Resources:Appendix A: The Home Depot, Inc. Annual Report inFundamentals of Financial Accounting

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• What does the Consolidated Statements of Earningsthe income statementtell you about the company? Why is this statement important? What business decisions could be made using the income statement?
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• What does the statement of cash flows tell you about the company? What business decisions could be made using the statement of cash flows?
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The Home Depot 2008 Annual Report Dear Shareholders: In 2008, our retail sales declined by 7.8 percent, with comp sales down 8.7 percent. Our adjusted earnings per share from continuing operations declined 22 percent. In ordinary times, these would be very disappointing results. But 2008 was not an ordinary year. Despite the difficult economic environment, we continued to improve our retail business, through investing in our associates and our stores, rebuilding our supply chain and improving customer service. We also made several strategic decisions to optimize our capital allocation, concentrating our efforts on our core business. In the first quarter, we closed 15 underperforming stores and reduced our pipeline of new stores by 50. In the third quarter, we renegotiated our private label credit card agreement, capping our cost of private label credit. In the fourth quarter, we announced our decision to exit EXPO and related businesses. These actions will make the Company stronger. On the financial side, we ended the year with a solid operating profit and $41 billion in assets. We generated cash from the business of approximately $5.5 billion, which allowed us to invest in the business where necessary and reduce our debt obligations while maintaining a healthy dividend. On the operational side, we implemented an \"Aprons on the Floor\" initiative, which deployed over $200 million in annualized savings onto the floor of the stores for customer service. Our customer service levels, as measured by our Voice of Customer surveys and other external sources, continue to improve. We launched our \"New Lower Price\" campaign in the fall and have been very pleased with the customer response to this program. More than ever, our customers expect great value and exciting products in our stores, and we are committed to providing for these expectations. We started the roll-out of our enhanced supply chain. At the end of January, we opened our fifth Rapid Deployment Center (RDC), and RDCs now serve approximately 500 of our U.S. stores. Our goal is to have approximately 20 RDCs in place by the end of 2010, serving all of our U.S. stores. We also rolled out new merchandising tools allowing our merchants to better plan and assort our products. These tools helped us drive better inventory productivity and provided better markdown control, particularly for our seasonal categories. On the international front, our stores in Mexico continued their strong performance, ending the year with double digit positive comps. We also took a major step in transforming our information technology application footprint by converting our Canadian business to a new enterprise resource planning platform. The rest of the business will benefit from the lessons learned from the Canadian effort. None of these activities would be possible without outstanding associates. Our associates carry our service culture to our customers every day. For 2008, we issued success sharing checks in excess of $88 million to our hourly associates. This is a Company record, and it is a source of pride that we can take care of associates in economically difficult times like these. Furthermore, associates under the officer level will receive performance based merit increases and our 401(k) matching program remains intact. Taking care of our associates is an important part of taking care of our customers. We are expecting another challenging year in 2009. Across the business, we are making the adjustments necessary to respond to the economic environment. We are carefully controlling our discretionary spending, scrutinizing every dollar of capital, and most importantly intensifying our focus on our customers. Our strategy is simple and straightforward: We are passionate about customer service. We are and must continue to be the number one authority on products in the home improvement market. And we will drive shareholder return through disciplined capital allocation. Above all, we are a values-based business. The Home Depot was founded in 1979 when the U.S. was in the middle of a recession. Our values taking care of our customers and taking care of our associates speak even more powerfully in difficult times. I hope as you spend time in our stores you will notice our continuing improvement. Francis S. Blake Chairman & Chief Executive Officer April 2, 2009 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 1, 2009 OR n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-8207 THE HOME DEPOT, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE (State or other jurisdiction of incorporation or organization) 95-3261426 (I.R.S. Employer Identification No.) 2455 PACES FERRY ROAD, N.W., ATLANTA, GEORGIA 30339 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (770) 433-8211 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF NAME OF EACH EXCHANGE ON WHICH REGISTERED EACH CLASS Common Stock, $0.05 Par Value Per Share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No n Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n No Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No n Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. n Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See the definitions of \"large accelerated filer,\" \"accelerated filer\" and \"smaller reporting company\" in Rule 12b-2 of the Exchange Act. (Check one): Smaller reporting company n Large accelerated filer Accelerated filer n Non-accelerated filer n (Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No The aggregate market value of the common stock of the Registrant held by non-affiliates of the Registrant on August 3, 2008 was $39.7 billion. The number of shares outstanding of the Registrant's common stock as of March 23, 2009 was 1,696,279,008 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's proxy statement for the 2009 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K to the extent described herein. THE HOME DEPOT, INC. FISCAL YEAR 2008 FORM 10-K TABLE OF CONTENTS PART I Item 1. Business 1 Item 1A. Risk Factors 5 Item 1B. Unresolved Staff Comments 8 Item 2. Properties 8 Item 3. