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Wal-Mart 10-Q 2013
WMT 10/31/13 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 October 31, 2013.
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 1-6991
WAL-MART STORES, 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 
ý
  
Accelerated Filer
 
o
Non-Accelerated Filer
 
o
  
Smaller Reporting Company
 
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 3,235,772,430 shares of common stock outstanding as of December 4, 2013.



Wal-Mart Stores, Inc.
Form 10-Q
For the Quarterly Period Ended October 31, 2013



Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statement of Shareholders' Equity and Redeemable Noncontrolling Interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1


PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Income
(Unaudited) 
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 31,
 
October 31,
(Amounts in millions, except per share data)
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
 
Net sales
 
$
114,876

 
$
113,077

 
$
344,290

 
$
338,644

Membership and other income
 
812

 
723

 
2,298

 
2,231

Total revenues
 
115,688

 
113,800

 
346,588

 
340,875

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales
 
86,687

 
85,470

 
260,098

 
256,226

Operating, selling, general and administrative expenses
 
22,691

 
22,237

 
66,965

 
65,504

Operating income
 
6,310

 
6,093

 
19,525

 
19,145

Interest:
 
 
 
 
 
 
 
 
Debt
 
527

 
522

 
1,556

 
1,512

Capital leases
 
65

 
68

 
198

 
205

Interest income
 
(12
)
 
(44
)
 
(92
)
 
(131
)
Interest, net
 
580

 
546

 
1,662

 
1,586

Income from continuing operations before income taxes
 
5,730

 
5,547

 
17,863

 
17,559

Provision for income taxes
 
1,860

 
1,738

 
5,856

 
5,718

Income from continuing operations
 
3,870

 
3,809

 
12,007

 
11,841

Income from discontinued operations, net of income tax
 
15

 
16

 
38

 
39

Consolidated net income
 
3,885

 
3,825

 
12,045

 
11,880

Less consolidated net income attributable to noncontrolling interest
 
(147
)
 
(190
)
 
(454
)
 
(487
)
Consolidated net income attributable to Walmart
 
$
3,738

 
$
3,635

 
$
11,591

 
$
11,393

 
 
 
 
 
 
 
 
 
Basic net income per common share:
 
 
 
 
 
 
 
 
Basic income per common share from continuing operations attributable to Walmart
 
$
1.14

 
$
1.08

 
$
3.53

 
$
3.36

Basic income per common share from discontinued operations attributable to Walmart
 
0.01

 

 

 
0.01

Basic net income per common share attributable to Walmart
 
$
1.15

 
$
1.08

 
$
3.53

 
$
3.37

 
 
 
 
 
 
 
 
 
Diluted net income per common share:
 
 
 
 
 
 
 
 
Diluted income per common share from continuing operations attributable to Walmart
 
$
1.14

 
$
1.07

 
$
3.51

 
$
3.34

Diluted income per common share from discontinued operations attributable to Walmart
 

 
0.01

 
0.01

 
0.01

Diluted net income per share attributable to Walmart
 
$
1.14

 
$
1.08

 
$
3.52

 
$
3.35

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
3,257

 
3,364

 
3,279

 
3,385

Diluted
 
3,271

 
3,379

 
3,293

 
3,400

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$

 
$

 
$
1.88

 
$
1.59

See accompanying notes.

2


Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 31,
 
October 31,
(Amounts in millions)
 
2013
 
2012
 
2013
 
2012
Consolidated net income
 
$
3,885

 
$
3,825

 
$
12,045

 
$
11,880

Less consolidated net income attributable to nonredeemable noncontrolling interest
 
(131
)
 
(176
)
 
(407
)
 
(448
)
Less consolidated net income attributable to redeemable noncontrolling interest
 
(16
)
 
(14
)
 
(47
)
 
(39
)
Consolidated net income attributable to Walmart
 
3,738

 
3,635

 
11,591

 
11,393

 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of income taxes
 
 
 
 
 
 
 
 
Currency translation and other
 
724

 
876

 
(2,171
)
 
1,232

Derivative instruments
 

 
250

 
180

 
(135
)
Minimum pension liability
 
1

 
(1
)
 
117

 
3

Other comprehensive income (loss), net of income taxes
 
725

 
1,125

 
(1,874
)
 
1,100

Less other comprehensive income (loss) attributable to nonredeemable noncontrolling interest
 
(15
)
 
(122
)
 
240

 
(196
)
Less other comprehensive income (loss) attributable to redeemable noncontrolling interest
 
(4
)
 
(34
)
 
38

 
(56
)
Other comprehensive income (loss) attributable to Walmart
 
706

 
969

 
(1,596
)
 
848

 
 
 
 
 
 
 
 
 
Comprehensive income, net of income taxes
 
4,610

 
4,950

 
10,171

 
12,980

Less comprehensive income attributable to nonredeemable noncontrolling interest
 
(146
)
 
(298
)
 
(167
)
 
(644
)
Less comprehensive income attributable to redeemable noncontrolling interest
 
(20
)
 
(48
)
 
(9
)
 
(95
)
Comprehensive income attributable to Walmart
 
$
4,444

 
$
4,604

 
$
9,995

 
$
12,241

See accompanying notes.

