flow during various periods;
•
customer traffic and average ticket in Walmart's stores and clubs and on its eCommerce platforms;
•
the mix of merchandise Walmart sells and its customers purchase;
•
the availability of goods from suppliers and the cost of goods acquired from suppliers;
•
the effectiveness of the implementation and operation of Walmart's strategies, plans, programs and initiatives;
•
the impact of acquisitions, divestitures, store or club closures, and other strategic decisions;
•
Walmart's ability to successfully integrate acquired businesses, including within the eCommerce space;
•
unexpected changes in Walmart's objectives and plans;
•
the amount of shrinkage Walmart experiences;
•
consumer acceptance of and response to Walmart's stores and clubs, eCommerce platforms, programs, merchandise offerings and delivery methods;
Walmart's gross profit margins, including pharmacy margins and margins of other product categories;
•
the selling prices of gasoline and diesel fuel;
•
disruption of seasonal buying patterns in Walmart's markets;
•
Walmart's expenditures for FCPA and other compliance-related costs, including the adequacy of our accrual for the FCPA matter;
•
disruptions in Walmart's supply chain;
•
cybersecurity events affecting Walmart and related costs and impact of any disruption in business;
•
Walmart's labor costs, including healthcare and other benefit costs;
•
Walmart's casualty and accident-related costs and insurance costs;
•
the size of and turnover in Walmart's workforce and the number of associates at various pay levels within that workforce;
•
the availability of necessary personnel to staff Walmart's stores, clubs and other facilities;
•
delays in the opening of new, expanded, relocated or remodeled units;
•
developments in, and the outcome of, legal and regulatory proceedings and investigations to which Walmart is a party or is subject, and the liabilities, obligations and expenses, if any, that Walmart may incur in connection therewith;
•
changes in the credit ratings assigned to the Company's commercial paper and debt securities by credit rating agencies;
•
Walmart's effective tax rate; and
•
unanticipated changes in accounting judgments and estimates;

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Regulatory and Other Factors
•
changes in existing, tax, labor and other laws and changes in tax rates, including the enactment of laws and the adoption and interpretation of administrative rules and regulations;
•
the imposition of new taxes on imports, new tariffs and changes in existing tariff rates;
•
the imposition of new trade restrictions and changes in existing trade restrictions;
•
adoption or creation of new, and modification of existing, governmental policies, programs, initiatives and actions in the markets in which Walmart operates and elsewhere and actions with respect to such policies, programs and initiatives;
•
changes in currency control laws;
•
changes in the level of public assistance payments;
•
the timing of federal income tax refunds;
•
natural disasters, public health emergencies, civil disturbances, and terrorist attacks; and
•
changes in generally accepted accounting principles in the United States.
Other Risk Factors; No Duty to Update
This Quarterly Report on Form 10-Q should be read in conjunction with Walmart's Annual Report on Form 10-K for the fiscal year ended January 31, 2019 and all of Walmart's subsequent other filings, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, made with the SEC. Walmart urges the reader to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this Quarterly Report on Form 10-Q. The Company cannot assure you that the results or developments anticipated by the Company and reflected or implied by any forward-looking statement contained in this Quarterly Report on Form 10-Q will be realized or, even if substantially realized, that those results or developments will result in the forecasted or expected consequences for the Company or affect the Company, its operations or its financial performance as the Company has forecasted or expected. As a result of the matters discussed above and other matters, including changes in facts, assumptions not being realized or other factors, the actual results relating to the subject matter of any forward-looking statement in this Quarterly Report on Form 10-Q may differ materially from the anticipated results expressed or implied in that forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report, and Walmart undertakes no obligation to update any such statements to reflect subsequent events or circumstances.

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Item 6. Exhibits
The following documents are filed as an exhibit to this Quarterly Report on Form 10-Q:
Exhibit 3.1
 
 
 
 
Exhibit 3.2
 
 
 
Exhibit 31.1*
 
 
 
Exhibit 31.2*
 
 
 
Exhibit 32.1**
 
 
 
Exhibit 32.2**
 
 
 
 
Exhibit 99.1*
 
 
 
Exhibit 101.INS*
 
XBRL Instance Document
 
 
Exhibit 101.SCH*
 
XBRL Taxonomy Extension Schema Document
 
 
Exhibit 101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
Exhibit 101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
Exhibit 101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
Exhibit 101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
*
Filed herewith as an Exhibit.
**
Furnished herewith as an Exhibit.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
WALMART INC.

June 7, 2019
By:
 
/s/ C. Douglas McMillon
 
 
 
C. Douglas McMillon
President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
June 7, 2019
By:
 
/s/ M. Brett Biggs
 
 
 
M. Brett Biggs
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
June 7, 2019
By:
 
/s/ David M. Chojnowski
 
 
 
David M. Chojnowski
Senior Vice President and Controller
(Principal Accounting Officer)


38