Home Depot 2001 Annual Report Download - page 30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Home Depot, Inc. and Subsidiaries
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Home Depot, Inc. and subsidiaries (the “Company”) operates
Home Depot stores, which are full-service, warehouse-style stores
averaging approximately 109,000 square feet in size. The stores
stock approximately 40,000 to 50,000 different kinds of building
materials, home improvement supplies and lawn and garden prod-
ucts that are sold primarily to do-it-yourselfers, but also to home
improvement contractors, tradespeople, and building maintenance
professionals. In addition, the Company operates EXPO Design
Center stores, which offer products and services primarily related
to design and renovation projects, and Villager’s Hardware stores,
which offer products and services for home enhancement and
smaller project needs in a convenience hardware store format.
Additionally, the Company operates one Home Depot Floor Store,
a test store that offers only flooring products and installation serv-
ices. At the end of fiscal 2001, the Company was operating 1,333
stores, including 1,201 Home Depot stores, 41 EXPO Design
Center stores, 4 Villager’s Hardware stores and 1 Home Depot
Floor Store in the United States; 78 Home Depot stores in Canada;
4 Home Depot stores in Argentina, which were sold on February
18, 2002; and 4 Home Depot stores in Mexico. Included in the
Company’s Consolidated Balance Sheet at February 3, 2002, were
$946 million of net assets of the Canada, Argentina and Mexico
operations. Also included in consolidated results are several whol-
ly-owned subsidiaries. The Company offers facilities maintenance
and repair products, as well as wallpaper and custom window
treatments via direct shipment through subsidiaries Maintenance
Warehouse and National Blinds and Wallpaper, Inc. Georgia
Lighting is a specialty lighting designer, distributor and retailer to
both commercial and retail customers. The Company offers
plumbing, HVAC and other professional plumbing products
through wholesale plumbing distributors Apex Supply Company
and Your “other”Warehouse.
FISCAL YEAR The Company’s fiscal year is a 52- or 53-week peri-
od ending on the Sunday nearest to January 31. Fiscal year 2001,
which ended February 3, 2002, consisted of 53 weeks. Fiscal years
2000 and 1999, which ended January 28, 2001 and January 30,
2000, respectively, consisted of 52 weeks.
BASIS OF PRESENTATION The consolidated financial statements
include the accounts of the Company, its wholly-owned sub-
sidiaries, and its majority-owned partnership, The Home Depot
Chile S.A. In October 2001, the Company sold its interest in The
Home Depot Chile S.A. All significant intercompany transactions
have been eliminated in consolidation.
Stockholders’equity, share and per share amounts for all peri-
ods presented have been adjusted for a three-for-two stock split
effected in the form of a stock dividend on December 30, 1999.
CASH EQUIVALENTS The Company considers all highly liquid
investments purchased with a maturity of three months or less to
be cash equivalents. The Company’s cash and cash equivalents
are carried at fair market value and consist primarily of commer-
cial paper, money market funds, U.S. government agency securi-
ties and tax-exempt notes and bonds.
MERCHANDISE INVENTORIES The majority of the Company’s
inventory is stated at the lower of cost (first-in, first-out) or market,
as determined by the retail inventory method.
Certain subsidiaries and distribution centers value inventories
at the lower of cost (first-in, first-out) or market, as determined by
the cost method. These inventories represent approximately 6% of
total inventory.
INVESTMENTS The Company’s investments, consisting primarily
of high-grade debt securities, are recorded at fair value and are
classified as available-for-sale.
INCOME TAXES The Company provides for federal, state and for-
eign income taxes currently payable, as well as for those deferred
because of timing differences between reporting income and
expenses for financial statement purposes versus tax purposes.
Federal, state and foreign incentive tax credits are recorded as a
reduction of income taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differ-
ences between the financial statement carrying amounts of exist-
ing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect of a change in tax rates is recognized as income or
expense in the period that includes the enactment date.
The Company and its eligible subsidiaries file a consolidated
U.S. federal income tax return. Non-U.S. subsidiaries, which are
consolidated for financial reporting, are not eligible to be includ-
ed in consolidated U.S. federal income tax returns. Separate
provisions for income taxes have been determined for these enti-
ties. The Company intends to reinvest the unremitted earnings of
its non-U.S. subsidiaries and postpone their remittance indefinite-
ly. Accordingly, no provision for U.S. income taxes for non-U.S.
subsidiaries was required for any year presented.
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