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 12 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 24 Item 8. Financial Statements and Supplementary Data 25 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 50 Item 9A. Controls and Procedures 50 Item 9B. Other Information 50 Item 10. Directors, Executive Officers and Corporate Governance 51 Item 11. Executive Compensation 52 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 52 Item 13. Certain Relationships and Related Transactions, and Director Independence 52 Item 14. Principal Accounting Fees and Services 52 Exhibits, Financial Statement Schedules 53 Signatures 57 PART II PART III PART IV Item 15. CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements regarding our future performance constitute \"forward-looking statements\" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services, net sales growth, comparable store sales, impact of cannibalization, store openings and closures, state of the economy, state of the residential construction, housing and home improvement markets, commodity price inflation and deflation, implementation of store initiatives, continuation of reinvestment plans, net earnings performance, earnings per share, stock-based compensation expense, capital allocation and expenditures, liquidity, the effect of adopting certain accounting standards, return on invested capital, management of our purchasing or customer credit policies, the effect of charges, the planned recapitalization of the Company, timing of the completion of such recapitalization and the ability to issue debt securities on terms and at rates acceptable to us. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You are cautioned not to place undue reliance on our forward-looking statements. Such statements are not guarantees of future performance and are subject to future events, risks and uncertainties many of which are beyond our control or are currently unknown to us as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include, but are not limited to, those described in Item 1A, \"Risk Factors.\" Forward-looking statements speak only as of the date they are made, and we do not undertake to update such statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission (\"SEC\"). PART I Item 1. Business. Introduction The Home Depot, Inc. is the world's largest home improvement retailer based on Net Sales for the fiscal year ended February 1, 2009 (\"fiscal 2008\"). The Home Depot stores sell a wide assortment of building materials, home improvement and lawn and garden products and provide a number of services. The Home Depot stores average approximately 105,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. As of the end of fiscal 2008, we had 2,233 The Home Depot stores located throughout the United States including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam (\"U.S.\"), Canada, China and Mexico. In addition, at the end of fiscal 2008, the Company operated 34 EXPO Design Center stores, two THD Design Center stores and five Yardbirds stores. On January 26, 2009, we announced the planned closing of our EXPO, THD Design Center and Yardbirds stores as part of our focus on our core business. The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978. Our Store Support Center (corporate office) is located at 2455 Paces Ferry Road, N.W., Atlanta, Georgia 30339. Our telephone number is (770) 433-8211. We maintain an Internet website at www.homedepot.com. We make available on our website, free of charge, our Annual Reports to shareholders, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and Forms 3, 4 and 5 as soon as reasonably practicable after filing such documents with, or furnishing such documents to, the SEC. We include our website addresses throughout this filing only as textual references. The information contained on our websites is not incorporated by reference into this report. 1 Our Business Operating Strategy. In fiscal 2008, despite the continuing difficult economic environment, we continued to focus on our core retail business, investing in our associates and stores and improving our customer service. We shifted our focus from new square footage growth to maximizing the productivity of our existing store base. During the year, we implemented significant changes in our store operations to make them simpler, more consistent and more customer-focused. We shifted associate hours to be more customer facing and refocused our efforts on offering every day values in the stores. Additionally, we made several strategic decisions which are intended to optimize our capital allocation, concentrate our efforts on our core business and create long-term value for our shareholders, including our decision to close 15 stores, remove approximately 50 stores from our new store pipeline and exit our EXPO, THD Design Center, Yardbirds and HD Bath businesses. Customers. The Home Depot stores serve three primary customer groups: Do-It-Yourself (\"D-I-Y\") Customers: These customers are typically home owners who purchase products and complete their own projects and installations. Do-It-For-Me (\"D-I-F-M\") Customers: These customers are typically home owners who purchase materials themselves and hire third parties to complete the project or installation, or both. We arrange for the installation of a variety of The Home Depot products through qualified independent contractors. Professional Customers: These customers are professional remodelers, general contractors, repairmen, small business owners and tradesmen. In many stores, we offer a variety of programs to these customers, including delivery and will-call services, dedicated staff, extensive merchandise selections and expanded credit programs, all of which we believe increase sales to these customers. Products. A typical Home Depot store stocks approximately 30,000 to 40,000 products during the year, including both national brand name and proprietary items. The following table shows the percentage of Net Sales of each major product group (and related services) for each of the last three fiscal years: Percentage of Net Sales for Fiscal Year Ended February 1, February 3, January 28, 2009 2008 2007 Product Group Plumbing, electrical and kitchen Hardware and seasonal Building materials, lumber and millwork Paint and flooring Total 30.6% 28.7 22.1 18.6 31.0% 28.0 22.3 18.7 30.8% 27.0 23.6 18.6 100.0% 100.0% 100.0% In fiscal 2008, we reduced our inventory while maintaining a favorable in-stock rate. We also reduced a number of onetime discount promotions and refocused our efforts on offering every day values. We continued to introduce innovative and distinctive products to our customers, including Thomasville deep seating patio furniture, Charbroil infrared grills, RIDGID pressure washers and Homelite trimmers. To complement and enhance our product selection, we have formed strategic alliances and exclusive relationships with selected suppliers to market products under a variety of well-recognized brand names. During fiscal 2008, we offered a number of proprietary and exclusive brands across a wide range of departments including, but not limited to, Behr Premium Plus paint, Hampton Bay lighting, Vigoro lawn care products, Husky hand tools, RIDGID and Ryobi power tools, Pegasus faucets, and Glacier Bay bath fixtures. We may consider additional strategic alliances and relationships with other suppliers and will continue to assess opportunities to expand the range of products available under brand names that are exclusive to The Home Depot. From our Store Support Center we maintain a global sourcing merchandise program to source high-quality products directly from manufacturers around the world. Our Product Development Merchants identify and purchase market leading innovative products directly for our stores. Additionally, we have three sourcing offices located in the Chinese cities of Shanghai, Shenzhen and Dalian, and offices in Gurgaon, India; Milan, Italy; Monterrey, Mexico and Toronto, Canada. 