Home Depot 2014 Annual Report Download - page 24

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reasonably estimate a range of losses because no claims have yet been asserted and because there are significant factual and
legal issues to be resolved. We will continue to evaluate information as it becomes known and will record an estimate for
losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably
estimable. We believe that the ultimate amount paid on payment card network claims could be material to our consolidated
financial condition, results of operations, or cash flows in future periods.
In addition, at least 57 actions have been filed in courts in the U.S. and Canada, and other claims may be asserted against us
on behalf of customers, payment card brands, payment card issuing banks, shareholders or others seeking damages or other
related relief, allegedly arising from the Data Breach. Furthermore, several state and federal agencies, including State
Attorneys General, are investigating events related to the Data Breach, including how it occurred, its consequences and our
responses. We are cooperating in the governmental investigations, and we may be subject to fines or other obligations. While
a loss from these matters is reasonably possible, we are not able to estimate the costs, or range of costs, related to these
matters because the proceedings remain in the early stages, alleged damages have not been specified, there is uncertainty as
to the likelihood of a class or classes being certified or the ultimate size of any class if certified, and there are significant
factual and legal issues to be resolved. We have not concluded that a loss from these matters is probable; therefore, we have
not recorded an accrual for litigation, claims and governmental investigations related to these matters in fiscal 2014. We will
continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is
both probable that a loss has been incurred and the amount of the loss is reasonably estimable. We believe that the ultimate
amount paid on these actions, claims and investigations could be material to our consolidated financial condition, results of
operations, or cash flows in future periods.
Future Costs
We expect to incur significant legal and other professional services expenses associated with the Data Breach in future
periods. We will recognize these expenses as services are received. Costs related to the Data Breach that may be incurred in
future periods may also include liabilities to payment card networks for reimbursements of credit card fraud and card
reissuance costs; liabilities related to our private label credit card fraud and card reissuance costs; liabilities from current and
future civil litigation, governmental investigations and enforcement proceedings; future expenses for legal, investigative and
consulting fees; and incremental expenses and capital investments for remediation activities. We believe that the ultimate
amount paid on these services and claims could be material to our consolidated financial condition, results of operations, or
cash flows in future periods.
Insurance Coverage
We maintained $100 million of network security and privacy liability insurance coverage in fiscal 2014, above a $7.5 million
deductible, to limit our exposure to losses such as those related to the Data Breach. As of February 1, 2015, we had received
an initial payment of $10 million of insurance reimbursements. In fiscal 2015, we entered into a new policy, with $100
million of network security and privacy liability insurance coverage, above a $10 million deductible, to limit our exposure to
similar losses.
Key Initiatives
In fiscal 2014, we continued to focus on the following key initiatives:
Customer Service – Our customer service initiative is anchored on the principles of simplifying the business, creating an
emotional connection with customers, putting customers first and taking care of our associates. In fiscal 2014, we completed
the rollout of our second generation FIRST phone, a handheld mobile customer service tool used by our store associates. The
latest FIRST phone generation provides a more intuitive smartphone interface, internet access to convert online sales in the
aisle, integrated mobile checkout and greatly improved overall processing speed.
Product Authority – Our product authority initiative is facilitated by our merchandising transformation and portfolio strategy,
which is focused on delivering product innovation, assortment and value. In fiscal 2014, we continued to introduce a wide
range of innovative new products to our professional, do-it-for-me and do-it-yourself customers, while remaining focused on
offering everyday values in our stores and online. Using our new merchandising assortment planning and pricing tools in
fiscal 2014, we reviewed approximately one-third of the products offered in a typical store, allowing us to better match our
assortments to local customer preferences, regulations and demographics. We also used these tools to help us make other
focused merchandising decisions, including decisions regarding our markdown and clearance process.