CONSOLIDATED STATEMENTS OF EARNINGS
The Home Depot, Inc. and Subsidiaries
AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED BALANCE SHEETS
The Home Depot, Inc. and Subsidiaries
AMOUNTS IN MILLIONS, EXCEPT SHARE DATA
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
The Home Depot, Inc. and Subsidiaries
AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA
(1) COMPONENTS OF COMPREHENSIVE INCOME ARE REPORTED NET OF RELATED TAXES.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Home Depot, Inc. and Subsidiaries
AMOUNTS IN MILLIONS
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Home Depot, Inc. and Subsidiaries
>NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company operates Home Depot stores, which are full-service, warehouse-style
stores averaging approximately 108,000 square feet in size. The stores stock
approximately 40,000 to 50,000 different kinds of building materials, home
improvement supplies and lawn and garden products that are sold primarily to
do-it-yourselfers, but also to home improvement contractors, tradespeople and
building maintenance professionals. In addition, the Company operates EXPO
Design Center stores, which offer products and services primarily related to
design and renovation projects, and is currently testing two Villager's Hardware
stores, a convenience hardware concept that offers products and services for
home enhancement and smaller project needs. At the end of fiscal 1999, the
Company was operating 930 stores, including 854 Home Depot stores, 15 EXPO
Design Center stores and 2 Villager's Hardware stores in the United States; 53
Home Depot stores in Canada; 4 Home Depot stores in Chile; and 2 Home Depot
stores in Puerto Rico. Included in the Company's Consolidated Balance Sheets at
January 30, 2000 were $707 million of net assets of the Canada, Chile and
Argentina operations.
FISCAL YEAR
The Company's fiscal year is a 52- or 53-week period ending on the Sunday
nearest to January 31. Fiscal years 1999, 1998 and 1997, which ended January 30,
2000, January 31,1999 and February 1, 1998, respectively, consisted of 52 weeks.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, and its majority-owned partnership. All significant
intercompany transactions have been eliminated in consolidation.
Stockholders' equity, share and per share amounts for all periods
presented have been adjusted for a three-for-two stock split effected in the
form of a stock dividend on December 30,1999, a two-for-one stock split effected
in the form of a stock dividend on July 2,1998, and a three-for-two stock split
effected in the form of a stock dividend on July 3,1997.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. The Company's cash and cash
equivalents are carried at fair market value and consist primarily of commercial
paper, money market funds, U.S. government agency securities and tax-exempt
notes and bonds.
MERCHANDISE INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market, as
determined by the retail inventory method.
INVESTMENTS
The Company's investments, consisting primarily of high-grade debt securities,
are recorded at fair value and are classified as available-for-sale.
INCOME TAXES
The Company provides for federal, state and foreign income taxes currently
payable, as well as for those deferred because of timing differences between
reporting income and expenses for financial statement purposes versus tax
purposes. Federal, state and foreign incentive tax credits are recorded as a
reduction of income taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
of a change in tax rates is recognized as income or expense in the period that
includes the enactment date.
The Company and its eligible subsidiaries file a consolidated U.S.
federal income tax return. Non-U.S. subsidiaries, which are consolidated for
financial reporting, are not eligible to be included in consolidated U.S.
federal income tax returns, and separate provisions for income taxes have been
determined for these entities. The Company intends to reinvest the unremitted
earnings of its non-U.S. subsidiaries and postpone their remittance.
Accordingly, no provision for U.S. income taxes for non-U.S. subsidiaries was
required for any year presented.
DEPRECIATION AND AMORTIZATION
The Company's buildings, furniture, fixtures and equipment are depreciated using
the straight-line method over the estimated useful lives of the assets.
