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Item 7. Management’s Discussion and Analysis

2025-03-14 compared with 2024-03-15 · 208 added, 172 removed, 338 unchanged (53% of the section changed)

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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 to provide a better understanding of how each of those segments and its results of operations affect the financial position and results of operations of the Company as a whole.

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 Item 7, we discuss segment operating income, comparable store and club sales and other measures.

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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.

Management also measures the results of comparable store and club sales, or comparable sales, a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, 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 digitally, including omni-channel transactions which are fulfilled through our stores and clubs as well as certain other business offerings that are part of our ecosystem, such as our Walmart Connect advertising business.

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.

Sales related to divested businesses are excluded from comparable sales, and sales related to acquisitions are excluded until such acquisitions have been owned for 12 months.

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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.

On February 23, 2024, the Company effected a 3-for-1 forward split of its common stock and a proportionate increase in the number of authorized shares.

All share and per share information, including share based compensation, throughout this Annual Report on Form 10-K has been retroactively adjusted to reflect the stock split.

Volatility in currency exchange rates have impacted and may continue to impact the results, including net sales and operating income, of the Company and the Walmart International segment.

We have taken certain strategic actions across our segments, including an increased emphasis on investments in automation and supply chain as well as diversifying our earnings streams through category and business mix.

Additionally, in the Walmart International segment, we have taken strategic actions to reshape our portfolio including the following highlights over the last three years:

• In February 2021, we completed the sale of Asda for net consideration of $9.6 billion.

Refer to Note 12 .

• In March 2021, we completed the sale of Seiyu for net consideration of $1.2 billion.

Refer to Note 12 .

In December 2024, the Walmart U.S.

segment completed the acquisition of VIZIO Holding Corp.

for net cash consideration of $1.9 billion.

Additionally, we have taken actions in the Walmart International segment to reshape our portfolio including the following highlights over the last three years:

• In November 2022, we completed the buyout of the noncontrolling interest shareholders of our Massmart subsidiary (Refer to Note 3 ) and in December 2022, we exited operations in certain countries in Africa.

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Refer to Note 3 .

• In August 2024, we sold our equity investment in JD.com for net proceeds of $3.6 billion.

Refer to Note 8 .

We operate in a highly competitive omni-channel retail industry in all of the markets we serve.

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We compete with a number of companies for attracting and retaining quality associates.

We, along with other retail companies, are

influenced by a number of factors including, but not limited to:

catastrophic events, weather and other risks related to climate change, global health epidemics and pandemics, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain, inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, inflation, deflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment.

We, along with other retail companies, are influenced by a number of factors including, but not limited to:

conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment.

Further information on the factors that can affect our operating results and on certain risks to our Company and an investment in its securities can be found herein under " Item 1A.

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We are committed to helping customers save money and live better through everyday low prices, supported by everyday low

Merchandise costs for fiscal 2024 continued to be impacted by inflation, however at a lower rate than we experienced in fiscal 2023.

The impact to our net sales and gross profit margin is influenced in part by our pricing and merchandising strategies in response to cost increases.

Our net sales and gross profit margin are influenced in part by our pricing and merchandising strategies in response to cost increases.

Those pricing strategies include but are not limited to:

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We expect continued uncertainty in our business and the global economy due to inflationary trends;

tariffs and trade restrictions;

fluctuations in global currencies;

swings in macroeconomic conditions and their effect on consumer confidence;

volatility in employment trends;

supply chain pressures;

and ongoing uncertainties related to global health epidemics or pandemics, any of which may impact our results.

and supply chain pressures, any of which may impact our results.

For a detailed discussion on results of operations by reportable segment, refer to " Results of Operations " below.

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• Margin - improve our operating income margin through productivity initiatives as well as category and business mix;

• Returns - improve our Return on Investment ("ROI") through margin improvement and disciplined capital spend.

• Returns - improve our Return on Investment through margin improvement and disciplined capital spend.

Our objective of prioritizing growth means we will focus on serving customers and members however they want to shop through our omni-channel business model.

This includes increasing comparable store and club sales through increasing membership at Sam's Club and through Walmart+, accelerating eCommerce sales growth and expansion of omni-channel initiatives that complement our strategy.

This includes increasing comparable store and club sales through increasing membership at Sam's Club U.S.

and through Walmart+, accelerating eCommerce sales growth and expansion of omni-channel initiatives that complement our strategy.

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.

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However, when we discuss our comparable sales below, we are referring to our calendar comparable sales calculated using our fiscal calendar, which may result in differences when compared to comparable sales using the retail calendar.

We focus on comparable sales in the U.S.

We report on comparable sales in the U.S.

as we believe it is a meaningful metric within the context of the U.S.

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4.8% 5.5% (0.1)% (0.1)%

Sam's Club 2.3% 14.6% (2.6)% 4.2%

Sam's Club U.S.

4.7% 2.3% (1.5)% (2.6)%

4.8% 4.9% (0.3)% (0.6)%

Comparable sales in the U.S., including fuel, increased 4.8% and 4.9% in fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

comparable sales increased 4.8% and 5.5% in fiscal 2025 and 2024, respectively.

For fiscal 2024, comparable sales growth was driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness.

For fiscal 2023, comparable sales growth was driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as growth in

transactions.

eCommerce sales positively contributed approximately 2.6% and 0.7% to comparable sales for fiscal 2024 and 2023, respectively, which was primarily driven by store pickup and delivery.

Comparable sales at Sam's Club increased 2.3% and 14.6% in fiscal 2024 and 2023, respectively.