3


Wal-Mart Stores, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
October 31,
 
January 31,
 
October 31,
(Amounts in millions)
 
2013
 
2013
 
2012
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
8,736

 
$
7,781

 
$
8,643

Receivables, net
 
6,206

 
6,768

 
5,567

Inventories
 
49,673

 
43,803

 
47,487

Prepaid expenses and other
 
2,160

 
1,588

 
1,654

Current assets of discontinued operations
 
367

 

 
80

Total current assets
 
67,142

 
59,940

 
63,431

Property and equipment:
 
 
 
 
 
 
Property and equipment
 
170,967

 
165,825

 
163,011

Less accumulated depreciation
 
(56,313
)
 
(51,896
)
 
(50,450
)
Property and equipment, net
 
114,654

 
113,929

 
112,561

Property under capital leases:
 
 
 
 
 
 
Property under capital leases
 
5,668

 
5,899

 
5,900

Less accumulated amortization
 
(3,095
)
 
(3,147
)
 
(3,208
)
Property under capital leases, net
 
2,573

 
2,752

 
2,692

 
 
 
 
 
 
 
Goodwill
 
19,729

 
20,497

 
20,572

Other assets and deferred charges
 
5,778

 
5,987

 
6,562

Total assets
 
$
209,876

 
$
203,105

 
$
205,818

 
 
 
 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Short-term borrowings
 
$
12,817

 
$
6,805

 
$
8,740

Accounts payable
 
39,221

 
38,080

 
40,272

Dividends payable
 
1,573

 

 
1,381

Accrued liabilities
 
18,606

 
18,808

 
18,536

Accrued income taxes
 
255

 
2,211

 
1,010

Long-term debt due within one year
 
4,147

 
5,587

 
6,550

Obligations under capital leases due within one year
 
315

 
327

 
331

Current liabilities of discontinued operations
 
87

 

 
25

Total current liabilities
 
77,021

 
71,818

 
76,845

 
 
 
 
 
 
 
Long-term debt
 
41,702

 
38,394

 
38,872

Long-term obligations under capital leases
 
2,841

 
3,023

 
2,964

Deferred income taxes and other
 
8,298

 
7,613

 
8,044

 
 
 
 
 
 
 
Redeemable noncontrolling interest
 
1,492

 
519

 
492

 
 
 
 
 
 
 
Commitments and contingencies
 

 

 

 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
Common stock
 
324

 
332

 
336

Capital in excess of par value
 
2,364

 
3,620

 
3,861

Retained earnings
 
72,888

 
72,978

 
70,256

Accumulated other comprehensive income (loss)
 
(2,183
)
 
(587
)
 
(562
)
Total Walmart shareholders' equity
 
73,393

 
76,343

 
73,891

Nonredeemable noncontrolling interest
 
5,129

 
5,395

 
4,710

Total equity
 
78,522

 
81,738

 
78,601

Total liabilities, redeemable noncontrolling interest, and equity
 
$
209,876

 
$
203,105

 
$
205,818

See accompanying notes.

4


Wal-Mart Stores, Inc.
Condensed Consolidated Statement of Shareholders' Equity and Redeemable Noncontrolling Interest
(Unaudited)
 
 
 
 
 
 
 
 
 
Accumulated
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Capital in
 
 
 
Other
 
Walmart
 
Nonredeemable
 
 
 
 
Redeemable
(Amounts in millions)
Common Stock
 
Excess of
 
Retained
 
Comprehensive
 
Shareholders'
 
Noncontrolling
 
Total
 
 
Noncontrolling
Shares
 
Amount
 
Par Value
 
Earnings
 
Income (Loss)
 
Equity
 
Interest
 
Equity
 
 
Interest
Balances as of February 1, 2013
3,314

 
$
332

 
$
3,620

 
$
72,978

 
$
(587
)
 
$
76,343

 
$
5,395

 
$
81,738

 
 
$
519

Consolidated net income

 

 

 
11,591

 

 
11,591

 
407

 
11,998

 
 
47

Other comprehensive income, net of income taxes

 

 

 

 
(1,596
)
 
(1,596
)
 
(240
)
 
(1,836
)
 
 
(38
)
Cash dividends declared ($1.88 per share)

 

 

 
(6,190
)
 

 
(6,190
)
 

 
(6,190
)
 
 

Purchase of Company stock
(77
)
 
(8
)
 
(268
)
 
(5,442
)
 

 
(5,718
)
 

 
(5,718
)
 
 

Redemption value adjustment of redeemable noncontrolling interest

 

 
(977
)
 

 

 
(977
)
 

 
(977
)
 
 
977

Other
5

 

 
(11
)
 
(49
)
 

 
(60
)
 
(433
)
 
(493
)
 
 
(13
)
Balances as of October 31, 2013
3,242

 
$
324

 
$
2,364

 
$
72,888

 
$
(2,183
)
 
$
73,393

 
$
5,129

 
$
78,522

 
 
$
1,492

See accompanying notes.

5


Wal-Mart Stores, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) 
 
 
Nine Months Ended
 
 
October 31,
(Amounts in millions)
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
Consolidated net income
 
$
12,045

 
$
11,880

Income from discontinued operations, net of income taxes
 
(38
)
 
(39
)
Income from continuing operations
 
12,007

 
11,841

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
 

 
 
Depreciation and amortization
 
6,600

 
6,304

Deferred income taxes
 
594

 
279

Other operating activities
 
465

 
138

Changes in certain assets and liabilities:
 

 
 
Receivables, net
 
191

 
501

Inventories
 
(6,230
)
 
(6,459
)
Accounts payable
 
2,089

 
3,545

Accrued liabilities
 
(95
)
 
(82
)
Accrued income taxes
 
(2,301
)
 
(160
)
Net cash provided by operating activities
 
13,320

 
15,907

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Payments for property and equipment
 
(9,506
)
 
(8,921
)
Proceeds from the disposal of property and equipment
 
521

 
343

Investments and business acquisitions, net of cash acquired
 
(15
)
 
(716
)
Other investing activities
 
58

 
(58
)
Net cash used in investing activities
 
(8,942
)
 
(9,352
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Net change in short-term borrowings
 
6,046

 
4,700

Proceeds from issuance of long-term debt
 
7,053

 
199

Payments of long-term debt
 
(4,943
)
 
(639
)
Dividends paid
 
(4,625
)
 
(4,034
)
Purchase of Company stock
 
(5,806
)
 
(4,657
)
Other financing activities
 
(960
)
 
(263
)
Net cash used in financing activities
 
(3,235
)
 
(4,694
)
 
 
 
 
 
Effect of exchange rates on cash and cash equivalents
 
(188
)
 
232

 
 
 
 
 
Net increase in cash and cash equivalents
 
955

 
2,093

Cash and cash equivalents at beginning of year
 
7,781

 
6,550

Cash and cash equivalents at end of period
 
$
8,736

 
$
8,643

See accompanying notes.