Improvements to leased premises are amortized using the straight-line method
over the life of the lease or the useful life of the improvement, whichever is
shorter. The Company's property and equipment is depreciated using the following
estimated useful lives:
ADVERTISING
Television and radio advertising production costs are amortized over the fiscal
year in which the advertisements first appear. All media placement costs are
expensed in the month the advertisement appears. Included in Current Assets in
the Company's Consolidated Balance Sheets were $24.4 million and $22.6 million
at the end of fiscal 1999 and 1998, respectively, relating to prepayments of
production costs for print and broadcast advertising.
COST IN EXCESS OF THE FAIR VALUE OF NET ASSETS ACQUIRED
Goodwill, which represents the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over 40 years. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining useful life
can be recovered through undiscounted future operating cash flows of the
acquired operation.
The amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting the
Company's average cost of funds.
STORE PRE-OPENING COSTS
Non-capital expenditures associated with opening new stores are expensed as
incurred.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for impairment when circumstances indicate
the carrying amount of an asset may not be recoverable. An impairment is
recognized to the extent the sum of undiscounted estimated future cash flows
expected to result from the use of the asset is less than the carrying value.
Accordingly, when the Company commits to relocate or close a store, the
estimated unrecoverable costs are charged to selling and store operating
expense. Such costs include the estimated loss on the sale of land and
buildings, the book value of abandoned fixtures, equipment and leasehold
improvements, and a provision for the present value of future lease obligations,
less estimated sub-lease income.
STOCK COMPENSATION
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," encourages the use of a fair-value-based method
of accounting. As allowed by SFAS 123, the Company has elected to account for
its stock-based
compensation plans under the intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"),
"Accounting for Stock Issued to Employees." Under APB No. 25, compensation
expense would be recorded on the date of grant if the current market price of
the underlying stock exceeded the exercise price. The Company has adopted the
disclosure requirements of SFAS 123.
COMPREHENSIVE INCOME
Comprehensive income includes net earnings adjusted for certain revenues,
expenses, gains and losses that are excluded from net earnings under generally
accepted accounting principles. Examples include foreign currency translation
adjustments and unrealized gains and losses on investments.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities denominated in a foreign currency are translated into
U.S. dollars at the current rate of exchange on the last day of the reporting
period, revenues and expenses are translated at the average monthly exchange
rates, and all other equity transactions are translated using the actual rate on
the day of the transaction.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from these estimates.
RECLASSIFICATIONS
Certain balances in prior fiscal years have been reclassified to conform with
the presentation in the current fiscal year.
>NOTE 2
LONG-TERM DEBT
The Company's long-term debt at the end of fiscal 1999 and 1998 consisted of the
following (amounts in millions):
On September 27, 1999, the Company issued $500 million of 6 1/2% Senior
Notes ("Senior Notes"). The Company, at its option, may redeem all or any
portion of the Senior Notes by notice to the holder. The Senior Notes are
redeemable at a redemption price, plus accrued interest, equal to the greater of
(1) 100% of the principal amount of the Senior Notes to be redeemed or (2) the
sum of the present values of the remaining scheduled payments of principal and
interest on the Senior Notes to maturity. The Senior Notes are not subject to
sinking fund requirements.
During fiscal 1999, the Company redeemed its 3 1/4% Convertible
Subordinated Notes ("3 1/4% Notes"). A total principal amount of $1.1 billion
was converted into 72 million shares of the Company's common stock. As a result,
the total principal amount converted, net of unamortized expenses of the
original debt issue, was credited to common stock at par and to additional
paid-in capital in the amount of $1.1 billion.
The Company has a commercial paper program that allows borrowings up to
a maximum of $800 million. As of January 30, 2000, there were no borrowings
outstanding under the program. In connection with the program, the Company has a
back-up credit facility with a consortium of banks for up to $800 million. The
credit facility, which expires in September 2004, contains various restrictive
convenants, none of which is expected to materially impact the Company's
liquidity or capital resources.
The restrictive covenants related to letter of credit agreements
securing the industrial revenue bonds are no more restrictive than those
referenced above.