For fiscal 2024, Sam's Club comparable sales benefited from growth in transactions and average ticket, including strong sales in grocery and health and wellness.

Sam's Club comparable sales for fiscal 2023 benefited from growth in transactions and average ticket and included higher inflation impacts in certain merchandise categories.

Sam's Club eCommerce sales positively contributed approximately 1.7% and 0.8% to comparable sales for fiscal 2024 and 2023, respectively.

For fiscal 2025, comparable sales growth was driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness.

For fiscal 2024, comparable sales growth was driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness.Walmart U.S.

eCommerce sales positively contributed approximately 2.9% and 2.6% to comparable sales for fiscal 2025 and 2024, respectively, which was primarily driven by store-fulfilled pickup and delivery.

Comparable sales at Sam's Club U.S.

increased 4.7% and 2.3% in fiscal 2025 and 2024, respectively.

For fiscal 2025, Sam's Club U.S.

comparable sales increased due to growth in transactions and unit volumes, with strong sales in grocery and health and wellness.

Sam's Club U.S.

comparable sales for fiscal 2024 increased due to growth in transactions and average ticket,

including strong sales in grocery and health and wellness.

Additionally, fiscal 2025 and 2024 growth was partially offset by lower fuel sales primarily due to lower market prices.

Sam's Club U.S.

eCommerce sales positively contributed approximately 2.3% and 1.7% to comparable sales for fiscal 2025 and 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and delivery.

Our objective of prioritizing margin focuses on growth with a focus on incremental margin accretion through a combination of productivity improvements as well as category and business mix.

We invest in technology and process improvements to increase productivity, manage inventory and reduce costs and we operate with discipline by managing expenses and optimizing the efficiency of how we work.

Additionally, we focus on our mix of businesses, including the expansion of connected value streams with higher margins, such as advertising and membership income.

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.

Additionally, we focus on our mix of businesses, including expanding our ecosystem in higher margin areas, such as digital advertising and marketplace.

Our objective is to achieve operating income leverage, which we define as growing operating income at a faster rate than net sales.

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Gross profit (1) as a percentage of net sales

Operating, selling, general and administrative expenses as a percentage of net sales 20.4 % 21.0 %

24.1 % 23.7 %

Operating expenses as a percentage of net sales

20.7 % 20.4 %

Operating income $ 29,348 $ 27,012

Operating income as a percentage of net sales 4.4 % 4.2 %

Gross profit as a percentage of net sales ("gross profit rate") increased 27 and decreased 98 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

For fiscal 2024, the increase was primarily driven by the Walmart U.S.

segment, due to managing prices aligned to our competitive historic price gaps and lapping higher markdowns incurred in the prior year, partially offset by product mix shifts into lower margin categories.

For fiscal 2023, the decrease was primarily due to markdowns and merchandise mix in the U.S., higher supply chain costs and inflation related LIFO charges in the Sam's Club segment.

For fiscal 2024, operating expenses as a percentage of net sales decreased 60 basis points when compared to the previous fiscal year.

Operating expenses as a percentage of net sales were positively impacted by lapping charges of $3.3 billion related to opioid-related legal settlements and $0.8 billion related to the reorganization and restructuring of certain businesses in the Walmart International segment in the prior year.

For fiscal 2023, operating expenses as a percentage of net sales increased 23 basis points when compared to the previous fiscal year.

Operating expenses as a percentage of net sales were negatively impacted by the charges related to opioid-related legal settlements and the reorganization and restructuring of certain businesses in the Walmart International segment discussed above.

These charges were partially offset by growth in net sales and lower incremental COVID-19 costs.

Operating income as a percentage of net sales increased 83 basis points and decreased 120 basis points for fiscal 2024 and 2023, respectively, due to the factors described above.

(1) Gross profit defined as net sales less cost of sales.

Gross profit as a percentage of net sales ("gross profit rate") increased 40 and 27 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The increases were primarily driven by the Walmart U.S.

segment, due to managing prices aligned to our competitive historic price gaps, as well as growth in higher margin businesses globally, partially offset by mix shifts into lower margin merchandise categories.

Additionally, the increase in fiscal 2024 benefited from lapping higher markdowns incurred in the prior year.

Operating expenses as a percentage of net sales increased 36 and decreased 60 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The increase for fiscal 2025 was primarily due to higher variable pay as a result of exceeding planned performance, increased marketing and higher depreciation expenses.

The decrease for fiscal 2024 was primarily due to lapping charges of $3.3 billion related to opioid-related legal settlements and $0.8 billion related to the reorganization and restructuring of certain businesses in the Walmart International segment in the prior year.

Operating income as a percentage of net sales increased 15 and 83 basis points for fiscal 2025 and 2024, respectively, due to the factors described above, as well as from strong growth in membership income globally.

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 assets, return on investment and free cash flow metrics.

We also provide returns in the form of share repurchases and dividends, which are discussed in the Liquidity and Capital Resources section.

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.

We include Return on Assets ("ROA") and Return on Investment ("ROI") as metrics to assess our return on capital.

ROA is the most directly comparable measure based on our financial statements presented in accordance with generally accepted accounting principles in the U.S.

("GAAP") 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 6.6% and 4.6% for fiscal 2024 and 2023, respectively.

The increase in ROA was primarily due to the increase in consolidated net income, which was driven by higher operating income .

ROI was 15.0% and 12.7% for fiscal 2024 and 2023, respectively.

