HD » Topics » Diluted Earnings per Share from Continuing Operations

These excerpts taken from the HD 10-K filed Apr 2, 2009.
Diluted Earnings per Share from Continuing Operations
 
Diluted Earnings per Share from Continuing Operations were $1.37 for fiscal 2008 and $2.27 for fiscal 2007. Excluding the Rationalization Charges and the write-down of our investment in HD Supply, Diluted Earnings per Share from Continuing Operations for fiscal 2008 were $1.78, a decrease of 21.6% from fiscal 2007. The 53rd week in fiscal 2007 increased Diluted Earnings per Share from Continuing Operations by approximately $0.04 for fiscal 2007.
 
Diluted Earnings per Share from Continuing Operations were favorably impacted by the repurchase of shares of our common stock. We repurchased 2.4 million shares for $70 million in fiscal 2008 and 293 million shares for $10.8 billion in fiscal 2007. Since the inception of the repurchase program in 2002, we have repurchased 746 million shares of our common stock for a total of $27.3 billion.
 
Discontinued Operations
 
On August 30, 2007, the Company closed the sale of HD Supply. Discontinued operations for fiscal 2008 consist of a loss of $52 million, net of tax, or $0.03 per diluted share, recorded to settle net working capital matters arising from the sale of HD Supply. Discontinued operations for fiscal 2007 consist of the results of operations for HD Supply through August 30, 2007 and a $4 million loss on the sale of HD Supply. Net Sales from discontinued operations were $7.4 billion for fiscal 2007 and Earnings from Discontinued Operations, net of tax, were $185 million for fiscal 2007.
 
Diluted Earnings per Share from Continuing Operations
 
Diluted Earnings per Share from Continuing Operations were $2.27 for fiscal 2007 and $2.55 for fiscal 2006. The 53rd week increased Diluted Earnings per Share from Continuing Operations by approximately $0.04 for fiscal 2007. Diluted Earnings per Share from Continuing Operations were favorably impacted in both fiscal 2007 and 2006 by the repurchase of shares of our common stock.
 
Discontinued Operations
 
Discontinued operations consist of the results of operations for HD Supply through August 30, 2007 and a loss on the sale of HD Supply. Net Sales from discontinued operations were $7.4 billion for fiscal 2007 compared to $11.8 billion for fiscal 2006. Earnings from Discontinued Operations, net of tax, were $185 million for fiscal 2007, compared to $495 million for fiscal 2006. Earnings from Discontinued Operations for fiscal 2007 include a $4 million loss, net of tax, recognized on the sale of the business.
 
Liquidity and Capital Resources
 
Cash flow generated from operations provides a significant source of liquidity. For fiscal 2008, Net Cash Provided by Operating Activities was $5.5 billion compared to $5.7 billion for fiscal 2007. This change was primarily a result of decreased Net Earnings partially offset by improved inventory management.
 
Net Cash Used in Investing Activities for fiscal 2008 was $1.7 billion compared to $4.8 billion provided by investing activities for fiscal 2007. The change in Net Cash Used in/Provided by Investing Activities was primarily the result of $8.3 billion of net proceeds from the sale of HD Supply in the third quarter of fiscal 2007 partially offset by $1.7 billion less in capital expenditures in fiscal 2008 compared to fiscal 2007.
 
In fiscal 2008, we spent $1.8 billion on Capital Expenditures, allocated as follows: 45% for new stores, 15% for merchandising and operations, 12% for maintenance, 11% for core technology and 17% for other initiatives. In fiscal 2008, we added 62 new stores, including six relocations.
 
Net Cash Used in Financing Activities for fiscal 2008 was $3.7 billion compared with $10.6 billion for fiscal 2007. The decrease in Net Cash Used in Financing Activities was primarily due to the repurchase of 289 million shares of our common stock for $10.7 billion in connection with our tender offer related to the sale of HD Supply in the third quarter of fiscal 2007 and by repayments in fiscal 2008 of $1.7 billion of short-term commercial paper and $282 million of structured financing debt.
 
We repurchased 2.4 million shares of our common stock for $70 million in fiscal 2008 and a total of 293 million shares for $10.8 billion in fiscal 2007, including a $10.7 billion tender offer funded primarily using proceeds from the sale of HD Supply. Since the inception of our share repurchase program in 2002, we have repurchased 746 million shares of our common stock for a total of $27.3 billion. As of February 1, 2009, $12.7 billion remained under our share repurchase authorization. Given current market conditions, we have suspended the repurchase program until our business and credit markets stabilize.
 
We have commercial paper programs that allow for borrowings up to $3.25 billion. In connection with the programs, we have a back-up credit facility with a consortium of banks for borrowings up to $3.25 billion. As of February 1, 2009, there were no borrowings outstanding under the commercial paper programs or the related credit facility. The credit facility, which expires in December 2010, contains various restrictive covenants, all of which we are in compliance. None of the covenants are expected to impact our liquidity or capital resources.