2 Services. Our stores offer a variety of installation services. These services target D-I-F-M customers who select and purchase products and installation of those products from us. These installation programs include products such as carpeting, flooring, cabinets, countertops and water heaters. In addition, we provide professional installation of a number of products sold through our in-home sales programs, such as generators and furnace and central air systems. Store Growth United States. At the end of fiscal 2008, we were operating 1,971 The Home Depot stores in the U.S., including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam. During fiscal 2008, we opened 41 new The Home Depot stores, including five relocations, in the U.S. Canada. At the end of fiscal 2008, we were operating 176 The Home Depot stores in ten Canadian provinces. Of these stores, 12 were opened during fiscal 2008, including one relocation. Mexico. At the end of fiscal 2008, we were operating 74 The Home Depot stores in Mexico. Of these stores, nine were opened during fiscal 2008. China. At the end of fiscal 2008, we were operating 12 The Home Depot stores in six Chinese cities. Certain financial information about our operations outside of the U.S. is reported in Note 1 to the Consolidated Financial Statements. Store Support Services Information Technologies. During fiscal 2008, we continued to make information technology investments to better support our customers and provide an improved overall shopping environment and experience. We invested in our supply chain and merchandising tools to improve inventory management capabilities and streamline our operations. We completed the deployment of a new enterprise resource planning (\"ERP\") system to our Canadian division, which includes all stores and distribution centers. We will assess the return on investment and performance of the system in the fiscal year ended January 31, 2010 (\"fiscal 2009\") as we evaluate alternatives for our U.S. application footprint. With regard to our supply chain, we implemented a new warehouse management system to support the U.S. and Canadian stores, continued implementation of a new transportation management system, completed a technology refresh at our distribution centers, and implemented improvements to our Central Automated Replenishment system. We made improvements to the tools utilized in merchandising systems in the areas of assortment management, forecasting, and replenishment. With our continued focus on the stores, we provided technology improvements designed to help store associates perform their tasks and improve customer service. We equipped 1,100 stores with new computers, registers and printers, and 920 stores received new paint dispensers. Credit Services. We offer six credit programs through third-party credit providers to professional, D-I-Y and D-I-F-M customers. In fiscal 2008, approximately 3.2 million new The Home Depot credit accounts were opened, and the total number of The Home Depot active account holders was approximately 12.5 million. Proprietary credit card sales accounted for approximately 28% of store sales in fiscal 2008. In fiscal 2008, Home Depot re-negotiated and extended the term of the primary contracts governing the programs. The new contract with Citibank established a ceiling for the cost of credit for the program while retaining the ability for portfolio performance improvements to lower the cost of credit. Logistics. Our logistics programs are designed to ensure product availability for customers, effective use of our investment in inventory and low total supply chain costs. At the end of fiscal 2008, we operated 30 lumber distribution centers, 45 conventional distribution centers and five transit facilities, all located in the U.S., Canada and Mexico. Additionally in 2008, we opened four new Rapid Deployment Centers (\"RDC\") in the U.S., bringing our total number of RDCs to five. We now serve approximately 25% of our U.S. stores from RDCs. RDCs allow for aggregation of store product needs to a single purchase order, and then rapid allocation and deployment of inventory to individual stores upon 3 arrival at the center. This process allows improved transportation, simplified order processing at suppliers and reduced lead time from the time that product needs at stores are determined to actual replenishment. We plan to open additional RDCs during fiscal 2009 and 2010 and ultimately serve all of our U.S. stores from RDCs. In fiscal 2008, approximately 35% of the merchandise shipped to our U.S. stores flowed through our distribution facilities. The remaining merchandise was shipped directly from suppliers to our stores. The expansion of the RDC network is expected to increase our distribution utilization. In addition to replenishing merchandise at our stores, we also provide delivery of in-stock and special order product directly to our customers. Associates. At the end of fiscal 2008, we employed approximately 322,000 associates, of whom approximately 22,500 were salaried, with the remainder compensated on an hourly or temporary basis. Approximately 65% of our associates are employed on a full-time basis. We believe that our employee relations are very good. To attract and retain qualified personnel, we seek to maintain competitive salary and wage levels in each market we serve. Intellectual Property. Through our wholly-owned subsidiary, Homer TLC, Inc., we have registered or applied for registration, in a number of countries, for a variety of internet domain names, service marks and trademarks for use in our businesses, including The Home Depot; Hampton Bay fans, lighting and accessories; Glacier Bay toilets, sinks and faucets; Pegasus faucets and bath accessories; and Workforce tools, tool boxes and shelving. We have also obtained and now maintain patent portfolios relating to certain products and services provided by The Home Depot, and continually seek to patent or otherwise protect selected innovations we incorporate into our products and business operations. We regard our intellectual property as having significant value to our business and as being an important factor in the marketing of our brand, e-commerce, stores and new areas of our business. Quality Assurance Program. We have both quality assurance and engineering resources who oversee the quality of our directly imported, globally-sourced and proprietary products. Through these programs, we have established criteria for supplier and product performance that are designed to ensure our products comply with federal, state and local quality and performance standards. These programs also allow us to measure and track timeliness of shipments. These performance records are made available to the factories to allow them to strive for improvement. The program addresses quality assurance at the factory, product and packaging levels. Environmental, Health & Safety (\"EH&S\"). We are committed to maintaining a safe environment for our customers and associates and protecting the environment of the communities in which we do business. Our EH&S function in the field is directed by trained associates focused primarily on the execution of the EH&S programs. Additionally, we have a Store Support Center-based team of dedicated EH&S professionals who evaluate, develop, implement and enforce policies, processes and programs on a Company-wide basis. Environmental. The Home Depot is committed to conducting business in an environmentally responsible manner and this commitment impacts all areas of our business, including store construction and maintenance, energy usage, product selection and customer education. In fiscal 2008, we spent approximately $27.5 million for energy efficiency related projects. By replacing HVAC units in