The increase in ROI was the result of an increase in operating income, primarily due to lapping charges associated with opioid-related legal settlements as well as reorganization and restructuring expenses, all recorded in fiscal 2023, as well as improvements in business performance, partially offset by an increase in average invested capital, primarily due to higher purchases of property and equipment.

We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing twelve 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.

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 GAAP 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;

and 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.

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 ROA, the most directly comparable GAAP financial measure.

ROA is consolidated net income for the period divided by average total assets for the period.

We define ROI as operating income plus interest income, depreciation and amortization, and rent expense for the trailing 12 months divided by average invested capital during the period.

We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and amortization, less average accounts payable and average accrued liabilities for that period.

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.

ROA was 7.9% and 6.6% for fiscal 2025 and 2024, respectively.

The increase in ROA was primarily due to an increase in consolidated net income during the trailing 12 month period, as a result of higher operating income and changes in the fair value of our equity and other investments.

ROI was 15.5% and 15.0% for fiscal 2025 and 2024, respectively.

The increase in ROI was the result of an increase in operating income, primarily due to improvements in business performance, partially offset by an increase in average invested capital primarily due to higher purchases of property and equipment.

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:

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Return on investment (ROI) 15.5 % 15.0 %

(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.

(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 two.

As of January 31,

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Allocation of Capital Expenditures 2025 2024

Supply chain, customer-facing initiatives and technology $ 11,828 $ 9,209

Supply chain, customer-facing initiatives, technology and other

$ 14,603 $ 11,828

Store and club remodels 5,552 5,792

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Total Capital Expenditures

$ 23,783 $ 20,606

Free Cash Flow

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We generated free cash flow of $12.7 billion, $15.1 billion and $12.0 billion for fiscal 2025, 2024 and 2023, respectively.

The increase in net cash provided by operating activities in fiscal 2024 is primarily due to higher cash provided by operating income, as well as timing of certain payments and strategic inventory management as part of working capital initiatives, partially offset by payment of the remaining accrued opioid legal charges.

Free cash flow for fiscal 2024 increased when compared to fiscal 2023 due to the increase in operating cash flows described above, partially offset by an increase of $3.7 billion in capital expenditures to support our investment strategy.

Net cash provided by operating activities for fiscal 2023 increased when compared to fiscal 2022 primarily due to moderated levels of inventory purchases, partially offset by a decline in operating income and the timing of certain payments.

The increase in net cash provided by operating activities in fiscal 2025 is primarily due to an increase in cash provided by operating income and lapping the payment of accrued opioid legal charges in the prior year, partially offset by increased inventory purchases.

Free cash flow for fiscal 2025 decreased when compared to fiscal 2024 due to an increase of $3.2 billion in capital expenditures to support our investment strategy, partially offset by the increase in net cash provided by operating activities described above.

Net cash provided by operating activities for fiscal 2024 increased when compared to fiscal 2023 primarily due to higher cash provided by operating income, as well as timing of certain payments and strategic inventory management as part of working capital initiatives, partially offset by payment of the remaining accrued opioid legal charges.

Free cash flow for fiscal 2024 increased when compared to fiscal 2023 due to the increase in net cash provided by operating activities described above, partially offset by an increase of $3.7 billion in capital expenditures to support our investment strategy.

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Fiscal Years Ended January 31,

(Amounts in millions, except unit counts) 2024 2023 2022

Total revenues $ 648,125 $ 611,289 $ 572,754

Percentage change from comparable period 6.0 % 6.7 % 2.4 %

(Dollar amounts and retail square feet in millions) 2025 2024 2023

Net sales $ 674,538 $ 642,637 $ 605,881

Percentage change from comparable period 5.0 % 6.1 % 6.7 %

calendar comparable sales increase 4.9 % 8.2 % 7.7 %

Gross profit rate 23.7 % 23.5 % 24.4 %

Membership and other income (1)

$ 6,447 $ 5,488 $ 5,408

Total revenues

680,985 648,125 611,289

Percentage change from comparable period 5.1 % 6.0 % 6.7 %

Gross profit (2)

162,785 152,495 142,160

Operating expenses (2)

139,884 130,971 127,140

Operating income 29,348 27,012 20,428

Operating income as a percentage of net sales 4.2 % 3.4 % 4.6 %

Loss on extinguishment of debt $ — $ — $ 2,410

Other (gains) and losses 794 3,027 1,538

Consolidated net income 20,157 16,270 11,292

Percentage of net sales

Gross profit 24.1 % 23.7 % 23.5 %

Operating expenses

20.7 % 20.4 % 21.0 %

Operating income 4.4 % 4.2 % 3.4 %

Unit counts at period end

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1,053 1,053 1,056

(1) Unit counts and associated retail square feet are presented for stores and clubs generally open as of period end, and reflects the removal of stores in the U.K.

and Japan subsequent to closing the divestitures in fiscal 2022.

Permanently closed locations are not included in these metrics.

Our total revenues, which includes net sales and membership and other income, increased $36.8 billion or 6.0% and $38.5 billion or 6.7% for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

(1) Membership and other income includes membership fees and other items such as rental and tenant income, recycling income, gift card breakage income, as well as other income from corporate campus facilities.

(2) Gross profit is defined as net sales less cost of sales.

Operating expenses refers to operating, selling, general and administrative expenses.