Interest expense in the accompanying Consolidated Statements of
Earnings is net of interest capitalized of $45 million in fiscal 1999, $31
million in fiscal 1998 and $19 million in fiscal 1997.
Maturities of long-term debt are $29 million for fiscal 2000, $4
million for fiscal 2001, $19 million for fiscal 2002, $5 million for fiscal 2003
and $506 million for fiscal 2004.
The estimated fair value of the 6 1/2% Senior Notes, which are publicly
traded, was approximately $485 million based on an imputed market price at
January 30, 2000. The estimated fair value of all other long-term borrowings was
approximately $441 million compared to the carrying value of $279 million. These
fair values were estimated using a discounted cash flow analysis based on the
Company's incremental borrowing rate for similar liabilities.
>NOTE 3
INCOME TAXES
THE PROVISION FOR INCOME TAXES CONSISTED OF THE FOLLOWING (IN MILLIONS):
The Company's combined federal, state and foreign effective tax rates
for fiscal years 1999, 1998 and 1997, net of offsets generated by federal, state
and foreign tax incentive credits, were approximately 39.0%, 39.2% and 38.9%,
respectively. A reconciliation of income tax expense at the federal statutory
rate of 35% to actual tax expense for the applicable fiscal years follows (in
millions):
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of January
30, 2000 and January 31, 1999 were as follows (in millions):
No valuation allowance was recorded against the deferred tax assets at
January 30, 2000 or January 31,1999. Company management believes the existing
net deductible temporary differences comprising the total gross deferred tax
assets will reverse during periods in which the Company generates net taxable
income.
>NOTE 4
EMPLOYEE STOCK PLANS
The 1997 Omnibus Stock Incentive Plan ("1997 Plan") provides that incentive
stock options, non-qualified stock options, stock appreciation rights,
restricted stock and deferred shares may be issued to selected associates,
officers and directors of the Company. The maximum number of shares of the
Company's common stock available for issuance under the 1997 Plan is the lesser
of 225 million shares or the number of shares carried over from prior plans plus
one-half percent of the total number of outstanding shares as of the first day
of each fiscal year. In addition, restricted shares issued under the 1997 Plan
may not exceed 22.5 million shares. As of January 30, 2000, there were
128,623,884 shares available for future grants under the 1997 Plan.
Under the 1997 Plan and prior plans, incentive and non-qualified
options for 116,647,978 shares, net of cancellations (of which 48,228,638 had
been exercised), have been granted at prices ranging from $6.42 to $51.46 per
share. Incentive stock options vest at the rate of 25% per year commencing on
the first anniversary date of the grant and expire on the tenth anniversary date
of the grant. The non-qualified options have similar terms; however, vesting
does not generally begin until the second anniversary date of the grant.
As of January 30, 2000, 208,337 shares of restricted stock were
outstanding. The restricted shares vest over varying terms and are generally
based on the attainment of certain performance goals. The expected fair value of
the restricted shares on the vesting dates will be charged to expense ratably
over the vesting periods unless it is determined that the performance goals will
not be met.
The per share weighted average fair value of stock options granted
during fiscal years 1999, 1998 and 1997 was $18.86, $9.94 and $4.20,
respectively. These amounts were determined using the Black-Scholes
option-pricing model, which values options based on the stock price at the grant
date, the expected life of the option, the estimated volatility of the stock,
expected dividend payments, and the risk-free interest rate over the expected
life of the option. The dividend yield was calculated by dividing the current
annualized dividend by the option price for each grant. Expected volatility was
based on stock prices for the fiscal year the grant occurred and the two
previous fiscal years. The risk-free interest rate was the rate available on
zero coupon U.S. government issues with a term equal to the remaining term for
each grant. The expected life of each option was estimated based on the exercise
history from previous grants.