approximately 200 existing stores and switching to the use of T-5 lighting in approximately 700 existing stores, we estimate cumulative savings to be approximately $28 million since fiscal 2006. In addition, we have implemented strict operational standards that establish energy efficient practices in all of our facilities. These include HVAC unit temperature regulation and adherence to strict lighting schedules, which are the largest sources of energy consumption in our stores, as well as utilizing the Novar Energy Management and Alarm System in each store to monitor energy efficiency. We estimate that by implementing and utilizing these energy saving programs we have avoided 1.6 billion pounds of greenhouse gas emissions since fiscal 2006. We believe this is equivalent to removing approximately 132,000 cars from the highway. In June 2008, we launched a nation-wide in-store compact fluorescent light bulb recycling program. This service is offered to all customers free-of-charge and is available in all U.S. stores, including Alaska and Hawaii. We have also taken additional measures to further our sustainability efforts. We partnered with the U.S. Green Building Council and have built seven Leadership in Energy and Environmental Design (\"LEED\") green certified and equivalent stores. We offset the carbon emissions created by our facilities and a portion of those emissions created by businessrelated travel through an agreement with The Conservation Fund that resulted in the planting of thousands of trees that will help reduce the heat-island effect in urban areas, reduce erosion and help clean the air. Through our Eco OptionsSM 4 Program, we have created product categories that allow consumers to easily identify environmentally preferred product selections in our stores. We implemented a Supplier Social and Environmental Responsibility Program to ensure that our suppliers adhere to the highest standards of social and environmental responsibility. Seasonality. Our business is seasonal to a certain extent. Generally, our highest volume of sales occurs in our second fiscal quarter, and the lowest volume occurs during our fourth fiscal quarter. Competition. Our business is highly competitive, based in part on price, store location, customer service and assortment of merchandise. In each of the markets we serve, there are a number of other home improvement stores, electrical, plumbing and building materials supply houses and lumber yards. With respect to some products, we also compete with discount stores, local, regional and national hardware stores, mail order firms, warehouse clubs, independent building supply stores and, to a lesser extent, other retailers. Due to the variety of competition we face, we are unable to precisely measure the impact on our sales by our competitors. Item 1A. Risk Factors. The risks and uncertainties described below could materially and adversely affect our business, financial condition and results of operations and could cause actual results to differ materially from our expectations and projections. The Risk Factors described below include the considerable risks associated with the current economic environment and the possible adverse effects on our financial condition and results of operations. You should read these Risk Factors in conjunction with \"Management's Discussion and Analysis of Financial Condition and Results of Operations\" in Item 7 and our Consolidated Financial Statements and related notes in Item 8. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not perceive them to be material. Such factors could cause results to differ materially from our expectations. The state of the housing, construction and home improvement markets, rising costs, a reduction in the availability of financing, weather and other conditions in North America could further adversely affect our costs of doing business, demand for our products and services and our financial performance. In 2008, the housing, residential construction and home improvement markets have deteriorated dramatically and more severely than was previously anticipated. We expect the deterioration to continue through 2009 and our fiscal 2009 Net Sales and Diluted Earnings per Share from Continuing Operations to decline from fiscal 2008. Other factors including increasing unemployment and foreclosures, interest rate fluctuations, fuel and other energy costs, labor and healthcare costs, the availability of financing, the state of the credit markets, including mortgages, home equity loans and consumer credit, consumer confidence, weather, natural disasters and other factors beyond our control could further adversely affect demand for our products and services and our financial performance. These and other similar factors could increase our costs and cause our customers to delay purchasing or determine not to purchase home improvement products and services. We rely on third party suppliers. If we fail to identify and develop relationships with a sufficient number of qualified suppliers, or if our current suppliers experience financial difficulties, our ability to timely and efficiently access products that meet our high standards for quality could be adversely affected. We buy our products from suppliers located throughout the world. Our ability to continue to identify and develop relationships with qualified suppliers who can satisfy our high standards for quality and our need to access products in a timely and efficient manner is a significant challenge. Our ability to access products also can be adversely affected by political instability, the financial instability of suppliers, suppliers' noncompliance with applicable laws, trade restrictions, tariffs, currency exchange rates, transport capacity and cost and other factors beyond our control. If we are unable to effectively manage and expand our alliances and relationships with selected suppliers of brand name products, we may be unable to effectively execute our strategy to differentiate ourselves from our competitors. As part of our focus on product differentiation, we have formed strategic alliances and exclusive relationships with selected suppliers to market products under a variety of well-recognized brand names. If we are unable to manage and expand these alliances and relationships or identify alternative sources for comparable products, we may not be able to effectively execute product differentiation. 