Home Depot 2010 Annual Report Download - page 54

The amount of unrecognized tax benefits was $298 million, $386 million and $401 million as of January 30,
2011, January 31, 2010 and February 1, 2009, respectively, that if recognized would affect the annual effective
income tax rate.
Interest and penalties associated with uncertain tax positions provided income of $32 million in fiscal 2010,
expense of $41 million in fiscal 2009 and income of $19 million in fiscal 2008. Total accrued interest and
penalties as of January 30, 2011 and January 31, 2010 are $84 million and $138 million, respectively. Interest
and penalties are included in Interest Expense and SG&A, respectively, in the accompanying Consolidated
Statements of Earnings.
7. EMPLOYEE STOCK PLANS
The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan (“2005 Plan”) and The Home Depot, Inc. 1997
Omnibus Stock Incentive Plan (“1997 Plan” and collectively with the 2005 Plan, the “Plans”) provide that
incentive and non-qualified stock options, stock appreciation rights, restricted shares, performance shares,
performance units and deferred shares may be issued to selected associates, officers and directors of the
Company. Under the 2005 Plan, the maximum number of shares of the Company’s common stock authorized for
issuance is 255 million shares, with any award other than a stock option reducing the number of shares available
for issuance by 2.11 shares. As of January 30, 2011, there were 175 million shares available for future grants
under the 2005 Plan. No additional equity awards could be issued from the 1997 Plan after the adoption of the
2005 Plan on May 26, 2005.
Under the terms of the Plans, incentive stock options and non-qualified stock options must have an exercise price
at or above the fair market value of the Company’s stock on the date of the grant. Typically, incentive stock
options and non-qualified stock options vest at the rate of 25% per year commencing on the first or second
anniversary date of the grant and expire on the tenth anniversary date of the grant. Certain of the non-qualified
stock options also include performance options which vest on the later of the first anniversary date of the grant
and the date the closing price of the Company’s common stock has been 25% greater than the exercise price of
the options for 30 consecutive trading days. Additionally, certain stock options may become non-forfeitable upon
age 60, provided the associate has had five years of continuous service. The Company recognized $20 million,
$19 million and $47 million of stock-based compensation expense in fiscal 2010, 2009 and 2008, respectively,
related to stock options.
Restrictions on the restricted stock issued under the Plans generally lapse according to one of the following
schedules: (1) the restrictions on the restricted stock lapse over various periods up to five years, (2) the
restrictions on 25% of the restricted stock lapse upon the third and sixth anniversaries of the date of issuance with
the remaining 50% of the restricted stock lapsing upon the associate’s attainment of age 62, or (3) the restrictions
on 25% of the restricted stock lapse upon the third and sixth anniversaries of the date of issuance with the
remaining 50% of the restricted stock lapsing upon the earlier of the associate’s attainment of age 60 or the tenth
anniversary date. The Company has also granted performance shares under the Plans, the payout of which is
dependent on either (1) the Company’s total shareholder return percentile ranking compared to the performance
of individual companies included in the S&P 500 index at the end of the three-year performance cycle, or (2) the
Company’s performance against target average return on invested capital and operating profit over a three-year
performance cycle. Additionally, certain awards may become non-forfeitable upon the attainment of age 60,
provided the associate has had five years of continuous service. The fair value of the restricted stock and
performance shares is expensed over the period during which the restrictions lapse. The Company recorded
stock-based compensation expense related to restricted stock and performance shares of $167 million,
$158 million and $109 million in fiscal 2010, 2009 and 2008, respectively.
In fiscal 2010, 2009 and 2008, there were an aggregate of 479 thousand, 666 thousand and 641 thousand deferred
shares, respectively, granted under the Plans. For associates, each deferred share entitles the individual to one
share of common stock to be received up to five years after the grant date of the deferred shares, subject to
certain deferral rights of the associate. Additionally, certain awards may become non-forfeitable upon age 60,
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