Our total revenues increased $32.9 billion or 5.1% and $36.8 billion or 6.0% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

These increases in revenues were primarily due to increases in net sales, which increased $31.9 billion or 5.0% and $36.8 billion or 6.1% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

For fiscal 2024, the increase was primarily due to positive comparable sales for the Walmart U.S.

and Sam's Club segments, which were driven by growth in transactions, combined with growth in average ticket, including strong sales in grocery and health and wellness, along with positive comparable sales across our international markets.

Net sales were positively impacted by $3.0 billion of fluctuations in currency exchange rates during fiscal 2024.

For fiscal 2023, the increase was primarily due to strong positive comparable sales for the Walmart U.S.

and Sam's Club segments which was driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as growth in transactions, along with positive comparable sales in all of our international markets.

Additionally, net sales were negatively impacted by a decrease of $5.0 billion related to the divestiture of our operations in the U.K.

and Japan, which closed in the first quarter of fiscal 2022 and $3.7 billion of fluctuations in currency exchange rates during fiscal 2023.

Our gross profit rate increased 27 basis points and decreased 98 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

For fiscal 2024, the increase was primarily driven by the Walmart U.S.

For fiscal 2023, the decrease was primarily due to markdowns and merchandise mix in the U.S., higher supply chain costs and inflation related LIFO charges in the Sam's Club segment.

For fiscal 2024, operating expenses as a percentage of net sales decreased 60 basis points when compared to the previous fiscal year.

For fiscal 2023, operating expenses as a percentage of net sales increased 23 basis points when compared to the previous fiscal year.

These charges were partially offset by growth in net sales and lower incremental COVID-19 costs.

Loss on extinguishment of debt was $2.4 billion in fiscal 2022 due to the early retirement of certain higher rate long-term debt to reduce interest expense in future periods.

There were no such early retirements of debt in fiscal 2024 and fiscal 2023.

The increases were primarily due to strong positive comparable sales across our U.S.

segments and international markets, driven primarily by growth in transactions and unit volumes, which included strength in eCommerce as well as strong sales in grocery, and health and wellness.

Net sales were negatively impacted by $3.2 billion and positively impacted by $3.0 billion of fluctuations in currency exchange rates during fiscal 2025 and 2024, respectively.

Membership and other income increased $1.0 billion and $0.1 billion for fiscal 2025 and fiscal 2024, primarily driven by growth in membership fee income globally.

Our gross profit rate increased 40 and 27 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The increases were primarily driven by the Walmart U.S.

Additionally, the increase in fiscal 2024 benefited from lapping higher markdowns incurred in the prior year.

Our operating expenses as a percentage of net sales increased 36 and decreased 60 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The increase for fiscal 2025 was primarily due to higher variable pay as a result of exceeding planned performance, increased marketing and higher depreciation expenses.

Other gains and losses consist of certain non-operating items, such as the change in the fair value of our investments and gains or losses on business dispositions, which by their nature can fluctuate from period to period.

Other gains and losses consisted of a net loss of $3.0 billion and $1.5 billion for fiscal 2024 and 2023, respectively.

The net loss in fiscal 2024 primarily consists of net losses associated with the fair value changes of our equity and other investments.

The net loss in fiscal 2023 primarily consists of:

net losses associated with the fair value changes of our equity and other investments;

a gain of $0.4 billion recognized on the sale of our remaining equity method investment in Brazil;

and a $0.2 billion dividend from one of our investments.

Other gains and losses consisted of net losses of $0.8 billion and $3.0 billion in fiscal 2025 and 2024, respectively, which primarily consisted of changes in fair value of our equity and other investments driven by changes in their underlying stock prices.

Our effective income tax rate was 23.4%, 25.5%, and 33.6% for fiscal 2025, 2024 and 2023, respectively.

The higher effective tax rate in fiscal 2023 as compared to both fiscal 2024 and fiscal 2022 is primarily due to the tax impact of the business reorganization resulting in the full separation of PhonePe from Flipkart in fiscal 2023.

Our effective income tax rate may also fluctuate as a result of various factors, including changes in our assessment of unrecognized tax benefits, 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.

The decrease in effective tax rate in fiscal 2025 compared to fiscal 2024 is primarily due to the tax impact on changes in fair value of our investments.

The higher effective tax rate in fiscal 2023 compared to fiscal 2025 and fiscal 2024 is primarily related to the tax impacts of the separation of Flipkart and PhonePe.

Our effective income tax rate may also fluctuate as a result of various factors, including changes in our assessment of unrecognized tax benefits, valuation allowances, business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, changes in tax law, changes in the administrative practices, principles, and interpretations related to tax, and the mix and size of earnings among our U.S.

operations and international operations, which are subject to statutory rates that are generally higher than the U.S.

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The reconciliation from the U.S.

statutory rate to the effective income tax rates for fiscal 2024, 2023 and 2022 is presented in Note 9 .

As a result of the factors discussed above, we reported $16.3 billion and $11.3 billion of consolidated net income for fiscal 2024 and 2023, respectively, which represents an increase of $5.0 billion and a decrease of $2.6 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

statutory rate to the effective income tax rates for fiscal 2025, 2024 and 2023 is provided in Note 9 .

As a result of the factors discussed above, we reported $20.2 billion and $16.3 billion of consolidated net income for fiscal 2025 and 2024, respectively, which represents an increase of $3.9 billion and $5.0 billion for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

Diluted net income per common share attributable to Walmart ("EPS") was $2.41, $1.91 and $1.42 for fiscal 2025, 2024 and 2023, respectively.