5 Our ability to obtain additional financing on favorable terms, if needed, could be adversely affected by the volatility in the capital markets. We obtain and manage liquidity from the positive cash flow we generate from our operating activities and our access to capital markets, including our commercial paper programs supported by a long-term bank line-of-credit commitment. Although we currently maintain a strong investment grade rating and had no outstanding commercial paper obligations as of the end of fiscal 2008, there is no assurance that our ability to obtain additional financing through the capital markets, if needed, will not be adversely impacted if the current recessionary trends persist or worsen. Continued volatility in the capital markets could result in diminished availability of credit, higher cost of borrowing and lack of confidence in the equity market, making it more difficult to obtain additional financing on terms that are favorable to us. The implementation of our supply chain and technology initiatives could disrupt our operations in the near term, and these initiatives might not provide the anticipated benefits or might fail. We have made, and we plan to continue to make, significant investments in our supply chain and technology. These initiatives are designed to streamline our operations to allow our associates to continue to provide high quality service to our customers and to provide our customers with a better experience. The cost and potential problems and interruptions associated with the implementation of these initiatives could disrupt or reduce the efficiency of our operations in the near term. In addition, our improved supply chain and new or upgraded technology might not provide the anticipated benefits, it might take longer than expected to realize the anticipated benefits, or the initiatives might fail altogether. We may not timely identify or effectively respond to consumer trends, which could adversely affect our relationship with customers, the demand for our products and services and our market share. It is difficult to successfully predict the products and services our customers will demand. The success of our business depends in part on our ability to identify and respond to evolving trends in demographics and consumer preferences. Failure to design attractive stores and to timely identify or effectively respond to changing consumer tastes, preferences, spending patterns and home improvement needs could adversely affect our relationship with customers, the demand for our products and services and our market share. The inflation or deflation of commodity prices could affect our prices, demand for our products, sales and profit margins. Prices of certain commodity products, including lumber and other raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations and periodic delays in delivery. Rapid and significant changes in commodity prices may affect our sales and profit margins. Our costs of doing business could increase as a result of changes in federal, state or local regulations. Changes in the federal, state or local minimum wage or living wage requirements or changes in other wage or workplace regulations could increase our costs of doing business. In addition, changes in federal, state or local regulations governing the sale of some of our products or tax regulations could increase our costs of doing business. Also, passage of the Employee Free Choice Act or other similar laws in Congress could lead to higher labor costs by encouraging unionization efforts among our associates and disruption of store operations. Our success depends upon our ability to attract, train and retain highly qualified associates. To be successful, we must attract, train and retain a large number of highly qualified associates while controlling labor costs. Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs. In addition, many of our associates are in hourly positions with historically high turnover rates. We compete with other retail businesses for these associates and invest significant resources in training and motivating them. We also depend on our executives and other key associates for our success. There is no assurance that we will be able to attract or retain highly qualified associates in the future. 6 Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition. Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, asset impairment, inventories, lease obligations, self-insurance, tax matters and litigation, are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported or expected financial performance or financial condition. Increased competition could adversely affect prices and demand for our products and services and could decrease our market share. We operate in markets that are highly competitive. We compete principally based on price, store location, customer service and assortment of merchandise. In each market we serve, there are a number of other home improvement stores, electrical, plumbing and building materials supply houses and lumber yards. With respect to some products, we also compete with discount stores, local, regional and national hardware stores, mail order firms, warehouse clubs, independent building supply stores and other retailers. In addition, we compete with specialty design stores or showrooms, some of which are only open to interior design professionals, local and regional distributors, and wholesalers and manufacturers that sell products directly to their customer bases. Intense competitive pressures from one or more of our competitors could affect prices or demand for our products and services. If we are unable to timely and appropriately respond to these competitive pressures, our financial performance and our market share could be adversely affected. We are involved in a number of legal proceedings, and while we cannot predict the outcomes of such proceedings and other contingencies with certainty, some of these outcomes may adversely affect our operations or increase our costs. We are involved in a number of legal proceedings, including government inquiries and investigations, and consumer, employment, tort and other litigation that arise from time to time in the ordinary course of business. Litigation is inherently unpredictable, and the outcome of some of these proceedings and other contingencies could require us to take or refrain from taking actions which could adversely affect our operations or could result in excessive verdicts. Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management's attention and resources from other matters. The regulatory environment related to information security and privacy is increasingly rigorous, and a significant privacy breach could adversely affect our business. The protection of our customer, employee and company data is important to us. The regulatory environment related to information security and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business. In addition, our customers have a high expectation that we will adequately protect their personal information. A significant breach of customer, employee or company data could damage our reputation and result in lost sales, fines and lawsuits. Any inability to open new stores on schedule will delay the contribution of these new stores to our financial performance. We expect to increase our presence in certain existing markets and enter new markets. Our ability to open new stores will depend primarily on our ability to identify attractive locations, negotiate leases or real estate purchase agreements on acceptable terms, attract and train qualified employees, and manage pre-opening expenses, including construction costs. Environmental regulations, local zoning issues and other laws related to land use affect our ability to open new stores. Failure to effectively manage these and other similar factors will affect our ability to open stores on schedule, which will delay the impact of these new stores on our financial performance. 