The assumptions used in the Black-Scholes model were as follows:
The Company applies APB No. 25 in accounting for its stock plans and,
accordingly, no compensation costs have been recognized in the Company's
financial statements for incentive or non-qualified stock options granted. If,
under SFAS 123, the Company determined compensation costs based on the fair
value at the grant date for its stock options, net earnings and earnings per
share would have been reduced to the pro forma amounts below (in millions,
except per share data):
The following table summarizes options outstanding under the various
stock option plans at January 30, 2000, January 31,1999 and February 1,1998 and
changes during the fiscal years ended on these dates (shares in thousands):
The following table summarizes information regarding stock options
outstanding as of January 30, 2000 (option shares in thousands):
In addition, the Company had 6,252,804 shares available for future
grants under the Employee Stock Purchase Plan ("ESPP") at January 30, 2000. The
ESPP enables the Company to grant substantially all full-time associates options
to purchase up to 99,618,750 shares of common stock, of which 93,365,946 shares
have been exercised from inception of the plan, at a price equal to the lower of
85% of the stock's fair market value on the first day or the last day of the
purchase period. Shares purchased may not exceed the lesser of 20% of the
associate's annual compensation, as defined, or $25,000 of common stock at its
fair market value (determined at the time such option is granted) for any one
calendar year. Associates pay for the shares ratably over a period of one year
(the purchase period) through payroll deductions, and cannot exercise their
option to purchase any of the shares until the conclusion of the purchase
period. In the event an associate elects not to exercise such options, the full
amount withheld is refundable. During fiscal 1999, options for 5,691,474 shares
were exercised at an average price of $21.91 per share. At January 30, 2000,
there were 2,860,618 options outstanding, net of cancellations, at an average
price of $37.64 per share.
>NOTE 5
LEASES
The Company leases certain retail locations, office space, warehouse and
distribution space, equipment and vehicles. While the majority of the leases are
operating leases, certain retail locations are leased under capital leases. As
leases expire, it can be expected that in the normal course of business, leases
will be renewed or replaced.
In June 1996, the Company entered into a $300 million operating lease
agreement for the primary purpose of financing construction costs for selected
new stores. The Company increased its available funding under the operating
lease agreement to $600 million in May 1997. In October 1998, through a second
operating lease agreement, the Company further increased the available funding
by $282 million to $882 million. Under the agreements, the lessor purchases the
properties, pays for the construction costs and subsequently leases the
facilities to the Company. The initial lease term for the $600 million agreement
is five years with five 2-year renewal options. The lease term for the $282
million agreement is 10 years with no renewal options. Both lease agreements
provide for substantial residual value guarantees and include purchase options
at original cost on each property. The Company financed a portion of its new
stores in fiscal 1997, 1998 and 1999, as well as an office building in fiscal
1999, under the operating lease agreements. The Company anticipates utilizing
these facilities to finance selected new stores and an additional office
building in fiscal 2000.
During 1995, the Company entered into two operating lease arrangements
under which the Company leases an import distribution facility, including its
related equipment, and an office building for store support functions. The
operating lease agreement for the office building terminated in 1999 when the
Company refinanced the property under the $600 million operating lease
agreement. The initial lease term for the import distribution facility is five
years with five 5-year renewal options. The lease agreement provides for
substantial residual value guarantees and includes purchase options at the
higher of the cost or fair market value of the assets.
The maximum amount of the residual value guarantees relative to the
assets under the lease agreements described above is projected to be $799
million. As the leased assets are placed into service, the Company estimates its
liability under the residual value guarantees and records additional rent
expense on a straight-line basis over the remaining lease terms.
Total rent expense, net of minor sublease income for the fiscal years
ended January 30, 2000, January 31,1999 and February 1, 1998 was $389 million,
$321 million and $262 million, respectively. Real estate taxes, insurance,
maintenance and operating expenses applicable to the leased property are
obligations of the Company under the building leases. Certain of the store
leases provide for contingent rentals based on percentages of sales in excess of
specified minimums. Contingent rentals for the fiscal years ended January 30,
2000, January 31,1999 and February 1, 1998 were approximately $11 million, $11
million and $10 million, respectively.
