Home Depot 1999 Annual Report Download - page 32

Notes to Consolidated Financial Statements (continued)
The Home Depot, Inc. and Subsidiaries
On September 27, 1999, the Company issued $500 million of
61⁄2% Senior Notes (“Senior Notes”). The Company, at its option, may
redeem all or any portion of the Senior Notes by notice to the holder.
The Senior Notes are redeemable at a redemption price, plus accrued
interest, equal to the greater of (1) 100% of the principal amount of
the Senior Notes to be redeemed or (2) the sum of the present values
of the remaining scheduled payments of principal and interest on the
Senior Notes to maturity. The Senior Notes are not subject to sinking
fund requirements.
During fiscal 1999, the Company redeemed its 31⁄4% Convertible
Subordinated Notes (“31⁄4% Notes”). A total principal amount of
$1.1 billion was converted into 72 million shares of the Company’s
common stock. As a result, the total principal amount converted, net
of unamortized expenses of the original debt issue, was credited to
common stock at par and to additional paid-in capital in the amount
of $1.1 billion.
The Company has a commercial paper program that allows
borrowings up to a maximum of $800 million. As of January 30, 2000,
there were no borrowings outstanding under the program. In connec-
tion with the program, the Company has a back-up credit facility with
a consortium of banks for up to $800 million. The credit facility, which
expires in September 2004, contains various restrictive convenants,
none of which is expected to materially impact the Company’s liquidity
or capital resources.
The restrictive covenants related to letter of credit agreements
securing the industrial revenue bonds are no more restrictive than
those referenced above.
Interest expense in the accompanying Consolidated Statements of
Earnings is net of interest capitalized of $45 million in fiscal 1999,
$31 million in fiscal 1998 and $19 million in fiscal 1997.
Maturities of long-term debt are $29 million for fiscal 2000,
$4 million for fiscal 2001, $19 million for fiscal 2002, $5 million for
fiscal 2003 and $506 million for fiscal 2004.
The estimated fair value of the 61⁄2% Senior Notes, which are
publicly traded, was approximately $485 million based on an imputed
market price at January 30, 2000. The estimated fair value of all other
long-term borrowings was approximately $441 million compared to
the carrying value of $279 million. These fair values were estimated
using a discounted cash flow analysis based on the Company’s incre-
mental borrowing rate for similar liabilities.
>Note 3
Income Taxes
The provision for income taxes consisted of the following (in millions):
Fiscal Year Ended
January 30, January 31, February 1,
2000 1999 1998
Current:
U.S. $ 1,209 $ 823 $ 653
State 228 150 98
Foreign 45 20 15
1,482 993 766
Deferred:
U.S. 946 (31)
State (4) (1) 1
Foreign (3) 22
247 (28)
Total $ 1,484 $ 1,040 $ 738
The Company’s combined federal, state and foreign effective tax
rates for fiscal years 1999, 1998 and 1997, net of offsets generated
by federal, state and foreign tax incentive credits, were approximately
39.0%, 39.2% and 38.9%, respectively. A reconciliation of income
tax expense at the federal statutory rate of 35% to actual tax expense
for the applicable fiscal years follows (in millions):
Fiscal Year Ended
January 30, January 31, February 1,
2000 1999 1998
Income taxes at U.S. statutory rate $ 1,331 $ 929 $ 664
State income taxes, net of federal
income tax benefit 145 96 65
Foreign rate differences 2–2
Other, net 615 7
Total $ 1,484 $ 1,040 $ 738
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
January 30, 2000 and January 31, 1999 were as follows (in millions):
January 30, January 31,
2000 1999
Deferred Tax Assets:
Accrued self-insurance liabilities $ 154 $ 110
Other accrued liabilities 142 97
Total gross deferred tax assets 296 207
Deferred Tax Liabilities:
Accelerated depreciation (321) (249)
Other (62) (43)
Total gross deferred tax liabilities (383) (292)
Net deferred tax liability $ (87) $ (85)
28