7 If we cannot successfully manage the unique challenges presented by international markets, we may not be successful in expanding our international operations. Our strategy includes expansion of our operations in international markets by selective acquisitions, strategic alliances and the opening of new stores. Our ability to successfully execute our strategy in international markets is affected by many of the same operational risks we face in expanding our U.S. operations. In addition, international expansion may be adversely affected by our inability to identify and gain access to local suppliers as well as by local laws and customs, U.S. laws applicable to foreign operations, such as the Foreign Corrupt Practices Act (\"FCPA\"), legal and regulatory constraints, political and economic conditions and currency regulations of the countries or regions in which we currently operate or intend to operate in the future. Risks inherent in international operations also include, among others, the costs and difficulties of managing international operations, adverse tax consequences, greater difficulty in enforcing intellectual property rights and risks associated with FCPA and local anti-bribery law compliance. Additionally, foreign currency exchange rates and fluctuations may have an impact on our future costs or on future cash flows from our international operations. Item 1B. Unresolved Staff Comments. Not applicable. Item 2. Properties. The following tables show locations of the 1,971 The Home Depot stores located in the U.S. and its territories and the 262 The Home Depot stores outside of the U.S. at the end of fiscal 2008: U.S. Locations Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Guam Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Number of Stores U.S. Locations 28 7 56 14 230 45 28 9 1 153 90 1 7 11 76 24 10 16 14 28 11 40 45 71 33 14 34 6 Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virgin Islands Virginia Washington West Virginia Wisconsin Wyoming Total U.S. 8 Number of Stores 8 20 20 66 13 99 43 1 70 16 26 70 8 8 25 1 39 178 22 3 1 49 45 6 27 5 1,971 International Locations Canada: Alberta British Columbia Manitoba New Brunswick Newfoundland Nova Scotia Ontario Prince Edward Island Quebec Saskatchewan Total Canada Number of Stores International Locations 26 23 6 3 1 4 86 1 22 4 176 China: Beijing Henan Liaoning Shaanxi Shandong Tianjin 2 1 1 2 1 5 Total China 12 Number of Stores Mexico: Aguascalientes Baja California Norte Baja California Sur Chiapas Chihuahua Coahuila Distrito Federal Durango Guanajuato Guerrero Hidalgo Jalisco Michoacn Morelos Nuevo Len Puebla Queretaro Quintana Roo San Luis Potosi Sinaloa Sonora State of Mexico Tabasco Tamaulipas Veracruz Yucatan 1 4 1 2 5 2 6 1 4 1 1 4 1 1 7 2 2 1 1 3 2 13 1 4 3 1 Total Mexico 74 Additionally, at the end of fiscal 2008, we had 41 other retail store locations, which included 34 EXPO Design Center stores located in Arizona, California, Florida, Georgia, Illinois, Maryland, Massachusetts, Missouri, New Jersey, New York, Tennessee, Texas and Virginia, five Yardbirds stores located in California and two THD Design Center stores located in California and North Carolina. We also operated nine Home Decorators Collection locations in California, Illinois, Kansas, Missouri, North Carolina and Oklahoma. Of our 2,274 stores at the end of fiscal 2008, approximately 89% were owned (including those owned subject to a ground lease) consisting of approximately 211.9 million square feet, and approximately 11% of such stores were leased consisting of approximately 26.2 million square feet. At the end of fiscal 2008, we utilized 204 warehouses and distribution centers located in 46 states, consisting of approximately 30.2 million square feet, of which approximately 0.2 million is owned and approximately 30.0 million is leased. Our executive, corporate staff, divisional staff and financial offices occupy approximately 2.0 million square feet of leased and owned space in Atlanta, Georgia. At the end of fiscal 2008, we occupied an aggregate of approximately 4.0 million square feet, of which approximately 2.2 million square feet is owned and approximately 1.8 million square feet is leased, for store support centers and customer support centers. 9 Item 3. Legal Proceedings. In August 2005, the Company received an informal request from the staff of the SEC for information related to the Company's return-to-vendor policies and procedures. Subsequent to August 2005, the SEC staff requested additional information related to such policies and procedures. The SEC staff last contacted the Company regarding this matter in January 2007. The Company responded to the requests and will continue to fully cooperate with the SEC staff. The SEC has informed the Company that the informal inquiry is not an indication that any violations of law have occurred. Although the Company cannot predict the outcome of this matter, it does not expect that this informal inquiry will have a material adverse effect on its consolidated financial condition or results of operations. The SEC informed the Company on December 10, 2008 that it does not intend to take any action on its informal inquiry into the Company's stock option granting practices, which inquiry commenced in June 2006. The Office of the U.S. Attorney for the Southern District of New York also requested information on this subject in 2006. The Company responded to each request and otherwise cooperated with the SEC and the Office of the U.S. Attorney, including producing documents to the Office of the U.S. Attorney in late 2006. The SEC matter is therefore now closed, and we have not received any communication from the Office of the U.S. Attorney since that time. On October 8, 2008, the U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal of class actions filed against the Company and certain of its current and former officers and directors in the U.S. District Court for the Northern District of Georgia in Atlanta, alleging certain misrepresentations in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder in connection with the Company's return-to-vendor practices. These actions were filed by certain current and former shareholders of the Company in the second quarter of 2006. Relief sought in the amended complaint included unspecified damages and costs and attorney's fees. The disposition of these matters is now complete. The Company has agreed to settle derivative and Securities Exchange Act of 1934 Section 14(a) claims filed against it and certain of its current and former officers and directors relating to the Company's return-to-vendor, stock option granting and compensation practices. The claims were filed by certain shareholders of the Company from the second quarter of fiscal 2006 through the fourth quarter of fiscal 2007. Relief sought included, among others, unspecified damages, injunctive relief, disgorgement of profits, benefits and compensation obtained by the defendants, cancellation of a new stock incentive plan and awards granted under such plan, punitive damages, costs and attorneys' fees. Under the terms of the settlement, the Company agreed to maintain or adopt certain corporate governance practices and to pay plaintiff's counsel attorneys' fees and reimbursement of expenses in the aggregate amount of $14.5 million. The settlement was approved by the Superior Court of Fulton County, Georgia, on June 10, 2008. The derivative and Section 14(a) actions were dismissed in accordance with the settlement, and the disposition of these matters is now complete. The following actions have been filed against the Company and, in some cases, against certain of its current and former officers and directors as described below. Although the Company cannot predict their outcome, it does not expect these actions, individually or together, will have a material adverse effect on its consolidated financial condition or results of operations. In the second and third quarters of fiscal 2006, three purported, but uncertified, class actions were filed