Fiscal Years Ended January 31,

(Amounts in millions, except unit counts) 2024 2023 2022

(Dollar amounts and retail square feet in millions) 2025 2024 2023

Net sales $ 462,415 $ 441,817 $ 420,553

Percentage change from comparable period 5.1 % 6.9 % 6.3 %

Net sales percentage change from comparable period 4.7 % 5.1 % 6.9 %

Calendar comparable sales increase 4.8 % 5.5 % 7.0 %

Membership and other income

$ 2,594 $ 1,985 $ 1,845

Gross profit 125,964 118,254 111,748

Operating expenses

104,676 98,085 92,973

Operating income 23,882 22,154 20,620

Operating income as a percentage of net sales 5.0 % 4.9 % 5.5 %

Percentage of net sales

Gross profit 27.2 % 26.8 % 26.6 %

Operating expenses

22.6 % 22.2 % 22.1 %

Operating income 5.2 % 5.0 % 4.9 %

Unit counts at period end 4,605 4,615 4,717

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The increases in net sales were primarily due to increases in comparable sales of 4.8% and 5.5% for fiscal 2025 and 2024, respectively.

Comparable sales in fiscal 2025 were driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness.

Comparable sales in fiscal 2024 were driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness.

Comparable sales in fiscal 2023 were driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as growth in transactions.

eCommerce sales positively contributed approximately 2.6% and 0.7% to comparable sales for fiscal 2024 and 2023, respectively, which was primarily driven by store pickup and delivery.

Gross profit rate increased 20 basis points for fiscal 2024 and decreased 85 basis points for fiscal 2023, when compared to the respective previous fiscal year.

eCommerce sales positively contributed approximately 2.9% and 2.6% to comparable sales for fiscal 2025 and 2024, respectively, which was primarily driven by store-fulfilled pickup and delivery.

Membership and other income increased $0.6 billion and $0.1 billion for fiscal 2025 and fiscal 2024, primarily driven by growth in membership fee income from Walmart+ and recycling income.

Gross profit rate increased 47 and 20 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The increase in fiscal 2025 gross profit rate was primarily driven by managing prices aligned to our competitive historic price gaps and growth in higher margin businesses, partially offset by mix shifts into lower margin merchandise categories.

The increase in fiscal 2024 gross profit rate was primarily due to managing prices aligned to our competitive historic price gaps and lapping higher net markdowns incurred in the prior year, partially offset by product mix shifts into lower margin categories.

The decrease in fiscal 2023 gross profit rate was primarily due to net markdowns and product mix shifts into lower margin categories and increased supply chain costs, partially offset by price management impacts driven by cost inflation.

Operating expenses as a percentage of segment net sales increased 9 basis points for fiscal 2024 when compared to the previous fiscal year primarily driven by higher variable pay relative to last year as a result of exceeding our planned performance.

For fiscal 2023, operating expenses as a percentage of segment net sales decreased 25 basis points primarily driven by strong sales growth and lower incremental COVID-19 related costs, partially offset by increased wage costs.

As a result of the factors discussed above, segment operating income increased $1.5 billion and decreased $1.0 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

Operating expenses as a percentage of segment net sales increased 44 and 9 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The increase for fiscal 2025 was primarily due to increased marketing expenses, higher variable pay as a result of exceeding planned performance and increased depreciation expenses.

For fiscal 2024, the increase was driven by higher variable pay relative to the prior year as a result of exceeding our planned performance.

As a result of the factors discussed above, segment operating income increased $1.7 billion and $1.5 billion for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

Walmart International Segment

Fiscal Years Ended January 31,

(Amounts in millions, except unit counts) 2024 2023 2022

(Dollar amounts and retail square feet in millions)

2025 2024 2023

Net sales $ 121,885 $ 114,641 $ 100,983

Percentage change from comparable period 6.3 % 13.5 % — %

Membership and other income $ 1,478 $ 1,408 $ 1,621

Gross profit 26,618 24,810 21,651

Operating expenses

22,595 21,309 20,307

Operating income 5,501 4,909 2,965

Operating income as a percentage of net sales 4.3 % 2.9 % 3.7 %

Percentage of net sales

Gross profit 21.8 % 21.6 % 21.4 %

Operating expenses

18.5 % 18.6 % 20.1 %

Operating income 4.5 % 4.3 % 2.9 %

Unit counts at period end 5,566 5,402 5,306

Retail square feet at period end 274 274 273

Net sales for the Walmart International segment increased $13.7 billion or 13.5% for fiscal 2024 and were flat for 2023, when compared to the previous fiscal year.

For fiscal 2024, the increase was primarily due to positive comparable sales across our international markets and positive fluctuations in currency exchange rates of $3.0 billion during fiscal 2024.

For fiscal 2023, net sales benefited from positive comparable sales across all of our international markets, offset by the impacts of a decrease of $5.0 billion related to the divestiture of our operations in the U.K.

and Japan, which closed in the first quarter of fiscal 2022, as well as $3.7 billion of fluctuations in currency exchange rates during fiscal 2023.

Gross profit rate increased 20 basis points and decreased 50 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

For fiscal 2024, the increase was primarily driven by supply chain efficiencies partially offset by ongoing format and channel shifts.

For fiscal 2023, the decrease was primarily driven by continued growth in lower margin formats and channels in China and category mix shifts into lower margin categories.

Operating expenses as a percentage of segment net sales decreased 152 basis points and increased 41 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

The decrease in operating expenses as a percentage of segment net sales for fiscal 2024 was primarily due to the lapping of business reorganization and restructuring charges incurred related to Flipkart and Massmart in fiscal 2023 and an increase in sales in the current year.

