Home Depot 2006 Annual Report Download - page 20

motivating them. We also depend on our executives and other key associates for our success. There is
no assurance that we will be able to attract or retain highly qualified associates in the future.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related
to complex accounting matters could significantly affect our financial results.
Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines and interpretations with regard to a wide range of matters that are relevant to our business,
such as revenue recognition, asset impairment, inventories, self-insurance, tax matters and litigation, are
highly complex and involve many subjective assumptions, estimates and judgments by our management.
Changes in these rules or their interpretation or changes in underlying assumptions, estimates or
judgments by our management could significantly change our reported or expected financial
performance.
Increased competition could adversely affect prices and demand for our products and services and could
decrease our market share.
We operate in markets in industries that are highly competitive. Our retail business competes
principally based on price, store location, customer service and depth of merchandise. Our HD Supply
business competes principally based on ability to provide and deliver supplies, product knowledge and
expertise, advisory services and availability of credit. In each market we serve, there are a number of
other home improvement stores, electrical, plumbing and building materials supply houses and lumber
yards. With respect to some products, we also compete with discount stores, local, regional and national
hardware stores, mail order firms, warehouse clubs, independent building supply stores and other
retailers. In addition, we compete with specialty design stores or showrooms, some of which are only
open to interior design professionals, local and regional distributors, and wholesalers and manufacturers
that sell products directly to their customer bases. Intense competitive pressures from one or more of
our competitors could affect prices or demand for our products and services. If we are unable to timely
and appropriately respond to these pressures, our financial performance and our market share could be
adversely affected.
We are involved in a number of legal proceedings, and while we cannot predict the outcomes of such
proceedings and other contingencies with certainty, some of these outcomes may adversely affect our operations
or increase our costs.
We are involved in a number of legal proceedings, including government inquiries and investigations,
and consumer, employment, tort and other litigation. We cannot predict the outcomes of these legal
proceedings and other contingencies, including environmental remediation and other proceedings
commenced by government authorities, with certainty. The outcome of some of these legal proceedings
and other contingencies could require us to take or refrain from taking actions which could adversely
affect our operations or could require us to pay substantial amounts of money. Additionally, defending
against these lawsuits and proceedings may involve significant expense and diversion of management’s
attention and resources from other matters.
Our costs of doing business could increase as a result of changes in federal, state or local regulations.
Changes in the federal, state or local minimum wage or living wage requirements or changes in other
wage or workplace regulations could increase our costs of doing business. Changes in federal, state or
local regulations governing the sale of some of our products could increase our costs of doing business.
In addition, changes to federal, state and local tax regulations could increase our costs of doing
business.
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