against the Company, The Home Depot FutureBuilder Administrative Committee and certain of the Company's current and former directors and employees alleging breach of fiduciary duty in violation of the Employee Retirement Income Security Act of 1974 (\"ERISA\") in connection with the Company's return-to-vendor and stock option practices. These actions are before the U.S. District Court for the Northern District of Georgia in Atlanta. In the first quarter of fiscal 2007, the plaintiffs joined together in one case and voluntarily dismissed the other two cases. In March 2007, the three original plaintiffs and two additional former employees filed a joint amended complaint seeking certification as a class action, unspecified damages, costs, attorneys' fees and equitable and injunctive relief. On September 10, 2007, the Court granted the defendants' motion to dismiss and entered judgment for the defendants. The plaintiffs appealed the dismissal and, on July 31, 2008, the U.S. Court of Appeals for the Eleventh Circuit reversed the District Court's decision on standing, affirmed its finding that the plaintiffs failed to exhaust the administrative remedies provided under ERISA, and remanded the matter to the District Court for further adjudication. The District Court has stayed the matter pending plaintiffs' pursuit of their administrative remedies under ERISA. 10 The Company has reached a tentative settlement, subject to court approval, with the plaintiffs in five current lawsuits in the Superior Court of the County of Los Angeles in California, containing multiple class-action allegations that the Company failed to provide meal breaks. The complaints were filed by current and former hourly associates from the first quarter of 2004 through the fourth quarter of 2008. Relief sought included unspecified monetary damages, injunctive relief or both. Class or collective-action certification was not addressed in any of these cases. In the fourth quarter of fiscal 2008, the Company established a reserve for this settlement, which is recorded in our Consolidated Balance Sheets in Other Accrued Expenses. From the third quarter of 2004 through the fourth quarter of 2008, current and former associates have filed three pending lawsuits in the District Court of New Jersey and the Superior Court of the County of Los Angeles, containing multiple class-action allegations that the Company misclassified their positions under the Fair Labor Standards Act and that they are entitled to overtime, or otherwise that they were not paid for work performed. The complaints generally seek unspecified monetary damages, injunctive relief or both. Final class or collective-action certification has yet to be addressed in most of these cases. The Company cannot reasonably estimate the possible loss which may arise from these lawsuits. These matters, if decided adversely to or settled by the Company, individually or in the aggregate, may have a material adverse effect on its consolidated financial condition or results of operations. The Company is vigorously defending itself against these actions. In July 2005, the Company received a grand jury subpoena from the United States Attorney's Office in Los Angeles, California, seeking documents and information relating to the Company's handling, storage and disposal of hazardous waste. The Company is cooperating fully with the United States Attorney's Office. Although the Company cannot predict the outcome of this proceeding, it does not expect any such outcome to have a material adverse effect on its consolidated financial condition or results of operations. On September 26, 2008, the Company received an Administrative Order and Notice of Civil Administrative Penalty Assessment from the State of New Jersey Department of Environmental Protection (\"DEP\"). The Order and Notice seeks a civil penalty for alleged violations of recordkeeping requirements pertaining to the use of generators as determined by the DEP. The Company is currently in settlement discussions with the DEP regarding this matter. Although the Company cannot predict the outcome of this proceeding, it does not expect any such outcome to have a material adverse effect on its consolidated financial condition or results of operations. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. 11 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Since April 19, 1984, our common stock has been listed on the New York Stock Exchange, trading under the symbol \"HD.\" The Company paid its first cash dividend on June 22, 1987, and has paid cash dividends during each subsequent quarter. Future dividend payments will depend on the Company's earnings, capital requirements, financial condition and other factors considered relevant by the Board of Directors. The table below sets forth the high and low sales prices of our common stock on the New York Stock Exchange and the quarterly cash dividends declared per share of common stock during the periods indicated. Price Range High Low Cash Dividends Declared Fiscal Year 2008 First Quarter Ended May 4, 2008 Second Quarter Ended August 3, 2008 Third Quarter Ended November 2, 2008 Fourth Quarter Ended February 1, 2009 $30.12 $29.53 $30.16 $25.26 $25.00 $21.46 $18.51 $18.52 $0.225 $0.225 $0.225 $0.225 Fiscal Year 2007 First Quarter Ended April 29, 2007 Second Quarter Ended July 29, 2007 Third Quarter Ended October 28, 2007 Fourth Quarter Ended February 3, 2008 $41.76 $40.94 $38.31 $31.51 $36.74 $36.75 $30.70 $24.71 $0.225 $0.225 $0.225 $0.225 As of March 17, 2009, there were approximately 156,000 shareholders of record and approximately 1,200,000 additional shareholders holding stock under nominee security position listings. 12 Stock Performance Graph This graph depicts the Company's cumulative total shareholder returns relative to the performance of the Standard & Poor's 500 Composite Stock Index and the Standard & Poor's Retail Composite Index for the five-year period commencing February 2, 2004, the first trading day of fiscal 2004, and ending January 30, 2009, the last trading day of fiscal 2008. The graph assumes $100 invested at the closing price of the Company's common stock on the New York Stock Exchange and each index on January 30, 2004 and assumes that all dividends were reinvested on the date paid. The points on the graph represent fiscal year-end amounts based on the last trading day in each fiscal year. $225 $200 $175 $150 The Home Depot $125 S&P 500 Index $100 S&P Retail Composite $75 $50 $25 $0 January 30, 2004 January 28, 2005 The Home Depot S&P 500 Index S&P Retail Composite Index January 27, 2006 January 26, 2007 February 3, 2008 February 1, 2009 Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 $100.00 $100.00 $100.00 $114.91 $105.33 $114.90 $114.88 $117.57 $124.97 $116.79 $132.72 $139.54 $ 91.40 $132.76 $117.39 $66.93 $80.49 $73.11 13 Issuer Purchases of Equity Securities Since fiscal 2002, the Company has repurchased shares of its common stock having a value of approximately $27.3 billion pursuant to its share repurchase program. The number and average price of shares purchased in each fiscal month of the fourth quarter of fiscal 2008 are set forth in the table below: Period Nov. 3, 2008 Nov. 30, 2008 Dec. 1, 2008 Dec. 28, 2008 Dec. 29, 2008 Feb. 1, 2009 Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program(2) 10,405 10,237 43,381 $25.28 $23.14 $23.72 Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program $12,731,893,819 $12,731,893,819 $12,731,893,819 (1) These