The increase in operating expenses as a percentage of segment net sales for fiscal 2023, was primarily due to incurring these business reorganization and restructuring charges.

As a result of the factors discussed above, segment operating income increased $1.9 billion and decreased $0.8 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

Sam's Club Segment

Net sales for the Walmart International segment increased $7.2 billion or 6.3% and $13.7 billion or 13.5% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

For fiscal 2025, the increase was primarily due to positive comparable sales in all of our international markets, which included strength in eCommerce, partially offset by negative fluctuations in currency exchange rates of $3.2 billion.

For fiscal 2024, the increase was primarily due to positive comparable sales across our international markets and positive fluctuations in currency exchange rates of $3.0 billion.

Gross profit rate increased 20 basis points for both fiscal 2025 and 2024 when compared to the previous fiscal year.

For fiscal 2025, the increase was primarily due to improved eCommerce margin and business mix changes, partially offset by ongoing channel and format mix changes.

For fiscal 2024, the increase was primarily driven by supply chain efficiencies partially offset by ongoing channel and format mix shifts.

Operating expenses as a percentage of segment net sales decreased 5 and 152 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The decrease in operating expenses as a percentage of segment net sales for fiscal 2025 was primarily due to increased sales driving expense leverage, partially offset by planned investments in associate wages and strategic priorities in Mexico and Central America.

The decrease in operating expenses as a percentage of segment net sales for fiscal 2024, was primarily due to the lapping of business reorganization and restructuring charges incurred related to Flipkart and Massmart in fiscal 2023 and an increase in sales in fiscal 2024.

As a result of the factors discussed above, segment operating income increased $0.6 billion and $1.9 billion for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

Sam's Club U.S.

Fiscal Years Ended January 31,

(Amounts in millions, except unit counts) 2024 2023 2022

(Dollar amounts and retail square feet in millions)

2025 2024 2023

Including Fuel

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Calendar comparable sales increase 4.7 % 2.3 % 14.6 %

Membership and other income $ 2,323 $ 2,051 $ 1,908

Gross profit 10,203 9,431 8,761

Operating expenses

10,122 9,290 8,705

Operating income 2,404 2,192 1,964

Operating income as a percentage of net sales 2.5 % 2.3 % 3.1 %

Percentage of net sales

Gross profit 11.3 % 10.9 % 10.4 %

Operating expenses

11.2 % 10.8 % 10.3 %

Operating income 2.7 % 2.5 % 2.3 %

Unit counts at period end 600 599 600

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Operating income as a percentage of net sales 2.2 % 2.2 % 1.9 %

(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.

Management uses such information to better measure underlying operating results in the segment.

Net sales for the Sam's Club segment increased $1.8 billion or 2.2% and $10.8 billion or 14.7% for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

(1) We believe the "Excluding Fuel" information is useful to investors because it permits investors to understand the effect of the Sam's Club U.S.

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 U.S.

segment in the future.

Net sales for the Sam's Club U.S.

segment increased $4.1 billion or 4.7% and $1.8 billion or 2.2% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

The increases in net sales were primarily due to increases in comparable sales, including fuel, of 4.7% and 2.3% for fiscal 2025 and 2024, respectively.

Comparable sales benefited from growth in transactions and average ticket, including strong sales in grocery and health and wellness.

Additionally, fiscal 2024 growth was partially offset by lower fuel sales due to deflation in this category.

Sam's Club eCommerce sales positively contributed approximately 1.7% and 0.8% to comparable sales for fiscal 2024 and 2023, respectively, which was primarily driven by curbside pickup and ship to home.

Gross profit rate increased 55 basis points and decreased 155 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

For fiscal 2024, the increase in gross profit rate was primarily due to the lapping of elevated markdowns in the prior year, partially offset by product mix shifts into lower margin categories.

For fiscal 2023 , the decrease in gross profit rate was primarily due to inventory markdowns, elevated supply chain and eCommerce fulfillment costs and inflation related LIFO charges.

Comparable sales in fiscal 2025 were driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness.

Comparable sales in fiscal 2024 were driven by growth in transactions and average ticket, including strong sales in grocery and health and wellness.

Additionally, fiscal 2025 and 2024 growth was partially offset by lower fuel sales primarily due to lower market prices.

Sam's Club U.S.

Membership and other income increased 13.3% and 7.5% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

For fiscal 2025 and 2024, the increases were primarily due to growth in membership base and Plus penetration.

Fiscal 2024 was also positively impacted by higher Plus renewals, as well as the expiration of a promotional offering offsetting membership fee increases during the fourth quarter of fiscal 2024.

Operating expenses as a percentage of segment net sales increased 46 basis points and decreased 97 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

Fiscal 2025 and 2024 were also positively impacted by the expiration of a promotional offering offsetting membership fee increases during the fourth quarter of fiscal 2024.

Gross profit rate increased 37 and 55 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

For fiscal 2025, the increase in gross profit rate was primarily due to improved operational efficiencies related to merchandise flow and increased margins in fuel, partially offset by higher eCommerce fulfillment costs.

For fiscal 2024 , the increase in gross profit rate was primarily due to the lapping of elevated markdowns in the prior year.

Additionally, fiscal 2025 and 2024 gross profit rates were partially offset by product mix shifts into lower margin categories.

Operating expenses as a percentage of segment net sales increased 44 and 46 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

Fiscal 2025 operating expenses as a percentage of net sales increased primarily due to increased compensation related expenses, including associate wage investments and higher variable pay as a result of exceeding our planned performance, as well as elevated technology spend.

