Home Depot 2008 Annual Report Download - page 26

Provision for Income Taxes
Our combined effective income tax rate for continuing operations decreased to 36.4% for fiscal 2007 from 38.1% for
fiscal 2006. The decrease in our effective income tax rate for fiscal 2007 reflects the impact of a one-time retroactive tax
assessment received from the Canadian province of Quebec in the second quarter of fiscal 2006 and tax benefits
recognized upon settlement of several state audits and completion of the fiscal 2003 and 2004 federal tax audits in fiscal
2007.
Diluted Earnings per Share from Continuing Operations
Diluted Earnings per Share from Continuing Operations were $2.27 for fiscal 2007 and $2.55 for fiscal 2006. The
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week increased Diluted Earnings per Share from Continuing Operations by approximately $0.04 for fiscal 2007.
Diluted Earnings per Share from Continuing Operations were favorably impacted in both fiscal 2007 and 2006 by the
repurchase of shares of our common stock.
Discontinued Operations
Discontinued operations consist of the results of operations for HD Supply through August 30, 2007 and a loss on the sale
of HD Supply. Net Sales from discontinued operations were $7.4 billion for fiscal 2007 compared to $11.8 billion for
fiscal 2006. Earnings from Discontinued Operations, net of tax, were $185 million for fiscal 2007, compared to
$495 million for fiscal 2006. Earnings from Discontinued Operations for fiscal 2007 include a $4 million loss, net of tax,
recognized on the sale of the business.
Liquidity and Capital Resources
Cash flow generated from operations provides a significant source of liquidity. For fiscal 2008, Net Cash Provided by
Operating Activities was $5.5 billion compared to $5.7 billion for fiscal 2007. This change was primarily a result of
decreased Net Earnings partially offset by improved inventory management.
Net Cash Used in Investing Activities for fiscal 2008 was $1.7 billion compared to $4.8 billion provided by investing
activities for fiscal 2007. The change in Net Cash Used in/Provided by Investing Activities was primarily the result of
$8.3 billion of net proceeds from the sale of HD Supply in the third quarter of fiscal 2007 partially offset by $1.7 billion
less in capital expenditures in fiscal 2008 compared to fiscal 2007.
In fiscal 2008, we spent $1.8 billion on Capital Expenditures, allocated as follows: 45% for new stores, 15% for
merchandising and operations, 12% for maintenance, 11% for core technology and 17% for other initiatives. In fiscal
2008, we added 62 new stores, including six relocations.
Net Cash Used in Financing Activities for fiscal 2008 was $3.7 billion compared with $10.6 billion for fiscal 2007. The
decrease in Net Cash Used in Financing Activities was primarily due to the repurchase of 289 million shares of our
common stock for $10.7 billion in connection with our tender offer related to the sale of HD Supply in the third quarter
of fiscal 2007 and by repayments in fiscal 2008 of $1.7 billion of short-term commercial paper and $282 million of
structured financing debt.
We repurchased 2.4 million shares of our common stock for $70 million in fiscal 2008 and a total of 293 million shares
for $10.8 billion in fiscal 2007, including a $10.7 billion tender offer funded primarily using proceeds from the sale of
HD Supply. Since the inception of our share repurchase program in 2002, we have repurchased 746 million shares of our
common stock for a total of $27.3 billion. As of February 1, 2009, $12.7 billion remained under our share repurchase
authorization. Given current market conditions, we have suspended the repurchase program until our business and credit
markets stabilize.
We have commercial paper programs that allow for borrowings up to $3.25 billion. In connection with the programs, we
have a back-up credit facility with a consortium of banks for borrowings up to $3.25 billion. As of February 1, 2009,
there were no borrowings outstanding under the commercial paper programs or the related credit facility. The credit
facility, which expires in December 2010, contains various restrictive covenants, all of which we are in compliance. None
of the covenants are expected to impact our liquidity or capital resources.
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