The Home Depot, Inc. (HD) 10-Q 3 Jun 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended May. 02, 2010	May. 28, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-05-02
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	HD
Entity Registrant Name	HOME DEPOT INC
Entity Central Index Key	0000354950
Current Fiscal Year End Date	--01-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,680,353,844

CONSOLIDATED STATEMENTS OF EARN

CONSOLIDATED STATEMENTS OF EARNINGS (USD $)
In Millions, except Per Share data	3 Months Ended May. 02, 2010	3 Months Ended May. 03, 2009
NET SALES	$16,863	$16,175
Cost of Sales	11,069	10,725
GROSS PROFIT	5,794	5,450
Operating Expenses:
Selling, General and Administrative	4,078	4,042
Depreciation and Amortization	411	428
Total Operating Expenses	4,489	4,470
OPERATING INCOME	1,305	980
Interest and Other (Income) Expense:
Interest and Investment Income	(4)	(5)
Interest Expense	142	180
Other	51
Interest and Other, net	189	175
EARNINGS BEFORE PROVISION FOR INCOMETAXES	1,116	805
Provision for Income Taxes	391	291
NET EARNINGS	$725	$514
Weighted Average Common Shares	1,677	1,683
BASIC EARNINGS PER SHARE	0.43	0.31
Diluted Weighted Average Common Shares	1,688	1,689
DILUTED EARNINGS PER SHARE	0.43	0.3
Dividends Declared Per Share	0.23625	0.225

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	May. 02, 2010	Jan. 31, 2010
Current Assets:
Cash and Cash Equivalents	$2,436	$1,421
Short-Term Investments	6	6
Receivables, net	1,342	964
Merchandise Inventories	11,479	10,188
Other Current Assets	1,383	1,321
Total Current Assets	16,646	13,900
Property and Equipment, at cost	37,653	37,345
Less Accumulated Depreciation and Amortization	12,249	11,795
Net Property and Equipment	25,404	25,550
Goodwill	1,192	1,171
Other Assets	377	256
Total Assets	43,619	40,877
Current Liabilities:
Accounts Payable	7,051	4,863
Accrued Salaries and Related Expenses	1,154	1,263
Sales Taxes Payable	544	362
Deferred Revenue	1,225	1,158
Income Taxes Payable	400	108
Current Installments of Long-Term Debt	2,021	1,020
Other Accrued Expenses	1,582	1,589
Total Current Liabilities	13,977	10,363
Long-Term Debt, excluding current installments	7,676	8,662
Other Long-Term Liabilities	2,356	2,140
Deferred Income Taxes	239	319
Total Liabilities	24,248	21,484
STOCKHOLDERS' EQUITY
Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.720 billion shares at May 2, 2010 and 1.716 billion shares at January 31, 2010; outstanding: 1.686 billion shares at May 2, 2010 and 1.698 billion shares at January 31, 2010	86	86
Paid-In Capital	6,321	6,304
Retained Earnings	13,552	13,226
Accumulated Other Comprehensive Income	506	362
Treasury Stock, at cost, 34 million shares at May 2, 2010 and 18 million shares at January 31, 2010	(1,094)	(585)
Total Stockholders' Equity	19,371	19,393
Total Liabilities and Stockholders' Equity	$43,619	$40,877

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
	May. 02, 2010	Jan. 31, 2010
Common Stock, par value	0.05	0.05
Common Stock, authorized	10,000,000,000	10,000,000,000
Common Stock, issued	1,720,000,000	1,716,000,000
Common Stock, outstanding	1,686,000,000	1,698,000,000
Treasury Stock, shares	34,000,000	18,000,000