Fiscal 2024 operating expenses as a percentage of net sales increased primarily due to lower fuel sales and elevated technology spend.

Fiscal 2023 operating expenses as a percentage of net sales decreased primarily due to higher sales.

As a result of the factors discussed above, segment operating income increased $0.2 billion and decreased $0.3 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

As a result of the factors discussed above, segment operating income increased $0.2 billion for both fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

Liquidity and Capital Resources

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Generally, some or all of the remaining available cash flow has been used to fund dividends on our common stock and share repurchases.

We believe our sources of liquidity will continue to be sufficient to fund operations, finance our global investment activities, pay dividends and fund our share repurchases for at least the next 12 months and for the foreseeable future.

We believe our sources of liquidity will continue to be sufficient to fund operations, finance our investment activities, pay dividends and fund our share repurchases for at least the next 12 months and for the foreseeable future.

Net Cash Provided by Operating Activities

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Net cash provided by operating activities was $36.4 billion, $35.7 billion and $28.8 billion for fiscal 2025, 2024 and 2023, respectively.

The increase in net cash provided by operating activities for fiscal 2023, when compared to the previous fiscal year, was primarily due to moderated levels of inventory purchases, partially offset by a decline in operating income and the timing of certain payments.

The increase in net cash provided by operating activities in fiscal 2025, when compared to the previous fiscal year, is primarily due to an increase in cash provided by operating income and lapping the payment of accrued opioid legal charges in the prior year, partially offset by increased inventory purchases.

The increase in net cash provided by operating activities for fiscal 2024, when compared to the previous fiscal year, was primarily due to higher cash provided by operating income, as well as timing of certain payments and strategic inventory management as part of working capital initiatives, partially offset by payment of the remaining accrued opioid legal charges.

Cash Equivalents and Working Capital Deficit

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Our working capital deficit, defined as total current assets less total current liabilities, was $17.1 billion and $15.5 billion as of January 31, 2025 and 2024, respectively.

The decrease in our working capital deficit is primarily driven by a decrease in accrued liabilities primarily due to the payment of the remaining accrued opioid legal charges and an increase in cash, partially offset by an increase in accounts payable and a decrease in inventories as part of working capital initiatives.

The increase in our working capital deficit is primarily driven by an increase in short-term borrowings for general corporate purposes and accounts payable due to timing of payments, partially offset by increased inventories and receivables related to higher sales growth.

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.

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Net cash used in investing activities was $21.4 billion, $21.3 billion and $17.7 billion for fiscal 2025, 2024 and 2023, respectively, and generally consisted of capital expenditures.

Net cash used in investing activities increased $0.1 billion for fiscal 2025 when compared to the previous fiscal year.

The increase is primarily due to increased purchases of property and equipment as well as the acquisition of VIZIO for net consideration of $1.9 billion, partially offset by net proceeds received from sales of certain strategic investments, including $3.6 billion related to the sale of our JD.com investment.

Net cash used in investing activities increased $3.6 billion for fiscal 2024 when compared to the previous fiscal year, primarily due to increased payments for property and equipment.

Net cash used in investing activities increased $11.7 billion for fiscal 2023 when compared to the previous fiscal year, primarily due to the result of lapping the net proceeds received from the divestitures of our operations in the U.K.

and Japan and an increase in capital expenditures to support our investment strategy.

Capital expenditures

5 unchanged sentences

Net cash used in financing activities $ (14,822) $ (13,414) $ (17,039)

Net cash from financing activities generally consists of debt transactions, dividends paid, repurchases of Company stock and transactions with noncontrolling interest shareholders.

Fiscal 2024 net cash used in financing activities decreased $3.6 billion when compared to the previous fiscal year.

The decrease is primarily due to fewer repurchases of Company stock, partially offset by the purchase of certain noncontrolling interests.

Net cash used in financing activities generally consisted of debt transactions, dividends paid, repurchases of Company stock and transactions with noncontrolling interest shareholders.

Fiscal 2025 net cash used in financing activities increased $1.4 billion when compared to the previous fiscal year.

The increase is primarily due to lapping debt issuances in the prior fiscal year and increased share repurchases, partially offset by the purchase of certain noncontrolling interests in the prior fiscal year and higher short-term borrowings.

Fiscal 2024 net cash used in financing activities decreased $3.6 billion when compared to the previous fiscal year.

The decrease was primarily due to repayments of long-term debt and related payment of premiums for the early extinguishment of certain notes in the prior fiscal year, partially offset by the equity funding from the sale of subsidiary stock in the prior fiscal year.

The decrease was primarily due to fewer share repurchases, partially offset by the purchase of certain noncontrolling interests.

Purchase and Sale of Subsidiary Stoc k

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During fiscal 2023, we completed a $0.4 billion buyout of the noncontrolling interest shareholders of our Massmart subsidiary and completed a $0.4 billion acquisition of Alert Innovation, bringing our ownership to approximately 100% of both Massmart and Alert Innovation.

During fiscal 2022, we received $3.2 billion primarily related to a new equity funding for our majority-owned Flipkart subsidiary.

The Alert Innovation entity was subsequently sold and deconsolidated in fiscal 2025.

Short-term Borrowings

We generally utilize the liquidity provided by short-term borrowings to provide funding for our operations, dividend payments, share repurchases, capital expenditures and other cash requirements.