The approximate future minimum lease payments under capital and
operating leases at January 30, 2000 were as follows (in millions):
Short-term and long-term obligations for capital leases are included in
the Company's Consolidated Balance Sheets in Current Installments of Long-Term
Debt and Long-Term Debt, respectively. The assets under capital leases recorded
in Net Property and Equipment, net of amortization, totaled $208 million and
$180 million, at January 30, 2000 and January 31, 1999, respectively.
>NOTE 6
EMPLOYEE BENEFIT PLANS
During fiscal 1996, the Company established a defined contribution plan
("401(k)") pursuant to Section 401(k) of the Internal Revenue Code. The 401(k)
covers substantially all associates that meet certain service requirements. The
Company makes weekly matching cash contributions to purchase shares of the
Company's common stock, up to specified percentages of associates' contributions
as approved by the Board of Directors.
During fiscal 1988, the Company established a leveraged Employee Stock
Ownership Plan and Trust ("ESOP") covering substantially all full-time
associates. At January 30, 2000, the ESOP held a total of 32,208,550 shares of
the Company's common stock in trust for plan participants' accounts. The ESOP
purchased the shares in the open market with contributions received from the
Company in fiscal 1998 and 1997, and from the proceeds of loans obtained from
the Company during fiscal 1992, 1990 and 1989 totaling approximately $81
million. All loans payable to the Company in connection with the purchase of
such shares have been paid in full.
During February 1999, the Company made its final contribution to the
ESOP plan and amended its 401(k) plan. In the amendment, the Company elected to
increase its percentage contribution to the 401(k) in lieu of future ESOP
contributions.
The Company adopted a non-qualified ESOP Restoration Plan in fiscal
1994. The Company also made its final contribution to the ESOP Restoration Plan
in February 1999 and established a new 401(k) Restoration Plan. The primary
purpose of the new plan is to provide certain associates deferred compensation
that they would have received under the 401(k) matching contribution if not for
the maximum compensation limits under the Internal Revenue Code of 1986, as
amended. The Company has established a "rabbi trust" to fund the benefits under
the 401(k) Restoration Plan. Compensation expense related to this plan for
fiscal years 1999, 1998 and 1997 was not material. Funds provided to the trust
are primarily used to purchase shares of the Company's common stock in the open
market.
The Company's combined contributions to the 401(k) and ESOP were $57
million, $41 million and $33 million for fiscal years 1999, 1998 and 1997,
respectively.
>NOTE 7
BASIC AND DILUTED EARNINGS PER SHARE
The calculations of basic and diluted earnings per share for fiscal years
1999,1998 and 1997 were as follows (amounts in millions, except per share data):
Employee stock plans represent shares granted under the Company's
employee stock purchase plan and stock option plans, as well as shares issued
for deferred compensation stock plans. For fiscal years 1999, 1998 and 1997,
shares issuable upon conversion of the Company's 3 1/4% Notes, issued in October
1996, were included in weighted average shares assuming dilution for purposes of
calculating diluted earnings per share. To calculate diluted earnings per share,
net earnings are adjusted for tax-effected net interest and issue costs on the 3
1/4% Notes (prior to conversion to equity in October 1999) and divided by
weighted average shares assuming dilution.
> NOTE 8
LAWSUIT SETTLEMENTS
During fiscal 1997, the Company, without admitting any wrongdoing, entered into
a settlement agreement with plaintiffs in the class action lawsuit Butler et.
al. v. Home Depot, Inc., in which the plaintiffs had asserted claims of gender
discrimination. The Company subsequently reached agreements to settle three
other lawsuits seeking class action status, each of which involved claims of
gender discrimination.
