Home Depot 2010 Annual Report Download - page 50

term debt to refinance debt maturing in fiscal 2011. At January 30, 2011, the approximate fair market value of this
agreement was a liability of $2 million, which is the estimated amount the Company would have paid to settle the
agreement and is included in Other Long-Term Liabilities in the accompanying Consolidated Balance Sheets.
In September 2010, the Company issued $500 million of 3.95% Senior Notes due September 15, 2020 at a
discount of $1 million and $500 million of 5.40% Senior Notes due September 15, 2040 at a discount of
$1 million (together, the “September 2010 issuance”). Interest on these Senior Notes is due semi-annually on
March 15 and September 15 of each year. The net proceeds of the September 2010 issuance were used to
refinance the Company’s 4.625% Senior Notes that matured August 15, 2010 in the aggregate principal amount
of $1.0 billion. The $2 million discount associated with the September 2010 issuance is being amortized over the
term of the Senior Notes using the effective interest rate method. Issuance costs were $8 million and are being
amortized over the term of the Senior Notes.
In fiscal 2009 and 2010, the Company entered into forward starting interest rate swap agreements with a
combined notional amount of $1.0 billion to hedge interest rate fluctuations in anticipation of the September
2010 issuance, which were accounted for as cash flow hedges. Upon the September 2010 issuance, the Company
paid $193 million to settle these forward starting interest rate swap agreements. This amount, net of income
taxes, is included in Accumulated Other Comprehensive Income and is being amortized to Interest Expense over
the lives of the Senior Notes issued in September 2010.
During fiscal 2007 and 2008, the Company entered into interest rate swaps, accounted for as fair value hedges,
with notional amounts of $3.0 billion, that swapped fixed rate interest on the Company’s $3.0 billion
5.40% Senior Notes due March 1, 2016 for variable rate interest equal to LIBOR plus 60 to 149 basis points. In
fiscal 2008, the Company received $56 million to settle these swaps, which is being amortized to reduce
net Interest Expense over the remaining term of the debt.
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 September 2010
Issuance and the 5.25% Senior Notes and the 5.875% Senior Notes issuance (together, the “December 2006
Issuance”), holders of the September 2010 Issuance and 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.
Further, while the indenture governing the Senior Notes contains various restrictive covenants, none is expected
to impact the Company’s liquidity or capital resources.
At January 30, 2011, the Company had outstanding cross currency swap agreements with a notional amount of
$590 million, accounted for as cash flow hedges, to hedge foreign currency fluctuations on certain intercompany
debt. At January 30, 2011, the approximate fair value of these agreements was a liability of $38 million, which is
the estimated amount the Company would have paid to settle the agreements and is included in Other Long-Term
Liabilities in the accompanying Consolidated Balance Sheets.
Interest Expense in the accompanying Consolidated Statements of Earnings is net of interest capitalized of
$3 million, $4 million and $20 million in fiscal 2010, 2009 and 2008, respectively. Maturities of Long-Term
Debt are $1.0 billion for fiscal 2011, $29 million for fiscal 2012, $1.3 billion for fiscal 2013, $28 million for
fiscal 2014, $26 million for fiscal 2015 and $7.3 billion thereafter.
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