The following table includes additional information related to the our short-term borrowings for fiscal 2024, 2023 and 2022:

The following table includes additional information related to our short-term borrowings for fiscal 2025, 2024 and 2023:

Fiscal Years Ended January 31,

14 unchanged sentences

$ 3,447 $ 36,132 $ 39,579

Proceeds from issuance of long-term debt — 4,967 4,967

Repayments of long-term debt (3,468) — (3,468)

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Balances as of January 31, 2025 $ 2,598 $ 33,401 $ 35,999

Our total outstanding long-term debt increased $0.7 billion during fiscal 2024, primarily due to the issuance of new long-term debt in April 2023, partially offset by the maturities of certain long-term debt.

Our total outstanding long-term debt decreased $3.6 billion during fiscal 2025, primarily due to maturities of certain long-term debt.

Refer to Note 6 to our Consolidated Financial Statements for details on the issuances of long-term debt.

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As of January 31, 2025, the Company has $37.2 billion of unrecorded purchase obligations outstanding, of which $15.9 billion is due within one year.

Purchase obligations include legally binding contracts, such as firm commitments for inventory and

utility purchases, as well as commitments to make capital expenditures, software acquisition and license commitments and legally binding service contracts.

Purchase obligations include legally binding contracts, such as firm commitments for inventory and utility purchases, as well as commitments to make capital expenditures, software acquisition and license commitments and legally binding service contracts.

Contractual obligations for the purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including:

26 unchanged sentences

In Note 10 to our Consolidated Financial Statements, which is captioned "Contingencies" and appears in Part II of this Annual Report on Form 10-K under the caption " Item 8.

Financial Statements and Supplementary Data ," we discuss, under the sub-captions " Settlement Framework Regarding Multidistrict and State or Local Opioid Related Litigation ," and " Other Opioid Related Litigation " the Prescription Opiate Litigation, the Settlement Framework, and other matters, including certain risks arising therefrom.

In that Note 10 , we also discuss under the sub-caption " Asda Equal Value Claims" the Company's indemnification obligation for the Asda Equal Value Claims matter, under the sub-caption " Money Transfer Agent Services Matters, " a United States Federal Trade Commission complaint related to money transfers and the Company's anti-fraud program and a government investigation by the U.S.

Attorney's Office for the Middle District of Pennsylvania into the Company's consumer fraud prevention and anti-money laundering compliance related to the Company's money transfer agent services as well as under the sub-caption " Mexico Antitrust Matter ," we disclose the main Mexican operating subsidiary of Wal-Mart de México was notified of the initiation of a quasi-judicial administrative process against it for alleged relative monopolistic practices in connection with the supply and wholesale distribution of certain consumer goods, retail marketing practices of such consumer goods and related services.

We discuss various legal proceedings related to the Federal and State Prescription Opiate Litigation, the Settlement Framework, DOJ Opioid Civil Litigation and Opioids Related Securities Class Actions and Derivative Litigation in Part I of this Annual Report on Form 10-K under the caption " Item 3.

Financial Statements and Supplementary Data ," we discuss, under the sub-captions " Settlement of Certain Opioid-Related Matters, " and " Ongoing Opioid-Related Litigation, " certain opioid-related matters, as well as the Prescription Opiate Litigation, and other matters, including certain risks arising therefrom.

In that Note 10 , we discuss " Asda Equal Value Claims " the Company's indemnification obligation for the Asda Equal Value Claims matter, " Money Transfer Agent Services Matters, " a United States Federal Trade Commission complaint related to money transfers and the Company's anti-fraud program and a government investigation by the U.S.

" In Note 10 , under " Mexico Antitrust Matter ," we also discuss a quasi-judicial administrative process initiated by COFECE against Walmex and Walmex's related constitutional challenge.

In Note 10 , we also discuss a show cause notice and requests issued by the Directorate of Enforcement to Flipkart regarding Foreign Direct Investment rules and regulations in India and an India Antitrust Matter.

We reference various legal proceedings related to the Prescription Opiate Litigation, the DOJ Opioid Civil Litigation, Opioids-Related Securities Class Actions, Shareholder Derivative Litigation and False Claims Act Litigation;

Asda Equal Value Claims;

Money Transfer Agent Services Litigation;

Driver Platform Litigation;

and Mexico Antitrust Matter in Part I of this Annual Report on Form 10-K under the caption " Item 3.

Legal Proceedings ," under the sub-caption "I.

Supplemental Information." We also discuss the Foreign Direct Investment Matters in Part I of this Annual Report on Form 10-K under the caption " Item 3.

Legal Proceedings ," under the sub-caption "II.

Certain Other Matters." We also discuss an environmental matter with the State of California in Part I of this Annual Report on Form 10-K under the caption " Item 3.

Legal Proceedings ," under the sub-caption "III.

Environmental Matters." The foregoing matters and other

matters described elsewhere in this Annual Report on Form 10-K 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.

Supplemental Information." The foregoing matters and other matters described elsewhere in this Annual Report on Form 10-K 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.

Summary of Critical Accounting Estimates

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If a loss or an additional loss has at least a reasonable possibility of occurring and the impact on the financial statements would be material, we provide disclosure of the loss contingency in the footnotes to our financial statements.

We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or the range of the loss can be made.

We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a

reasonable estimate of the loss or the range of the loss can be made.

Although we are not able to predict the outcome or reasonably estimate a range of possible losses in certain matters described in Note 10 to our Consolidated Financial Statements and have not recorded an associated accrual related to these matters, an adverse judgment or negotiated resolution in any of these matters could have a material adverse effect on our business, reputation, financial position, results of operations or cash flows.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis