The Home Depot Reports Results of Investigation Into Options Practices
ATLANTA, Dec 06, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- The Home Depot(R) disclosed today the
principal conclusions of an investigation into its stock option practices. In August 2006, the Company announced that it had
asked the Board of Directors to review its historical stock option practices. A subcommittee of the Audit Committee undertook
the review with the assistance of independent outside counsel, Hogan & Hartson, and it has now completed its review. The
review encompassed the entire 26-year history of the Company as a public company. It involved examining more than 3 million
documents and conducting more than 60 interviews with current and former officers, directors, and employees.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030502/HOMEDEPOTLOGO )
The principal findings of the review are as follows:
* All options granted in the period from 2002 through the present had an
exercise price based on the market price of the Company's stock on the
date the grant was approved by the Board of Directors or an officer
acting pursuant to delegated authority. During this period, the stock
administration department corrected administrative errors retroactively
and without separate approvals. The administrative errors included
inadvertent omissions of grantees from lists that were approved
previously and miscalculations of the number of options granted to
particular employees on approved lists.
* All options granted from December 1, 2000 through the end of 2001 had an
exercise price based on the market price of the Company's stock on the
date of a meeting of the Board of Directors or some other date selected
without the benefit of hindsight. The February 2001 annual grant was
not finally allocated to recipients until several weeks after the grant
was approved. During this period, the stock administration department
also corrected administrative errors retroactively and without separate
approvals as in the period 2002 to the present.
* For annual option grants and certain quarterly option grants from 1981
through November 2000, the stated grant date was routinely earlier than
the actual date on which the grants were approved by a committee of the
Board of Directors. In almost every instance, the stock price on the
apparent approval date was higher than the price on the stated grant
date. The backdating occurred for grants at all levels of the Company.
Management personnel, who have since left the Company, generally
followed a practice of reviewing closing prices for a prior period and
selecting a date with a low stock price to increase the value of the
options to employees on lists of grantees subsequently approved by a
committee of the Board of Directors.
* The annual option grants in 1994 through 2000, as well as many quarterly
grants during this period, were not finally allocated among the
recipients until several weeks after the stated grant date. Because of
the absence of records prior to 1994, it is unclear whether allocations
also postdated the selected grant dates from 1981 through 1993.
Moreover, for many of these annual and quarterly grants from 1981
through December 2000, there is insufficient documentation to determine
with certainty when the grants were actually authorized by a committee
of the Board of Directors. Finally, the Company's stock administration
department also retroactively added employees to lists of approved
grantees, or changed the number of options granted to specific
employees, without authorization of the Board of Directors or a board
committee, to correct administrative errors.
* Numerous option grants to rank-and-file employees were made pursuant to
delegations of authority that may not have been effective under Delaware
* In numerous instances, and primarily prior to 2003, beneficiaries of
grants who were required to report them to the Securities and Exchange
Commission failed to do so in a timely manner or at all.
* The subcommittee concluded that there was no intentional wrongdoing by
any current member of the Company's management team or its Board of
The Company believes that, because of these errors, it had unrecorded expense over the affected period (the 26 years from
1981 through the present), excluding related tax consequences, of approximately $200 million in the aggregate. The Company
does not consider these errors to have a material impact on the Company's financial statements. Currently, the Company
believes that correction of these errors will result in an increase to paid-in capital of approximately $200 million and a decrease
to retained earnings of the same amount. Total Stockholders' Equity, which totaled $27.8 billion at October 29, 2006, is not
expected to be affected when adjustments to these accounts are made in the Company's Form 10-K for the fiscal year ending
January 28, 2007. The Company is also reviewing the potential tax implications relating to its stock options granting practices.
The effect of such tax implications is not expected to materially impact the Company's financial statements.
As previously disclosed, the staff of the Securities and Exchange Commission has begun an informal inquiry into the
Company's stock option practices, and the U.S. Attorney for the Southern District of New York has also requested information
on the subject. The Company is continuing to cooperate with these agencies. While the Company cannot predict the outcome
of these matters, it does not believe that they will have a material adverse impact on its financial position or results of
At the end of the third quarter, the Company operated a total of 2,104 retail stores in all 50 states, the District of Columbia,
Puerto Rico, U.S. Virgin Islands, 10 Canadian provinces and Mexico. Through its HD Supply(SM) businesses, The Home Depot
is also one of the largest diversified wholesale distributors in the United States, with more than 950 branches in the United
States and Canada offering products and services for building, improving and maintaining homes, businesses and municipal
infrastructures. In fiscal 2005, The Home Depot had sales of $81.5 billion and earnings of $5.8 billion. The Company employs
approximately 355,000 associates and has been recognized by FORTUNE magazine as the No. 1 Most Admired Specialty
Retailer and the No. 13 Most Admired Corporation in America for 2006. The Home Depot's stock is traded on the New York
Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index. HDE
Certain statements contained herein may be "forward-looking statements" as defined in the Private Securities Litigation Reform
Act of 1995. These statements are based on currently available information as of their dates and are subject to risks and
uncertainties that may cause actual results to differ materially. Information regarding these risks and uncertainties is contained
in the Company's periodic filings with the Securities and Exchange Commission, including the Company's most recently filed
Annual Report on Form 10-K. Forward-looking statements speak only as of their respective dates, and the Company
specifically disclaims any obligation to update them except as may be required under the federal securities laws.
SOURCE The Home Depot
Financial Community, Diane Dayhoff, Senior Vice President, Investor Relations,
+1-770-384-2666, or firstname.lastname@example.org, or News Media, Jerry Shields,
+1-770-384-2741, or email@example.com, or Ron DeFeo, +1-770-384-3179, or
firstname.lastname@example.org, all of The Home Depot
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