6


Wal-Mart Stores, Inc.
Notes to Condensed Consolidated Financial Statements
Note 1. Accounting Policies
Basis of Presentation
The Condensed Consolidated Financial Statements of Wal-Mart Stores, 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 a 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, 2013. Therefore, the interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K.
The Company's Condensed Consolidated Financial Statements are based on a fiscal year ending on January 31 for the United States ("U.S.") and Canadian operations. The Company consolidates all other operations generally using a one-month lag and based on a calendar year. There were no significant intervening events during October 2013 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 different calendar events and national and religious holidays, as well as different weather patterns. Historically, the Company's highest sales volume and operating income occur in the fiscal quarter ending January 31.
Certain prior period amounts have been reclassified to conform to the current period's presentation. These reclassifications did not impact the Company's operating income or consolidated net income.
Receivables
Receivables are stated at their carrying values, net of a reserve for doubtful accounts. Receivables consist primarily of amounts due from:
insurance companies resulting from pharmacy sales;
banks for customer credit and debit cards and electronic bank transfers that take in excess of seven days to process;
consumer financing programs in certain international operations;
suppliers for marketing or incentive programs; and
real estate transactions.
The Walmart International segment offers a limited number of consumer credit products, primarily through its financial institutions in select countries. The receivable balance from consumer credit products was $1.2 billion, net of a reserve for doubtful accounts of $93 million at October 31, 2013, compared to a receivable balance of $1.2 billion, net of a reserve for doubtful accounts of $115 million at January 31, 2013. These balances are included in receivables, net, in the Company's Condensed Consolidated Balance Sheets.
Inventories
The Company values inventories at the lower of cost or market as determined primarily by the retail method of accounting, using the last-in, first-out ("LIFO") method for substantially all of the Walmart U.S. segment's inventories. The Walmart International segment's inventories are primarily valued by the retail method of accounting, using the first-in, first-out ("FIFO") method. The retail method of accounting results in inventory being valued at the lower of cost or market since permanent markdowns are currently taken as a reduction of the retail value of inventory. The Sam's Club segment's inventories are valued based on the weighted-average cost using the LIFO method. At October 31, 2013 and January 31, 2013, the Company's inventories valued at LIFO approximate those inventories as if they were valued at FIFO.
Recently Adopted or New Accounting Pronouncements
No recently adopted or new accounting pronouncements have had, or are expected to have, a material effect on the Company's net income, financial position or cash flows.

7


Note 2. Net Income Per Common Share
Basic income per common share from continuing operations attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period. Diluted income per common share from continuing operations attributable to Walmart is based on the weighted-average common shares outstanding during the relevant period adjusted for the dilutive effect of outstanding stock options and other share-based awards. The Company did not have significant stock options or other share-based awards outstanding that were antidilutive and not included in the calculation of diluted income per common share from continuing operations attributable to Walmart for the three and nine months ended October 31, 2013 and 2012.
The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted income per common share from continuing operations attributable to Walmart:
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 31,
 
October 31,
(Amounts in millions, except per share data)
 
2013
 
2012
 
2013
 
2012
Numerator
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
3,870

 
$
3,809

 
$
12,007

 
$
11,841

Less income from continuing operations attributable to noncontrolling interest
 
(143
)
 
(185
)
 
(443
)
 
(475
)
Income from continuing operations attributable to Walmart
 
$
3,727

 
$
3,624

 
$
11,564

 
$
11,366

 
 
 
 
 
 
 
 
 
Denominator
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding, basic
 
3,257

 
3,364

 
3,279

 
3,385

Dilutive impact of stock options and other share-based awards
 
14

 
15

 
14

 
15

Weighted-average common shares outstanding, diluted
 
3,271

 
3,379

 
3,293

 
3,400

 
 
 
 
 
 
 
 
 
Income per common share from continuing operations attributable to Walmart
 
 
 
 
 
 
 
 
Basic
 
$
1.14

 
$
1.08

 
$
3.53

 
$
3.36

Diluted
 
1.14

 
1.07

 
3.51

 
3.34


8


Note 3. Accumulated Other Comprehensive Income (Loss)
The following table provides the changes in the composition of total Walmart accumulated other comprehensive income (loss) for the nine months ended October 31, 2013:
(Amounts in millions and net of income taxes)
 
Currency Translation
and Other
 
Derivative
Instruments
 
Minimum
Pension Liability
 
Total
Balances as of February 1, 2013
 
$
47

 
$
129

 
$
(763
)
 
$
(587
)
Other comprehensive income (loss) before reclassifications
 
(1,893
)
 
168

 
111

 
(1,614
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
12

 
6

 
18

Balances as of October 31, 2013
 
$
(1,846
)
 
$
309

 
$
(646
)
 
$
(2,183
)
Amounts reclassified from accumulated other comprehensive income (loss) are generally included in interest, net, in the Company's Condensed Consolidated Statements of Income, except for amounts related to the minimum pension liability category, which are included in the computation of net periodic pension costs.
The Company's unrealized net gains and losses on net investment hedges, included in the currency translation and other category of accumulated other comprehensive income (loss), were not significant as of October 31, 2013 and January 31, 2013.
Note 4. Long-term Debt
Information on significant long-term debt issued during the nine months ended October 31, 2013, is as follows: 
(Amounts in millions)
 
 
 
 
 
 
Issue Date
 
Maturity Date
 
Interest Rate
 
Principal Amount
April 11, 2013
 
April 11, 2016
 
0.600%
 
$
1,000

April 11, 2013
 
April 11, 2018
 
1.125%
 
1,250

April 11, 2013
 
April 11, 2023
 
2.550%
 
1,750

April 11, 2013
 
April 11, 2043
 
4.000%
 
1,000

October 2, 2013
 
December 15, 2018
 
1.950%
 
1,000

October 2, 2013
 
October 2, 2043
 
4.750%
 
750

Total
 
 
 
