Home Depot 2003 Annual Report Download - page 32

Derivatives
The Company measures its derivatives at fair value and
recognizes these assets or liabilities on the Consolidated Balance
Sheets. The Company’s primary objective for holding derivative
instruments is to decrease the volatility of earnings and cash flow
associated with fluctuations in interest rates. At February 1, 2004,
the Company had several outstanding interest rate swaps with
a total notional amount of $475 million that swap fixed rate inter-
est on our $500 million 53/8% Senior Notes for variable interest
rates equal to LIBOR plus 30 to 245 basis points and expire on
April 1, 2006. At February 1, 2004, the fair market value of these
agreements was $19 million, which is the estimated amount that
the Company would have received to sell similar interest rate
swap agreements at current interest rates.
Comprehensive Income
Comprehensive Income includes Net Earnings adjusted for certain
revenues, expenses, gains and losses that are excluded from Net
Earnings under generally accepted accounting principles.
Examples include foreign currency translation adjustments and
unrealized gains and losses on certain derivatives.
Foreign Currency Translation
The assets and liabilities denominated in a foreign currency are
translated into U.S. dollars at the current rate of exchange on the
last day of the reporting period. Revenues and expenses are
translated at the average monthly exchange rates and equity
transactions are translated using the actual rate on the day of
the transaction.
Segment Information
The Company operates within a single operating segment within
North America. Included in the Company’s Consolidated Balance
Sheets at February 1, 2004, were $2.3 billion of net assets of the
Canada and Mexico operations.
Reclassifications
Certain amounts in prior fiscal years have been reclassified to
conform with the presentation adopted in the current fiscal year.
2. LONG-TERM DEBT
The Company’s Long-Term Debt at the end of fiscal 2003 and
fiscal 2002 consisted of the following (amounts in millions):
February 1,February 2,
2004 2003
61/2% Senior Notes;
due September 15, 2004;
interest payable semi-annually
on March 15 and September 15 $ 500 $ 500
53/8% Senior Notes;
due April 1, 2006; interest payable
semi-annually on April 1and October 1500 500
Capital Lease Obligations; payable in
varying installments through
January 31, 2045 318 277
Other 47 51
Total Long-Term Debt 1,365 1,328
Less current installments 509 7
Long-Term Debt, excluding
current installments $ 856 $1,321
The Company has a commercial paper program with maximum
available borrowings for up to $1billion. In connection with the
program, the Company has a back-up credit facility with a consor-
tium of banks for up to $800 million. The credit facility, which
expires in September 2004, contains various restrictive
covenants, none of which are expected to materially impact the
Company’s liquidity or capital resources.
The Company had $500 million of unsecured 61
/2% Senior Notes
and $500 million of unsecured 53/8% Senior Notes outstanding as
of February 1, 2004, collectively referred to as “Senior Notes.”
The Senior Notes may be redeemed by the Company at any time,
in whole or in part, at a redemption price plus accrued interest up
to the redemption date. The redemption price is 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 to maturity. The
Senior Notes are not subject to sinking fund requirements.
Notes to Consolidated Financial Statements
The Home Depot, Inc. and Subsidiaries
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