Home Depot 2006 Annual Report Download - page 58

Other Comprehensive Income, which will be amortized to interest expense over the life of the related
debt.
In March 2006, the Company issued $1.0 billion of 5.20% Senior Notes due March 1, 2011 at a
discount of $1 million and $3.0 billion of 5.40% Senior Notes due March 1, 2016 at a discount of
$15 million, together the ‘‘March 2006 Issuance.’’ The net proceeds of the March 2006 Issuance were
used to pay for the acquisition price of Hughes Supply, Inc. and for the repayment of the Company’s
5.375% Senior Notes due April 2006 in the aggregate principal amount of $500 million. The
$16 million discount and $19 million of issuance costs associated with the March 2006 Issuance are
being amortized to interest expense over the term of the related Senior Notes.
Additionally in March 2006, the Company entered into a forward starting interest rate swap agreement
with a notional amount of $2.0 billion, accounted for as a cash flow hedge, to hedge interest rate
fluctuations in anticipation of the issuance of the 5.40% Senior Notes due March 1, 2016. Upon
issuance of the hedged debt, the Company settled its forward starting interest rate swap agreements
and recorded a $12 million decrease, net of income taxes, to Accumulated Other Comprehensive
Income, which will be amortized to interest expense over the life of the related debt.
In August 2005, the Company issued $1.0 billion of 4.625% Notes due August 15, 2010 (‘‘August 2005
Issuance’’) at a discount of $5 million. The net proceeds of $995 million were used to pay for a portion
of the acquisition price of National Waterworks, Inc. The $5 million discount and $7 million of issuance
costs associated with the August 2005 Issuance are being amortized to interest expense over the term of
the related Senior Notes.
The Company also had $1.0 billion of 3.75% Senior Notes due September 15, 2009 outstanding as of
January 28, 2007, collectively referred to with the December 2006 Issuance, March 2006 Issuance and
August 2005 Issuance 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. Additionally, if a Change in Control Triggering Event occurs, as defined by the
terms of the December 2006 Issuance, holders of the December 2006 Issuance have the right to require
the Company to redeem those notes at 101% of the aggregate principal amount of the notes plus
accrued interest up to the redemption date.
The Company is generally not limited under the indenture governing the Senior Notes in its ability to
incur additional indebtedness or required to maintain financial ratios or specified levels of net worth or
liquidity. However, the indenture governing the Senior Notes contains various restrictive covenants,
none of which is expected to impact the Company’s liquidity or capital resources.
Interest Expense in the accompanying Consolidated Statements of Earnings is net of interest
capitalized of $47 million, $51 million and $40 million in fiscal 2006, 2005 and 2004, respectively.
Maturities of Long-Term Debt are $18 million for fiscal 2007, $301 million for fiscal 2008, $1.8 billion
for fiscal 2009, $1.0 billion for fiscal 2010, $1.0 billion for fiscal 2011 and $7.5 billion thereafter.
As of January 28, 2007, the market value of the Senior Notes was approximately $10.9 billion. The
estimated fair value of all other long-term borrowings, excluding capital lease obligations, was
approximately $316 million compared to the carrying value of $311 million. These fair values were
estimated using a discounted cash flow analysis based on the Company’s incremental borrowing rate for
similar liabilities.
48