 
 
$
6,750

The aggregate net proceeds from these long-term debt issuances were approximately $6.7 billion, which were used to pay down and refinance existing debt and for other general corporate purposes. The Company also received additional aggregate net proceeds of approximately $0.4 billion from other, smaller long-term debt issuances in several of its international operations, which were used primarily to refinance existing debt.
On April 11, 2013, the Company issued $1.0 billion principal amount of its 0.600% Notes due 2016, $1.25 billion principal amount of its 1.125% Notes due 2018, $1.75 billion principal amount of its 2.550% Notes due 2023 and $1.0 billion principal amount of its 4.000% Notes due 2043. The aggregate net proceeds from these note issuances were approximately $5.0 billion. The notes of each series require semi-annual interest payments on April 11 and October 11 of each year, with the first interest payment made on October 11, 2013. Unless previously purchased and canceled, the Company will repay the notes of each series at 100% of the principal amount, together with accrued and unpaid interest thereon, at maturity. However, the Company has the right to redeem any or all of the notes that mature on April 11, 2023, at any time on or after January 11, 2023, and to redeem any or all of the notes that mature on April 11, 2043, at any time on or after October 11, 2042, in each case at 100% of the principal amount, together with the accrued and unpaid interest thereon to, but excluding, the date of redemption. The notes of each series are senior, unsecured obligations of the Company and are not convertible or exchangeable.

On October 2, 2013, the Company issued $1.0 billion principal amount of its 1.950% Notes due 2018 and $750 million principal amount of its 4.750% Notes due 2043. The aggregate net proceeds from these note issuances were approximately $1.7 billion. The 1.950% Notes due 2018 series require semi-annual interest payments on June 15 and December 15 of each year, with the first interest payment commencing on June 15, 2014. The 4.750% Notes due 2043 series require semi-annual interest payments on October 2 and April 2 of each year, commencing on April 2, 2014. Unless previously purchased and canceled, the Company will repay the notes of each series at 100% of the principal amount, together with accrued and unpaid interest thereon, at maturity. However, the Company has the right to redeem any or all of the notes that mature on October 2, 2043, at any time on or after April 2, 2043, at 100% of the principal amount, together with the accrued and unpaid interest thereon to, but excluding, the date of redemption. The notes of each series are senior, unsecured obligations of the Company and are not convertible or exchangeable.

9


Note 5. Fair Value Measurements
The Company records and discloses certain financial and non-financial assets and liabilities at their fair value. The fair value of an asset is the price at which the asset could be sold in an ordinary transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor. 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.
Recurring Fair Value Measurements
The Company holds derivative instruments that are required to be measured at fair value on a recurring basis. The fair values are the estimated amounts the Company would receive or pay upon termination of the related derivative agreements as of the reporting dates. The fair values have been measured using the income approach and Level 2 inputs, which include the relevant interest rate and foreign currency forward curves. As of October 31, 2013 and January 31, 2013, the notional amounts and fair values of these derivatives are as follows:
 
October 31, 2013
 
January 31, 2013
(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
$
1,000

 
$
11

 
$
3,445

 
$
60

Receive fixed-rate, pay fixed-rate cross-currency interest rate swaps designated as net investment hedges
1,250

 
139

 
1,250

 
223

Receive fixed-rate, pay fixed-rate cross-currency interest rate swaps designated as cash flow hedges
2,971

 
400

 
2,944

 
230

Receive variable-rate, pay fixed-rate interest rate swaps designated as cash flow hedges
477

 
(2
)
 
1,056

 
(8
)
Receive variable-rate, pay fixed-rate forward starting interest rate swaps designated as cash flow hedges
2,500

 
177

 
5,000

 
10

Total
$
8,198

 
$
725

 
$
13,695

 
$
515

Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company's assets and liabilities are also subject to nonrecurring fair value measurements. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. The Company did not record any significant impairment charges to assets measured at fair value on a nonrecurring basis for the three and nine months ended October 31, 2013, or for the fiscal year ended January 31, 2013.
Other Fair Value Disclosures
The Company records cash and cash equivalents 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 October 31, 2013 and January 31, 2013, are as follows: 
 
 
October 31, 2013
 
January 31, 2013
(Amounts in millions)
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Long-term debt, including amounts due within one year
 