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Table of Contents

We use capital and operating leases to finance a portion of our real estate, including our stores, distribution centers and store support centers. The net present value of capital lease obligations is reflected in our Consolidated Balance Sheets in Long-Term Debt and Current Maturities of Long-Term Debt. In accordance with generally accepted accounting principles, the operating leases are not reflected in our Consolidated Balance Sheets. As of the end of fiscal 2008, our long-term debt-to-equity ratio was 54.4% compared to 64.3% at the end of fiscal 2007.
 
As of February 1, 2009, we had $525 million in Cash and Short-Term Investments. We believe that our current cash position, access to the debt capital markets and cash flow generated from operations should be sufficient to enable us to complete our capital expenditure programs and required long-term debt payments through the next several fiscal years. In addition, we have funds available from our commercial paper programs and the ability to obtain alternative sources of financing for other requirements. We intend to use cash flow generated by operations to repay $1.8 billion in debt coming due in fiscal 2009.
 
During fiscal 2008 and 2007, we entered into interest rate swaps, accounted for as fair value hedges, with notional amounts of $3.0 billion, that swapped fixed rate interest on our $3.0 billion 5.40% Senior Notes for variable rate interest equal to LIBOR plus 60 to 149 basis points. In fiscal 2008, we received $56 million to settle these swaps, which will be amortized to reduce Interest Expense over the remaining term of the debt.
 
At February 1, 2009, we had outstanding an interest rate swap, accounted for as a cash flow hedge, with a notional amount of $750 million that swaps variable rate interest on our $750 million Floating Rate Senior Notes for fixed rate interest at 4.36% that expires on December 16, 2009. At February 1, 2009, the approximate fair value of this agreement was a liability of $21 million, which is the estimated amount we would have paid to settle this interest rate swap agreement.
 
Diluted
Earnings per Share from Continuing Operations



 



Diluted Earnings per Share from Continuing Operations were $1.37
for fiscal 2008 and $2.27 for fiscal 2007. Excluding the
Rationalization Charges and the write-down of our investment in
HD Supply, Diluted Earnings per Share from Continuing Operations
for fiscal 2008 were $1.78, a decrease of 21.6% from fiscal
2007. The
53rd week

in fiscal 2007 increased Diluted Earnings per Share from
Continuing Operations by approximately $0.04 for fiscal 2007.


 



Diluted Earnings per Share from Continuing Operations were
favorably impacted by the repurchase of shares of our common
stock. We repurchased 2.4 million shares for
$70 million in fiscal 2008 and 293 million shares for
$10.8 billion in fiscal 2007. Since the inception of the
repurchase program in 2002, we have repurchased 746 million
shares of our common stock for a total of $27.3 billion.


 




Discontinued
Operations



 



On August 30, 2007, the Company closed the sale of HD
Supply. Discontinued operations for fiscal 2008 consist of a
loss of $52 million, net of tax, or $0.03 per diluted
share, recorded to settle net working capital matters arising
from the sale of HD Supply. Discontinued operations for fiscal
2007 consist of the results of operations for HD Supply through
August 30, 2007 and a $4 million loss on the sale of
HD Supply. Net Sales from discontinued operations were
$7.4 billion for fiscal 2007 and Earnings from Discontinued
Operations, net of tax, were $185 million for fiscal 2007.


 




Diluted
Earnings per Share from Continuing Operations



 



Diluted Earnings per Share from Continuing Operations were $2.27
for fiscal 2007 and $2.55 for fiscal 2006. The
53rd week

increased Diluted Earnings per Share from Continuing Operations
by approximately $0.04 for fiscal 2007. Diluted Earnings per
Share from Continuing Operations were favorably impacted in both
fiscal 2007 and 2006 by the repurchase of shares of our common
stock.


 




Discontinued
Operations



 



Discontinued operations consist of the results of operations for
HD Supply through August 30, 2007 and a loss on the sale of
HD Supply. Net Sales from discontinued operations were
$7.4 billion for fiscal 2007 compared to $11.8 billion
for fiscal 2006. Earnings from Discontinued Operations, net of
tax, were $185 million for fiscal 2007, compared to
$495 million for fiscal 2006. Earnings from Discontinued
Operations for fiscal 2007 include a $4 million loss, net
of tax, recognized on the sale of the business.


 




Liquidity
and Capital Resources



 



Cash flow generated from operations provides a significant
source of liquidity. For fiscal 2008, Net Cash Provided by
Operating Activities was $5.5 billion compared to
$5.7 billion for fiscal 2007. This change was primarily a
result of decreased Net Earnings partially offset by improved
inventory management.


