Home Depot 2014 Annual Report Download - page 47

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2. INVESTMENT IN HD SUPPLY HOLDINGS, INC.
At the end of fiscal 2013, the Company owned 16.3 million shares of HD Supply Holdings, Inc. ("HD Supply") common
stock, which represented approximately 8% of the shares of HD Supply common stock outstanding. This investment is
accounted for using the cost method, as there are significant restrictions in place on the Company's ability to sell or transfer
its HD Supply shares. The restrictions are controlled by the three largest shareholders of HD Supply (the "Principal
Shareholders") for so long as they continue to own a certain portion of their original holdings of HD Supply. The carrying
value of the HD Supply shares was impaired by the Company to a zero cost basis in fiscal 2009.
In the first quarter of fiscal 2014, the Principal Shareholders elected to sell shares of HD Supply common stock in a
secondary public offering (the "May Offering"). Under the terms of a registration rights agreement among the Company, HD
Supply and the Principal Shareholders (the "Registration Rights Agreement"), the Company had the right to include a portion
of its shares in the May Offering and elected to do so. During the third and fourth quarters of fiscal 2014, two of the Principal
Shareholders again elected to sell shares of HD Supply common stock in secondary public offerings, and the Company again
exercised its rights under the Registration Rights Agreement to include a portion of its shares in these offerings. As a result of
all of these offerings (including an overallotment option exercised during the second quarter of fiscal 2014 by the
underwriters of the May Offering), the Company sold 12.2 million shares of HD Supply common stock in fiscal 2014, for
which it received $323 million of proceeds and recognized a corresponding gain in fiscal 2014.
The total pretax gain of $323 million is included in Interest and Investment Income in the accompanying Consolidated
Statements of Earnings for fiscal 2014. The remaining 4.1 million shares owned by the Company, which represent
approximately 2% of the shares of HD Supply common stock outstanding, continue to be accounted for using the cost
method as the restrictions on these shares remain in place.
3. PROPERTY AND LEASES
Property and Equipment as of February 1, 2015 and February 2, 2014 consisted of the following (amounts in millions):
February 1,
2015 February 2, 2014
Property and Equipment, at cost:
Land $ 8,243 $ 8,375
Buildings 17,759 17,950
Furniture, Fixtures and Equipment 9,602 10,107
Leasehold Improvements 1,419 1,388
Construction in Progress 585 548
Capital Leases 905 696
38,513 39,064
Less Accumulated Depreciation and Amortization 15,793 15,716
Net Property and Equipment $ 22,720 $ 23,348
The Company leases certain retail locations, office space, warehouse and distribution space, equipment and vehicles. While
most of the leases are operating leases, certain locations and equipment are leased under capital leases. As leases expire, it
can be expected that in the normal course of business certain leases will be renewed or replaced.
Certain lease agreements include escalating rents over the lease terms. The Company expenses rent on a straight-line basis
over the lease term, which commences on the date the Company has the right to control the property. The cumulative expense
recognized on a straight-line basis in excess of the cumulative payments is included in Other Accrued Expenses and Other
Long-Term Liabilities in the accompanying Consolidated Balance Sheets.
Total rent expense, net of minor sublease income, for fiscal 2014, 2013 and 2012 was $918 million, $905 million and $849
million, respectively. Certain store leases also provide for contingent rent payments based on percentages of sales in excess of
specified minimums. Contingent rent expense for fiscal 2014, 2013 and 2012 was approximately $7 million, $5 million and
$4 million, respectively. Real estate taxes, insurance, maintenance and operating expenses applicable to the leased property
are obligations of the Company under the lease agreements.