$
45,849

 
$
50,467

 
$
43,981

 
$
50,664


10


Note 6. Derivative Financial Instruments
The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to changes in interest and currency exchange rates, as well as to maintain an appropriate mix of fixed- and variable-rate debt. Use of derivative financial instruments in hedging programs subjects the Company to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative financial instrument will change. In a hedging relationship, the change in the value of the derivative financial instrument is offset to a great extent by the change in the value of the underlying hedged item. Credit risk related to a derivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the contract. The notional, or contractual, amount of the Company's derivative financial instruments is used to measure interest to be paid or received and does not represent the Company's exposure due to credit risk. Credit risk is monitored through established approval procedures, including setting concentration limits by counterparty, reviewing credit ratings and requiring collateral (generally cash) from the counterparty when appropriate.
The Company only enters into derivative transactions with counterparties rated "A-" or better by nationally recognized credit rating agencies. Subsequent to entering into derivative transactions, the Company regularly monitors the credit ratings of its counterparties. In connection with various derivative agreements, including master netting arrangements, the Company held cash collateral from counterparties of $612 million and $413 million at October 31, 2013 and January 31, 2013, respectively. The Company records cash collateral received as amounts due to the counterparties exclusive of any derivative asset. Furthermore, as part of the master netting arrangements with these counterparties, the Company is also required to post collateral if the Company's net derivative liability position exceeds $150 million with any counterparty. The Company did not have any cash collateral posted with counterparties at October 31, 2013 or January 31, 2013. The Company records cash collateral it posts with counterparties as amounts receivable from those counterparties exclusive of any derivative liability.
The Company uses derivative financial instruments for the purpose of hedging its exposure to interest and currency exchange rate risks and, accordingly, the contractual terms of a hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria are recorded using hedge accounting. If a derivative financial instrument is recorded using hedge accounting, depending on the nature of the hedge, changes in the fair value of the instrument will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or be recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. Any hedge ineffectiveness is immediately recognized in earnings. The Company's net investment and cash flow instruments are highly effective hedges and the ineffective portion has not been, and is not expected to be, significant. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are recorded at fair value with unrealized gains or losses reported in earnings during the period of the change.
Fair Value Instruments
The Company is a party to receive fixed-rate, pay variable-rate interest rate swaps that the Company uses to hedge the fair value of fixed-rate debt. The notional amounts are used to measure interest to be paid or received and do not represent the Company's exposure due to credit loss. The Company's interest rate swaps that receive fixed-interest rate payments and pay variable-interest rate payments are designated as fair value hedges. As the specific terms and notional amounts of the derivative instruments match those of the fixed-rate debt being hedged, the derivative instruments are assumed to be perfectly effective hedges. Changes in the fair values of these derivative instruments are recorded in earnings, but are offset by corresponding changes in the fair values of the hedged items, also recorded in earnings, and, accordingly, do not impact the Company's Condensed Consolidated Statements of Income. These fair value instruments will mature on dates ranging from February 2014 to May 2014.
Net Investment Instruments
The Company is a party to cross-currency interest rate swaps that the Company uses to hedge its net investments. The agreements are contracts to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. All changes in the fair value of these instruments are recorded in accumulated other comprehensive income (loss), offsetting the currency translation adjustment of the related investment that is also recorded in accumulated other comprehensive income (loss). These instruments will mature on dates ranging from October 2023 to February 2030.
The Company has issued foreign-currency-denominated long-term debt as hedges of net investments of certain of its foreign operations. These foreign-currency-denominated long-term debt issuances are designated and qualify as nonderivative hedging instruments. Accordingly, the foreign currency translation of these debt instruments is recorded in accumulated other comprehensive income (loss), offsetting the foreign currency translation adjustment of the related net investments that is also recorded in accumulated other comprehensive income (loss). At October 31, 2013 and January 31, 2013, the Company had ¥200 billion and ¥275 billion, respectively, of outstanding long-term debt designated as a hedge of its net investment in Japan, as well as outstanding long-term debt of £2.5 billion at October 31, 2013 and January 31, 2013, 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 August 2014 to January 2039.

11


Cash Flow Instruments
The Company is a party to receive variable-rate, pay fixed-rate interest rate swaps that the Company uses to hedge the interest rate risk of certain non-U.S. denominated debt. The swaps are designated as cash flow hedges of interest expense risk. Amounts reported in accumulated other comprehensive income (loss) related to these derivatives are reclassified from accumulated other comprehensive income (loss) to earnings as interest is expensed for the Company's variable-rate debt, converting the variable-rate interest expense into fixed-rate interest expense. These cash flow instruments will mature on dates ranging from August 2014 to July 2015.
The Company is also a party to receive fixed-rate, pay fixed-rate cross-currency interest rate swaps to hedge the currency exposure associated with the forecasted payments of principal and interest of certain non-U.S. denominated debt. The swaps are designated as cash flow hedges of the currency risk related to payments on the non-U.S. denominated debt. The effective portion of changes in the fair value of derivatives designated as cash flow hedges of foreign exchange risk is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The hedged items are recognized foreign currency-denominated liabilities that are remeasured at spot exchange rates each period, and the assessment of effectiveness (and measurement of any ineffectiveness) is based on total changes in the related derivative's cash flows. As a result, the amount reclassified into earnings each period includes an amount that offsets the related transaction gain or loss arising from that remeasurement and the adjustment to earnings for the period's allocable portion of the initial spot-forward difference associated with the hedging instrument. These cash flow instruments will mature on dates ranging from September 2029 to March 2034.
The Company also uses forward starting receive variable-rate, pay fixed-rate swaps ("forward starting swaps"), to hedge its exposure to the variability in future cash flows due to changes in the LIBOR swap rate for 10- and 30-year debt issuances forecasted to occur in the future. Amounts reported in accumulated other comprehensive income (loss) related to these derivatives will be reclassified from accumulated other comprehensive income (loss) to earnings as interest expense is incurred on the forecasted hedged fixed-rate debt, adjusting interest expense to reflect the fixed-rate entered into by the forward starting swaps. These cash flow instruments hedge forecasted interest payments to be made through May 2044. These forward starting swaps will be terminated on the day the hedged forecasted debt issuances occur, but no later than October 31, 2014, if the hedged forecasted debt issuances do not occur. The Company terminated forward starting swaps with an aggregate notional amount of $2.5 billion by making a cash payment to the related counterparties of $74 million in connection with the April 2013 debt issuances described in Note 4. The $74 million loss was recorded in accumulated other comprehensive income (loss) and will be reclassified to earnings over the life of the related debt, effectively adjusting interest expense to reflect the fixed-rate entered into by the forward starting swaps.
Financial Statement Presentation
Although subject to master netting arrangements, the Company does not offset derivative assets and derivative liabilities in its Condensed Consolidated Balance Sheets. Derivative instruments with an unrealized gain are recorded in the Company's Condensed Consolidated Balance Sheets as either current or non-current assets, based on maturity date, and those hedging instruments with an unrealized loss are recorded as either current or non-current liabilities, based on maturity date.
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:
 
October 31, 2013
 
January 31, 2013
(Amounts in millions)
Fair Value
Instruments
 
Net Investment
Instruments
 
Cash Flow
Instruments
 
Fair Value
Instruments
 
Net Investment
Instruments
 
Cash Flow
Instruments
Derivative instruments
 
 
 
