Home Depot 2004 Annual Report Download - page 34

Notes to Consolidated Financial Statements (continued)
The Home Depot, Inc. and Subsidiaries
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 entering into derivative instru-
ments is to manage its exposure to interest rates, as well as to
maintain an appropriate mix of fixed and variable rate debt. At
January 30, 2005, the Company had several outstanding interest
rate swaps with a notional amount of $475 million that swap fixed
rate interest on the Company’s $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 January 30, 2005, the fair market
value of these agreements was $6 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
Assets and Liabilities denominated in a foreign currency are trans-
lated into U.S. dollars at the current rate of exchange on the last
day of the reporting period. Revenues and Expenses are generally
translated at a daily exchange rate 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. Net Sales for Canada and Mexico were $4.2 billion,
$3.4 billion and $2.6 billion during fiscal 2004, 2003 and 2002,
respectively. Long-lived assets in Canada and Mexico totaled $1.7 bil-
lion and $1.2 billion as of January 30, 2005 and February 1, 2004,
respectively.
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 2004 and
fiscal 2003 consisted of the following (amounts in millions):
January 30, February 1,
2005 2004
33⁄4% Senior Notes;
due September 15, 2009;
interest payable semi-annually
on March 15 and September 15 $995 $ –
61⁄2% Senior Notes;
due September 15, 2004;
interest payable semi-annually
on March 15 and September 15 –500
53⁄8% Senior Notes;
due April 1, 2006;
interest payable semi-annually
on April 1 and October 1 500 500
Capital Lease Obligations;
payable in varying installments
through January 31, 2045 351 318
Other 313 47
Total Long-Term Debt 2,159 1,365
Less current installments 11 509
Long-Term Debt, excluding
current installments $2,148 $ 856
In the second quarter of fiscal 2004, the Company increased the
maximum capacity for borrowing under its commercial paper
program to $1.25 billion as well as increased the related back-up
credit facility with a consortium of banks to $1.0 billion. As of
January 30, 2005, there were no amounts outstanding under
the program. The credit facility, which expires in May 2009,
contains various restrictive covenants, none of which are expected
to materially impact the Company’s liquidity or capital resources.
In September 2004, the Company issued $1.0 billion of 33⁄4%
Senior Notes due September 15, 2009 at a discount of $5 million
with interest payable semi-annually on March 15 and September
15 of each year. The net proceeds of $995 million were used in
part for the repayment of the Company’s outstanding 61⁄2% Senior
Notes due September 2004 in the aggregate principal amount of
$500 million. The remainder of the net proceeds was used for
general corporate purposes.