As a result of these agreements, the Company recorded a pre-tax
non-recurring charge of $104 million in fiscal 1997 and, in fiscal 1998, made
payments to settle these agreements. The payments made in fiscal 1998 included
$65 million to the plaintiff class members and $22.5 million to the plaintiff's
attorneys in Butler, and approximately $8 million for other related internal
costs, including implementation or enhancement of certain human resources
programs, as well as the settlement terms of the three other lawsuits. Payments
made in fiscal 1999 totaled $3.4 million primarily related to internal costs for
human resources staffing and training for store associates. The Company expects
to spend the remaining $5 million for additional training programs.
> NOTE 9
COMMITMENTS AND CONTINGENCIES
At January 30, 2000, the Company was continently liable for approximately $419
million under outstanding letters of credit issued in connection with purchase
commitments.
The Company is involved in litigation arising from the normal course of
business. In management's opinion, this litigation is not expected to materially
impact the Company's consolidated results of operations or financial condition.
> NOTE 10
ACQUISITIONS
During the first quarter of fiscal 1998, the Company purchased, for $261
million, the remaining 25% partnership interest held by The Molson Companies in
The Home Depot Canada. The excess purchase price over the estimated fair value
of net assets of $117 million as of the acquisition date was recorded as
goodwill and is being amortized over 40 years. As a result of this transaction,
the Company now owns all of The Home Depot's Canadian operations. The Home
Depot Canada partnership was formed in 1994 when the Company acquired 75% of
Aikenhead's Home Improvement Warehouse for approximately $162 million. The
terms of the original partnership agreement provided for a put/call option,
which would have resulted in the Company purchasing the remaining 25% of The
Home Depot Canada at any time after the sixth anniversary of the original
agreement. The companies reached a mutual agreement to complete the purchase
transaction at an earlier date.
During fiscal 1999, the Company acquired Apex Supply Company, Inc. and
Georgia Lighting, Inc. Both acquisitions were recorded under the purchase
method of accounting.
> NOTE 11
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the quarterly results of operations for the
fiscal years ended January 30, 2000 and January 31, 1999 (dollars in millions,
except per share data):
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements presented in this Annual Report have been prepared
with integrity and objectivity and are the responsibility of the management of
The Home Depot, Inc. These financial statements have been prepared in
conformity with generally accepted accounting principles and properly reflect
certain estimates and judgments based upon the best available information.
The Company maintains a system of internal accounting controls, which
is supported by an internal audit program and is designed to provide reasonable
assurance, at an appropriate cost, that the Company's assets are safeguarded
and transactions are properly recorded. This system is continually reviewed and
modified in response to changing business conditions and operations and as a
result of recommendations by the external and internal auditors. In addition,
the Company has distributed to associates its policies for conducting business
affairs in a lawful and ethical manner.
The financial statements of the Company have been audited by KPMG LLP,
independent auditors. Their accompanying report is based upon an audit
conducted in accordance with generally accepted auditing standards, including
the related review of internal accounting controls and financial reporting
matters.
The Audit Committee of the Board of Directors, consisting solely of
outside directors, meets quarterly with the independent auditors, the internal
auditors and representatives of management to discuss auditing and financial
reporting matters. The Audit Committee, acting on behalf of the stockholders,
maintains an ongoing appraisal of the internal accounting controls, the
activities of the outside auditors and internal auditors and the financial
condition of the Company. Both the Company's independent auditors and the
internal auditors have free access to the Audit Committee.
/s/ Dennis Carey /s/ Carol B. Tome
----------------------------- --------------------------
Dennis Carey Carol B. Tome
Executive Vice President and Senior Vice President,
Chief Financial Officer Finance and Accounting
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
The Home Depot, Inc.:
We have audited the accompanying consolidated balance sheets of The
Home Depot, Inc. and subsidiaries as of January 30, 2000 and January 31,1999 and
the related consolidated statements of earnings, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended January 30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of The
Home Depot, Inc. and subsidiaries as of January 30, 2000 and January 31, 1999,
and the results of their operations and their cash flows for each of the years
in the three-year period ended January 30, 2000 in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Atlanta, Georgia
February 25, 2000