 
 
 
 
 
 
 
 
Prepaid expenses and other
$
11

 
$

 
$

 
$
29

 
$

 
$

Other assets and deferred charges

 
139

 
577

 
31

 
223

 
327

Derivative asset subtotals
$
11

 
$
139

 
$
577

 
$
60

 
$
223

 
$
327

 
 
 
 
 
 
 
 
 
 
 
 
Accrued liabilities
$

 
$

 
$
1

 
$

 
$

 
$
4

Deferred income taxes and other

 

 
1

 

 

 
91

Derivative liability subtotals
$

 
$

 
$
2

 
$

 
$

 
$
95

 
 
 
 
 
 
 
 
 
 
 
 
Nonderivative hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Long-term debt due within one year
$

 
$
1,015

 
$

 
$

 
$
818

 
$

Long-term debt

 
5,025

 

 

 
6,145

 

Nonderivative hedge liability subtotals
$

 
$
6,040

 
$

 
$

 
$
6,963

 
$

Gains and losses related to the Company's derivatives primarily relate to interest rate hedges, which are included in interest, net, in the Company's Condensed Consolidated Statements of Income. Amounts related to the Company's derivatives expected to be reclassified from accumulated other comprehensive income (loss) to net income during the next 12 months, are not significant.

12


Note 7. Share Repurchases
From time to time, the Company repurchases shares of its common stock under share repurchase programs authorized by the Board of Directors. On June 6, 2013, the Company's Board of Directors replaced the previous $15.0 billion share repurchase program, which had approximately $712 million of remaining authorization for share repurchases as of that date, with a new $15.0 billion share repurchase program, which was announced on June 7, 2013. As was the case with the replaced share repurchase program, the new share repurchase program has no expiration date or other restrictions limiting the period over which the Company can make share repurchases. Any repurchased shares are constructively retired and returned to an unissued status.
The Company 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. The number of shares repurchased, average price paid per share and cash paid for share repurchases for the nine months ended October 31, 2013 and 2012, were as follows:

 
Nine Months Ended October 31,
(Amounts in millions, except per share data)
 
2013
 
2012
Total number of shares repurchased
 
77.9

 
70.9

Average price paid per share
 
$
74.54

 
$
65.69

Total cash paid for share repurchases
 
$
5,806

 
$
4,657

Note 8. Common Stock Dividends
On February 21, 2013, the Board of Directors approved an increase in the annual dividend for fiscal 2014 to $1.88 per share, an increase of approximately 18% over the $1.59 per share dividend paid in fiscal 2013. For fiscal 2014, the annual dividend will be paid in four quarterly installments of $0.47 per share, according to the following record and payable dates:
Record Date
  
Payable Date
March 12, 2013
  
April 1, 2013
May 10, 2013
  
June 3, 2013
August 9, 2013
  
September 3, 2013
December 6, 2013
  
January 2, 2014
The dividend installments payable on April 1, 2013, June 3, 2013 and September 3, 2013, were paid as scheduled.

13


Note 9. 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 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's shareholders. Unless stated otherwise, the matters, or groups of related 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.
Wage-and-Hour Class Action: The Company is a defendant in Braun/Hummel v. Wal-Mart Stores, Inc., a class-action lawsuit commenced in March 2002 in the Court of Common Pleas in Philadelphia, Pennsylvania. The plaintiffs allege that the Company failed to pay class members for all hours worked and prevented class members from taking their full meal and rest breaks. On October 13, 2006, a jury awarded back-pay damages to the plaintiffs of approximately $78 million on their claims for off-the-clock work and missed rest breaks. The jury found in favor of the Company on the plaintiffs' meal-period claims. On November 14, 2007, the trial judge entered a final judgment in the approximate amount of $188 million, which included the jury's back-pay award plus statutory penalties, prejudgment interest and attorneys' fees. By operation of law, post-judgment interest accrues on the judgment amount at the rate of six percent per annum from the date of entry of the judgment, which was November 14, 2007, until the judgment is paid, unless the judgment is set aside on appeal. On December 7, 2007, the Company filed its Notice of Appeal. The Company filed its opening appellate brief on February 17, 2009, plaintiffs filed their response brief on April 20, 2009, and the Company filed its reply brief on June 5, 2009. Oral argument was held before the Pennsylvania Superior Court of Appeals on August 19, 2009. On June 10, 2011, the court issued an opinion upholding the trial court's certification of the class, the jury's back pay award, and the awards of statutory penalties and prejudgment interest, but reversing the award of attorneys' fees. On September 9, 2011, the Company filed a Petition for Allowance of Appeal with the Pennsylvania Supreme Court. On July 2, 2012, the Pennsylvania Supreme Court granted the Company's Petition. The Company served its opening brief in the Pennsylvania Supreme Court on October 22, 2012, plaintiffs served their response brief on January 22, 2013, and the Company served its reply on February 28, 2013. Oral argument was held in the Pennsylvania Supreme Court on May 8, 2013. No decision has been issued. The Company believes it has substantial factual and legal defenses to the claims at issue, and plans to continue pursuing appellate review.
Gender Discrimination Class Actions: The Company is a defendant in Dukes v. Wal-Mart Stores, Inc., which was commenced as a class-action lawsuit in June 2001 in the United States District Court for the Northern District of California, asserting that the Company had engaged in a pattern and practice of discriminating against women in promotions, pay, training, and job assignments, and seeking, among other things, injunctive relief, front pay, back pay, punitive damages, and attorneys' fees. On June 21, 2004, the district court issued an order granting in part and denying in part the plaintiffs' motion for class certification. As defined by the district court, the class included "[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart's challenged pay and management track promotions policies and practices." The Company appealed the order to the Ninth Circuit Court of Appeals and subsequently to the United States Supreme Court. On June 20, 2011, the Supreme Court issued an opinion decertifying the class and remanding the case to the district court. On October 27, 2011, the plaintiffs' attorneys filed an amended complaint proposing a class of current and former female associates at the Company's California retail facilities, and the Company filed a motion to dismiss on January 13, 2012. On September 21, 2012, the court denied the motion. The plaintiffs filed a motion for class certification on April 15, 2013. On August 2, 2013, the court denied the motion. On August 16, 2013, the plaintiffs filed a petition for permission to appeal that ruling to the U.S. Court of Appeals for the Ninth Circuit. On November 18, 2013, the Ninth Circuit denied that petition.
On October 28, 2011, the attorneys for the plaintiffs in the Dukes case filed a similar complaint in the United States District Court for the Northern District of Texas entitled Odle v. Wal-Mart Stores, Inc., proposing a class of current and former female associates employed in any Walmart region that includes stores located in the state of Texas. On October 15, 2012, the court in the Odle case granted the Company's motion to dismiss, dismissing with prejudice the plaintiffs' class-action allegations and the individual claims of the lead plaintiff, Stephanie Odle. On March 19, 2013, the U.S. Court of Appeals for the Fifth Circuit denied the plaintiffs' petition for permission to appeal. On October 2, 2012, the plaintiffs' attorneys filed another similar complaint in the United States District Court for the Middle District of Tennessee entitled Phipps v. Wal-Mart Stores, Inc., proposing a class of current and former female associates employed in "Region 43, centered in Middle and Western Tennessee." On February 20, 2013, the court in the Phipps case granted the Company's motion to dismiss, dismissing with prejudice the plaintiffs' class-action allegations. On September 11, 2013, the U.S. Court of Appeals for the Sixth Circuit granted the plaintiffs’ petition for permission to appeal that ruling. On October 4, 2012, the plaintiffs' attorneys filed another similar complaint in the United States District Court for the Southern District of Florida, entitled Love v. Wal-Mart Stores, Inc., proposing a class of current and former female associates employed in certain designated stores and clubs in regions centered in the state of Florida. On September 23, 2013, the court in the Love case granted the Company’s motion to dismiss, dismissing

