Home Depot 2015 Annual Report Download - page 46

Table of Contents
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4. 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 was
accounted for using the cost method, as there were significant restrictions in place on the Company’s ability to sell or transfer
its HD Supply shares. The restrictions were controlled by the three largest shareholders of HD Supply (the "Principal
Shareholders") for so long as they continued 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 2014 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 2014 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 2014 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 Consolidated Statements of Earnings for
fiscal 2014.
During the second quarter of fiscal 2015, the remaining Principal Shareholder elected to sell shares of HD Supply common
stock in a secondary public offering, and the Company again exercised its rights under the Registration Rights Agreement to
include its shares in this offering. As a result, the Company sold its remaining 4.1 million shares of HD Supply common stock,
for which it received $144 million of proceeds and recognized a corresponding gain in fiscal 2015. The total pretax gain of
$144 million is included in Interest and Investment Income in the accompanying Consolidated Statements of Earnings for
fiscal 2015.
5. PROPERTY AND LEASES
Property and Equipment as of January 31, 2016 and February 1, 2015 consisted of the following (amounts in millions):
January 31,
2016 February 1, 2015
Property and Equipment, at cost:
Land $ 8,149 $ 8,243
Buildings 17,667 17,759
Furniture, Fixtures and Equipment 10,279 9,602
Leasehold Improvements 1,481 1,419
Construction in Progress 670 585
Capital Leases 1,020 905
39,266 38,513
Less Accumulated Depreciation and Amortization 17,075 15,793
Net Property and Equipment $ 22,191 $ 22,720
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 2015, 2014 and 2013 was $922 million, $918 million and $905
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 2015, 2014 and 2013 was approximately $7 million, $7 million and
$5 million, respectively. Real estate taxes, insurance, maintenance and operating expenses applicable to the leased property
are obligations of the Company under the lease agreements.