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended May. 02, 2010	3 Months Ended May. 03, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings	$725	$514
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities:
Depreciation and Amortization	438	453
Stock-Based Compensation Expense	64	54
Changes in Assets and Liabilities:
Increase in Receivables, net	(367)	(337)
Increase in Merchandise Inventories	(1,227)	(734)
Increase in Other Current Assets	(66)	(127)
Increase in Accounts Payable and Accrued Expenses	2,131	1,798
Increase in Deferred Revenue	61	82
Increase in Income Taxes Payable	289	67
Decrease in Deferred Income Taxes	(63)	(94)
Other	54	51
Net Cash Provided by Operating Activities	2,039	1,727
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures	(167)	(172)
Proceeds from Sales of Property and Equipment	27	70
Proceeds from Sales and Maturities of Investments		19
Net Cash Used in Investing Activities	(140)	(83)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of Long-Term Debt	(5)	(4)
Proceeds from Sales of Common Stock	11	2
Repurchases of Common Stock	(508)
Cash Dividends Paid to Stockholders	(399)	(381)
Other Financing Activities	8	426
Net Cash (Used in) Provided by Financing Activities	(893)	43
Increase in Cash and Cash Equivalents	1,006	1,687
Effect of Exchange Rate Changes on Cash and Cash Equivalents	9	8
Cash and Cash Equivalents at Beginning of Period	1,421	519
Cash and Cash Equivalents at End of Period	$2,436	$2,214

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions	3 Months Ended May. 02, 2010		3 Months Ended May. 03, 2009
Net Earnings	$725		$514
Other Comprehensive Income:
Foreign Currency Translation Adjustments	151		41
Cash Flow Hedges	(7)	[1]	(3)	[1]
Unrealized Gain on Investments			1	[1]
Total Other Comprehensive Income	144		39
Comprehensive Income	$869		$553
[1]These components of comprehensive income are reported net of income taxes.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	3 Months Ended May. 02, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying Consolidated Financial Statements have been prepared in accordance with the instructions to Form10-Q and do not include all of the information and footnotes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Companys Annual Report on Form10-K for the year ended January31, 2010, as filed with the Securities and Exchange Commission. Business The Home Depot,Inc. and its subsidiaries (the Company) operate The Home Depot stores, which are full-service, warehouse-style stores averaging approximately 105,000 square feet in size. The stores stock approximately 30,000 to 40,000 different kinds of building materials, home improvement supplies and lawn and garden products that are sold to do-it-yourself customers, do-it-for-me customers and professional customers. Valuation Reserves As of May2, 2010 and January31, 2010, the valuation allowances for Merchandise Inventories and uncollectible Receivables were not material. Reclassifications Certain amounts in the prior fiscal period have been reclassified to conform with the presentation adopted in the current fiscal period.

DEBT GUARANTEE EXTENSION

DEBT GUARANTEE EXTENSION
	3 Months Ended May. 02, 2010
DEBT GUARANTEE EXTENSION	2. DEBT GUARANTEE EXTENSION In connection with the sale of HD Supply, Inc. (HD Supply) on August30, 2007, the Company guaranteed a $1.0billion senior secured amortizing term loan (guaranteed loan) of HD Supply. The Company is responsible for up to $1.0billion and any unpaid interest in the event of nonpayment by HD Supply. The guaranteed loan is collateralized by certain assets of HD Supply. The original expiration date of the guarantee was August30, 2012. On March19, 2010, the Company amended the guarantee to extend the expiration date to April1, 2014. The fair value of the guarantee at August30, 2007 was $16 million and was recorded as a liability of the Company in Other Long-Term Liabilities. The extension of the guarantee increased the fair value of the guarantee to $67 million, resulting in a $51 million charge to Interest and Other, net, for the first quarter of fiscal 2010.