14


with prejudice the plaintiffs’ class-action allegations. Finally, on February 20, 2013, the plaintiffs' attorneys filed another similar complaint in the United States District Court for the Western District of Wisconsin, entitled Ladik v. Wal-Mart Stores, Inc., proposing a class of current and former female associates employed in "Region 14, which includes Wal-Mart retail stores located in parts of Wisconsin, Illinois, Indiana and Michigan." On May 24, 2013, the court in the Ladik case granted the Company's motion to dismiss, dismissing with prejudice the plaintiffs' class-action allegations. On June 13, 2013, the U.S. Court of Appeals for the Seventh Circuit denied the plaintiffs' petition for permission to appeal. Management does not believe any possible loss or the range of any possible loss that may be incurred in connection with these matters will be material to the Company's financial condition or results of operations.
FCPA Investigation and Related Matters
The Audit Committee (the "Audit Committee") of the Board of Directors of the Company, which is composed solely of independent directors, is 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 have engaged outside counsel from a number of law firms and other advisors who are assisting in the on-going investigation of these matters.
The Company is also conducting a voluntary global review of its policies, practices and internal controls for FCPA compliance. The Company is engaged in strengthening 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 have identified or been made aware of additional allegations regarding potential violations of the FCPA. When such allegations are reported or identified, the Audit Committee and the Company, together with their third party advisors, conduct inquiries and when warranted based on those inquiries, open investigations. Inquiries or investigations regarding allegations of potential FCPA violations have been commenced in a number of foreign markets where the Company operates, including, but not limited to, Brazil, China and India.
The Company has been informed by the DOJ and the SEC that it is also the subject of their respective investigations into possible violations of the FCPA. The Company is cooperating with the investigations by the DOJ and the SEC. A number of federal and local government agencies in Mexico have also initiated investigations of these matters. Walmex is cooperating with the Mexican governmental agencies conducting these investigations. Furthermore, lawsuits relating to the matters under investigation have been filed by several of the Company's shareholders against it, certain of its current directors, certain of its former directors, certain of its current and former officers and certain of Walmex's current and former officers.
The Company could be exposed to a variety of negative consequences as a result of the matters noted above. There could be one or more enforcement actions in respect of the matters that are the subject of some or all of the on-going government investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders, debarment or other relief, criminal convictions and/or penalties. The shareholder lawsuits may result in judgments against the Company and its current and former directors and officers named in those proceedings. The Company cannot predict at this time the outcome or impact of the government investigations, the shareholder lawsuits, or its own internal investigations and review. In addition, the Company expects to incur costs in responding to requests for information or subpoenas seeking documents, testimony and other information in connection with the government investigations, in defending the shareholder lawsuits, and in conducting the review and investigations. These costs will be expensed as incurred. For the three and nine months ended October 31, 2013, the Company incurred expenses of approximately $69 million and $224 million respectively, related to these matters. Of these expenses, approximately $43 million and $135 million, respectively, represent costs incurred for the ongoing inquiries and investigations and $26 million and $89 million, respectively, relate to the Company's global compliance program and organizational enhancements. These matters may require the involvement of certain members of the Company's senior management that could impinge on the time they have available to devote to other matters relating to the business. The Company expects that there will be on-going media and governmental interest, including additional news articles from media publications on these matters, which could impact the perception among certain audiences of the Company's role as a corporate citizen.    
The Company's process of assessing and responding to the governmental investigations and the shareholder lawsuits continues. While the Company believes that it is probable that it will incur a loss from these matters, given the on-going nature and complexity of the review, inquiries and investigations, the Company cannot reasonably estimate any loss or range of loss that may arise from these matters. Although the Company does not presently believe that these matters will have a material adverse effect on its business, given the inherent uncertainties in such situations, the Company can provide no assurance that these matters will not be material to its business in the future.

15


Note 10. Acquisitions, Disposals and Related Items
The Company is in process of completing the following transactions that impact the operations of Walmart International:
Vips Restaurant Business in Mexico
In September 2013, Walmex, a majority-owned subsidiary of the Company, entered into a definitive agreement with Alsea S.A.B. de C.V. to dispose of Walmex's Vips restaurant business ("Vips") in Mexico for approximately $625 million. Accordingly, the Vips operating results are presented as discontinued operations in the Company's Condensed Consolidated Statements of Income for the three and nine months ended October 31, 2013 and 2012. Additionally, the Vips assets and liabilities to be disposed of are reported separately in the Company's Condensed Consolidated Balance Sheets as of October 31, 2013. The Vips sale is subject to approval by Mexican regulatory authorities and is expected to close during the fourth quarter. Upon completion of this transaction, the Company expects to record a net gain, which will be recorded in discontinued operations in the Company's Condensed Consolidated Statements of Income.
Walmart Chile
In September 2013, certain redeemable noncontrolling interest shareholders exercised put options that would require the Company to purchase a portion of their shares in Walmart Chile at the mutually agreed upon redemption value to be determined after exercise of the put options. Upon initial exercise of the put options, the Company recorded an increase to redeemable noncontrolling interest of $977 million, with a corresponding decrease to capital in excess of par value, to reflect the estimated redemption value of the redeemable noncontrolling interest at $1.4 billion. Subsequent to period end, the Company negotiated with the redeemable noncontrolling interest shareholders to acquire all of their redeemable noncontrolling interest shares. In February 2014, upon closing of the purchase of the shares held by the redeemable noncontrolling interest shareholders, the Company's ownership interest in Walmart Chile will be approximately 99.7 percent. The Company will then initiate a tender offer for the remaining 0.3 percent noncontrolling interest held by the public in Chile at the same value per share as will be paid to the redeemable noncontrolling interest shareholders. The tender offer is expected to close in March 2014.
India Operations
During the fourth quarter of fiscal 2014, the Company entered into an agreement with Bharti Ventures Limited ("Bharti") to acquire Bharti’s ownership stake in Bharti Walmart Private Limited, a joint venture between Bharti and the Company established in 2007, which operates the Company’s wholesale cash & carry business in India, for $100 million. Upon completion of the transaction, the Company will be the sole owner of that business. In addition, the Company also entered into agreements with Bharti to terminate its franchise and supply agreements with Bharti Retail Limited ("Bharti Retail"), which operates Bharti's retail business in India, and to transfer to Bharti the Company's investment in that business. The Company will pay, or forgive indebtedness, aggregating approximately $234 million in connection with such agreements related to the Bharti retail business. Each of these transactions is subject to regulatory approval and is expected to close during the fourth quarter. The Company expects to record a net loss in continuing operations in the Company's Condensed Consolidated Statements of Income related to the transactions with respect to Bharti Retail.

16


Note 11. Segments
The Company is engaged in the operations of retail stores located in the U.S., Africa, Argentina, Brazil, Canada, Central America, Chile, China, India, Japan, Mexico and the United Kingdom. The Company's operations are conducted in three reportable business segments: Walmart U.S., Walmart International and Sam's Club. The Company defines its segments as those business units whose operating results its 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. operating under the "Walmart" or "Wal-Mart" brands, as well as walmart.com. The Walmart International segment consists of the Company's operations outside of the U.S., including various retail websites. The Sam's Club segment includes the warehouse membership clubs in the U.S., as well as samsclub.com. 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 October 31,
 
Nine Months Ended October 31,
(Amounts in millions)
 
2013
 
2012
 
2013
 
2012
Net sales:
 
 
 
 
 
 
 
 
Walmart U.S.
 
$
67,692

 
$
66,113

 
$
202,973

 
$
199,789

Walmart International
 
33,109

 
33,046

 
98,839

 
96,922

Sam's Club
 
14,075

 
13,918

 
42,478

 
41,933

Net sales
 
$
114,876

 
$
113,077

 
$
344,290

 
$
338,644

Operating income by segment, as well as for corporate and support, and interest, net, are as follows:
 
 
Three Months Ended October 31,
 
Nine Months Ended October 31,
(Amounts in millions)
 
2013
 
2012
 
2013
 
2012
Operating income (loss):
 
 
 
 
 
 
 
 
Walmart U.S.
 
$
5,123

 
$
4,841

 
$
15,973

 
$
15,122

Walmart International
 
1,457

 
1,432

 
4,144

 
4,201

Sam's Club
 
474

 
434

 
1,550

 
1,458

Corporate and support
 
(744
)
 
(614
)
 
(2,142
)
 
(1,636
)
Operating income
 
6,310

 
6,093

 
19,525

 
19,145

Interest, net
 
580

 
546

 
1,662

 
1,586

Income from continuing operations before income taxes
 
$
5,730

 
$
5,547

 
$
17,863

 
$
17,559


17


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Wal-Mart Stores, Inc. ("Walmart," the "Company" or "we") operates retail stores in various formats around the world and is committed to saving people money so they can live better. Our operations consist of three reportable business segments: Walmart U.S., Walmart International and Sam's Club.
The Walmart U.S. segment includes the Company's mass merchant concept in the United States ("U.S."), operating under the "Walmart" or "Wal-Mart" brand with various formats, including supercenters, discount stores, Neighborhood Markets and other small stores, as well as walmart.com. Of our three segments, Walmart U.S. is the largest and has historically had the highest gross profit as a percentage of net sales ("gross profit rate"). In addition, Walmart U.S. has historically contributed the greatest amount to the Company's net sales and operating income.
The Walmart International segment consists of the Company's operations outside of the U.S., including various retail websites. Walmart International operates retail, wholesale and other types of units, including restaurants and some banks. The overall gross profit rate for Walmart International is lower than that of Walmart U.S. because of the margin impact from Walmart International's wholesale and other units. Walmart International has been our most rapidly growing segment, growing primarily through new stores and acquisitions and, in recent years, has been growing its net sales and operating income at a faster rate than our other segments.