Home Depot Comments on Stock Buybacks

| About: Home Depot, (HD)
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On Home Depot's (NYSE:HD) Fiscal 2Q conference call, executives discuss plans to repurchase stock:

Robert Nardelli - Chairman, President, CEO

During the quarter, we continued our focus on returning value to our shareholders. In May, as you recall, the board approved the repurchase of $2 billion, or approximately $53 million shares, through an accelerated share repurchase program. Since the inception of our buyback program in late 2002, we have repurchased almost 350 million, or approximately 17% of our outstanding shares.

In addition, since 2000, we have more than doubled our annual dividend, increasing it from $0.16 to now $0.60 a year.

Over the past five years, we have returned 65% of cumulative earnings to our shareholders in the form of dividends and share repurchase...

...about the capital, 90% was in retail, so I do not see it as a dramatic change from where we have been, but we certainly are laser-focused in what we think will -- with the uncertainties of the second-half, we are laser-focused on retail.

Gary Balter - Credit Suisse

What does this do to the buyback?

Robert L. Nardelli

I think Carol mentioned we still have about $1.5 billion remaining on our buyback. We have I think set a pattern as a corporation, and certainly in retail, we do not just announce buybacks, but we actually do them. As evidenced in what we have done over the last few years, we have returned 65% of our earnings back to our shareholders. As we said time and again, going forward, you should use what we have done as a representative model in your planning going forward.

Obviously that is all contingent upon board approval, but I certainly would say that what we have done is certainly something you could consider for the future...

Gary Balter - Credit Suisse

Giving that you are reinvesting $350 million back in, and you are going to continue the buyback, have you changed your thoughts about the leverage that you would like in the company?

Robert L. Nardelli

No, I think again, we said time and again, we have a pretty balanced approach. I think we are certainly reinvesting through stock repurchase. We have taken the dividends from $0.16 when I got here to $0.60, while at the same time, I think you would agree with me, Gary, that the strategic reinvestment in going from zero to $12 billion in our Home Depot Supply business certainly broadens our ability, broadens our customer base...

I think the approach is balanced. I think we are very sensitive to a broad range of constituents out there. I think we have been very responsible in our actions, and we will be going forward.

Carol B. Tome - CFO, Executive Vice President

If I could just jump in, as you know, we have added additional leverage into our capital structure, increasing our debt-to-equity ratio to now 24%, where last year it was 9%. We have a tremendous amount of cash that comes off of our business. Our stores are cash cows. On average, they generate $5 million in EBITDA. We have access to tremendous leverage outside of the business. We can do whatever we need to do...

Michael Baker - Deutsche Bank

Thank you, just a couple quick ones here. Just on the guidance, I think originally when you gave the guidance in January of 10% to 14% earnings growth, it did exclude any impact of share buyback, and then I think you reiterated that at least offline, in the first quarter to me. Is that still the case, this 10% to 14%? Does that exclude your assumption of share buybacks?

Carol B. Tome

What I would like you to think about is in the second quarter, we had $0.03 of accretion from our buyback program, and we lost $0.03 because of the Quebec tax assessment, so those two offset each other.

What we are guiding from is GAAP, freezing the buyback as of where we are today, and then looking forward to the back-half of the year, so the full year guidance we have given you is at the low-end of the EPS growth of 10% to 14%. Does that help?

Michael Baker - Deutsche Bank

You said, sorry, freezing the buyback where you are today?

Carol B. Tome

Just from a modeling perspective.

Michael Baker - Deutsche Bank

Right, in other words, not assuming any more buybacks.

Carol B. Tome

Correct. That is right, yes.

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