 



Net Cash Used in Investing Activities for fiscal 2008 was
$1.7 billion compared to $4.8 billion provided by
investing activities for fiscal 2007. The change in Net Cash
Used in/Provided by Investing Activities was primarily the
result of $8.3 billion of net proceeds from the sale of HD
Supply in the third quarter of fiscal 2007 partially offset by
$1.7 billion less in capital expenditures in fiscal 2008
compared to fiscal 2007.


 



In fiscal 2008, we spent $1.8 billion on Capital
Expenditures, allocated as follows: 45% for new stores, 15% for
merchandising and operations, 12% for maintenance, 11% for core
technology and 17% for other initiatives. In fiscal 2008, we
added 62 new stores, including six relocations.


 



Net Cash Used in Financing Activities for fiscal 2008 was
$3.7 billion compared with $10.6 billion for fiscal
2007. The decrease in Net Cash Used in Financing Activities was
primarily due to the repurchase of 289 million shares of
our common stock for $10.7 billion in connection with our
tender offer related to the sale of HD Supply in the third
quarter of fiscal 2007 and by repayments in fiscal 2008 of
$1.7 billion of short-term commercial paper and
$282 million of structured financing debt.


 



We repurchased 2.4 million shares of our common stock for
$70 million in fiscal 2008 and a total of 293 million
shares for $10.8 billion in fiscal 2007, including a
$10.7 billion tender offer funded primarily using proceeds
from the sale of HD Supply. Since the inception of our share
repurchase program in 2002, we have repurchased 746 million
shares of our common stock for a total of $27.3 billion. As
of February 1, 2009, $12.7 billion remained under our
share repurchase authorization. Given current market conditions,
we have suspended the repurchase program until our business and
credit markets stabilize.


 



We have commercial paper programs that allow for borrowings up
to $3.25 billion. In connection with the programs, we have
a back-up
credit facility with a consortium of banks for borrowings up to
$3.25 billion. As of February 1, 2009, there were no
borrowings outstanding under the commercial paper programs or
the related credit facility. The credit facility, which expires
in December 2010, contains various restrictive covenants, all of
which we are in compliance. None of the covenants are expected
to impact our liquidity or capital resources.





21





Table of Contents






We use capital and operating leases to finance a portion of our
real estate, including our stores, distribution centers and
store support centers. The net present value of capital lease
obligations is reflected in our Consolidated Balance Sheets in
Long-Term Debt and Current Maturities of Long-Term Debt. In
accordance with generally accepted accounting principles, the
operating leases are not reflected in our Consolidated Balance
Sheets. As of the end of fiscal 2008, our long-term
debt-to-equity ratio was 54.4% compared to 64.3% at the end of
fiscal 2007.


 



As of February 1, 2009, we had $525 million in Cash
and Short-Term Investments. We believe that our current cash
position, access to the debt capital markets and cash flow
generated from operations should be sufficient to enable us to
complete our capital expenditure programs and required long-term
debt payments through the next several fiscal years. In
addition, we have funds available from our commercial paper
programs and the ability to obtain alternative sources of
financing for other requirements. We intend to use cash flow
generated by operations to repay $1.8 billion in debt
coming due in fiscal 2009.


 



During fiscal 2008 and 2007, we entered into interest rate
swaps, accounted for as fair value hedges, with notional amounts
of $3.0 billion, that swapped fixed rate interest on our
$3.0 billion 5.40% Senior Notes for variable rate
interest equal to LIBOR plus 60 to 149 basis points. In
fiscal 2008, we received $56 million to settle these swaps,
which will be amortized to reduce Interest Expense over the
remaining term of the debt.


 



At February 1, 2009, we had outstanding an interest rate
swap, accounted for as a cash flow hedge, with a notional amount
of $750 million that swaps variable rate interest on our
$750 million Floating Rate Senior Notes for fixed rate
interest at 4.36% that expires on December 16, 2009. At
February 1, 2009, the approximate fair value of this
agreement was a liability of $21 million, which is the
estimated amount we would have paid to settle this interest rate
swap agreement.


 




These excerpts taken from the HD 10-K filed Apr 3, 2008.

Diluted Earnings per Share from Continuing Operations

Diluted Earnings per Share from Continuing Operations were $2.55 for fiscal 2006 and $2.63 for fiscal 2005. Diluted Earnings per Share from Continuing Operations were favorably impacted in both fiscal 2006 and fiscal 2005 by the repurchase of shares of our common stock.

Diluted Earnings per Share from Continuing Operations



Diluted Earnings per Share from Continuing Operations were $2.55 for fiscal 2006 and $2.63 for fiscal 2005. Diluted Earnings per Share from Continuing Operations were favorably
impacted in both fiscal 2006 and fiscal 2005 by the repurchase of shares of our common stock.



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