RATIONALIZATION CHARGES

RATIONALIZATION CHARGES
	3 Months Ended May. 02, 2010
RATIONALIZATION CHARGES	3. RATIONALIZATION CHARGES In fiscal 2008, the Company reduced its square footage growth plans to improve free cash flow, provide stronger returns for the Company and invest in its existing stores to continue improving the customer experience. As a result of this store rationalization plan, the Company determined that it would no longer pursue the opening of approximately 50 U.S. stores that had been in its new store pipeline. The Company expects to dispose of or sublet these pipeline locations over varying periods. The Company also closed 15 underperforming U.S. stores in the second quarter of fiscal 2008, and the Company expects to dispose of or sublet those locations over varying periods. Also in fiscal 2008, the Company announced that it would exit its EXPO, THD Design Center, Yardbirds and HD Bath businesses (the Exited Businesses) in order to focus on its core The Home Depot stores. The Company closed the Exited Businesses in the first quarter of fiscal 2009, and expects to dispose of or sublet those locations over varying periods. These steps impacted approximately 5,000 associates in those locations, their support functions and their distribution centers. Finally, in January 2009 the Company also restructured its support functions to better align the Companys cost structure. These actions impacted approximately 2,000 associates. The Company recognized total pretax charges of $146 million for fiscal 2009, including $117 million in the first quarter of fiscal 2009, and $951 million for fiscal 2008 related to these actions (collectively, the Rationalization Charges). The Company did not incur any charges related to these actions in the first quarter of fiscal 2010 and does not expect any further charges related to these actions. Activity related to Rationalization Charges for the first quarter of fiscal 2010 was as follows (amounts in millions): AccruedBalance January31,2010 CashUses Non-cashUses AccruedBalance May2,2010 Asset impairments $23 $ $ $23 Lease obligation costs, net 191 14 177 Total $214 $14 $ $200 Costs related to asset impairments and lease obligations are included in Selling, General and Administrative expenses. Asset impairment charges, including contractual costs to complete certain assets, were determined based on fair market value using market data for each individual property. Lease obligation costs represent the present value of contractually obligated rental payments offset by estimated sublet income, including estimates of the time required to sublease the locations. The payments related to the leased locations therefore are not generally incremental uses of cash.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS
	3 Months Ended May. 02, 2010
FAIR VALUE MEASUREMENTS	4.FAIR VALUE MEASUREMENTS The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liabilitys fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1 Observable inputs that reflect quoted prices in active markets Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable Level 3 Unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions Assets and Liabilities Measured at Fair Value on a Recurring Basis The assets and liabilities of the Company that are measured at fair value on a recurring basis as of May2, 2010 and January31, 2010 are as follows (amounts in millions): FairValueatMay2,2010Using FairValueatJanuary31,2010Using Level1 Level2 Level3 Level1 Level2 Level3 Available-for-sale securities $6 $ $ $6 $ $ Derivative agreements - assets 30 15 Derivative agreements - liabilities (65) (4) Total $6 $(35) $ $6 $11 $ The Companys available-for-sale securities are recorded at fair value based on current market rates (level 1) and are included in Short-Term Investments in the accompanying Consolidated Balance Sheets. The Company uses derivative financial instruments from time to time in the management of its interest rate exposure on long-term debt and its exposure on foreign currency fluctuations. The fair value of the Companys derivative financial instruments is measured using level 2 inputs. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The assets and liabilities of the Company that are measured at fair value on a nonrecurring basis as of May2, 2010 are as follows (amounts in millions): FairValueasof May2,2010 Level 3 ThreeMonthsEnded May2,2010 Gains(Losses) Store Rationalization lease obligation costs, net $(177) $ Guarantee of HD Supply loan (67) (51) Total $(244) $(51) Lease obligation costs included in the Companys Rationalization Charges were measured on a nonrecurring basis using fair value measurements with unobservable inputs (level 3), as further discussed in Note 3. The guarantee of the HD Supply loan was measured on a nonrecurring basis using fair value measurements with unobservable inputs (level 3), as further discussed in Note 2. Long-lived assets were analyzed for impairment on a nonrecurring basis using fair value measurements with unobservable inputs (level 3). Impairment charges related to long-lived assets in the first quarter of fiscal 2010 were

BASIC AND DILUTED WEIGHTED AVER

BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
	3 Months Ended May. 02, 2010
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES	5. BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES The reconciliation of basic to diluted weighted average common shares for the three months ended May2, 2010 and May3, 2009 was as follows (amounts in millions): ThreeMonthsEnded May2, 2010 May3, 2009 Weighted average common shares 1,677 1,683 Effect of potentially dilutive securities: Stock plans 11 6 Diluted weighted average common shares 1,688 1,689 Stock plans include shares granted under the Companys employee stock plans. Options to purchase 38million and 54million shares of common stock for the three months ended May2, 2010 and May3, 2009, respectively, were excluded from the computation of Diluted Earnings per Share because their effect would have been anti-dilutive.