amounts are repurchases pursuant to the Company's 1997 and 2005 Omnibus Stock Incentive Plans (the \"Plans\"). Under the Plans, participants may exercise stock options by surrendering shares of common stock that the participants already own as payment of the exercise price. Participants in the Plans may also surrender shares as payment of applicable tax withholding on the vesting of restricted stock and deferred share awards. Shares so surrendered by participants in the Plans are repurchased pursuant to the terms of the Plans and applicable award agreements and not pursuant to publicly announced share repurchase programs. (2) The Company's common stock repurchase program was initially announced on July 15, 2002. As of the end of fiscal 2008, the Board approved purchases up to $40.0 billion. The program does not have a prescribed expiration date. Sales of Unregistered Securities During the fourth quarter of fiscal 2008, the Company issued 513 deferred stock units under The Home Depot, Inc. NonEmployee Directors' Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The deferred stock units were credited to the accounts of such nonemployee directors who elected to receive board retainers in the form of deferred stock units instead of cash during the fourth quarter of fiscal 2008. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan. During the fourth quarter of fiscal 2008, the Company credited 53,608 deferred stock units to participant accounts under The Home Depot FutureBuilder Restoration Plan pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, for involuntary, non-contributory plans. The deferred stock units convert to shares of common stock on a one-for-one basis following the termination of services as described in this plan. Item 6. Selected Financial Data. The information required by this item is incorporated by reference to pages F-1 and F-2 of this report. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Executive Summary and Selected Consolidated Statements of Earnings Data For fiscal year ended February 1, 2009 (\"fiscal 2008\"), we reported Net Earnings of $2.3 billion and Diluted Earnings per Share of $1.34 compared to Net Earnings of $4.4 billion and Diluted Earnings per Share of $2.37 for fiscal year ended February 3, 2008 (\"fiscal 2007\"). We took action on several strategic items in fiscal 2008 resulting in total pretax charges of $951 million (\"Rationalization Charges\"). These Rationalization Charges included the closing of 15 underperforming stores and the removal of approximately 50 stores from our new store opening pipeline, the planned exit of our EXPO, THD Design Center, Yardbirds and HD Bath businesses and strategic support staff reductions. Additionally, fiscal 2008 included a $163 million pretax write-down of our investment in HD Supply and a $52 million loss from discontinued operations, net of tax, for the settlement of working capital from the sale of HD Supply. Fiscal 2008 consisted of 52 weeks compared with 53 weeks for fiscal 2007. The 53rd week added approximately $1.1 billion in Net Sales and increased Diluted Earnings per Share from Continuing Operations by approximately $0.04 for fiscal 2007. We reported Earnings from Continuing Operations of $2.3 billion and Diluted Earnings per Share from Continuing Operations of $1.37 for fiscal 2008 compared to Earnings from Continuing Operations of $4.2 billion and Diluted Earnings per Share from Continuing Operations of $2.27 for fiscal 2007. Excluding the Rationalization Charges and the write-down of our investment in HD Supply, Earnings from Continuing Operations were $3.0 billion and Diluted Earnings per Share from Continuing Operations were $1.78 for fiscal 2008. Net Sales decreased 7.8% to $71.3 billion for fiscal 2008 from $77.3 billion for fiscal 2007. Excluding the 53rd week of fiscal 2007, Net Sales decreased 6.5% for fiscal 2008. The slowdown in the global economy and weakness in the U.S. residential construction and home improvement markets negatively impacted our Net Sales for fiscal 2008. Our comparable store sales declined 8.7% in fiscal 2008 driven by a 5.5% decline in comparable store customer transactions, as well as a 3.3% decline in our average ticket. In fiscal 2008, despite the continuing difficult economic environment, we continued to focus on our core retail business, investing in our associates and stores and improving our customer service. We have exited non-core businesses, restructured support staff and have stopped applying significant capital to building new square footage. We remain committed to the long-term health of our business through our strategy of investing in our retail business through the following five priorities: Associate Engagement - We have taken a number of actions to improve associate engagement by changing the way our associates are compensated, recognized and rewarded, including enhancing our success sharing program, an incentive program for our hourly associates driven by individual store performance. Success sharing payouts will be received by 83% of our stores for the second half of fiscal 2008 compared to 44% of stores for the same period last year. Product Excitement - We continue to work on our merchandising transformation by redefining how we run our business, implementing a focused bay portfolio approach to product assortment and creating new tools to support better merchandising decision making. As a result, we saw consumer unit share gains against the market in several key merchandising classes. For example, carpet, hand tools, power tools, blinds, bath fixtures, windows and doors all gained share in fiscal 2008. Our new lower price campaign is a major component of our portfolio strategy. An example is interior paint, where we have lowered prices on items such as Behr Flat Premium Plus. Unit sales are increasing, and at the same time, our attachment sales of related items are going up. Shopping Environment - We continued our store reinvestment by completing an aggressive list of maintenance projects, including the completion of our lighting upgrade, as well as more complex repair and maintenance activities for hundreds of other stores. In addition to programmatic maintenance, our integrated field and support center teams have rolled out store standards to all stores. We developed and piloted common guidelines on store appearance and shopability, including standards for front apron merchandising, wingstack usage, signage presentation, fixturing and off-shelf product. This 15 initiative helps reduce the amount of time our store managers spend on these issues, removes unnecessary clutter from the aisles and implements a basic and consistent approach to store appearance. Product Availability - We continued our supply chain transformation to improve product availability. We have five RDCs operating that now serve approximately 500 of our stores. We plan to open additional RDCs in fiscal 2009 and expect that they will serve approximately 1,000 of our stores by the end of fiscal 2009. We remain committed to our overall roll-out strategy for RDCs, supporting our goal of increasing our central distribution penetration. Own the Pro - We have made significant improvements in the services we provide our pro customers, particularly through our pro bid room. The pro bid room, which is available in all of our stores, allows us to leverage the buying power of The Home Depot for the benefit of our pro customers. Our direct ship program allows us to have large orders delivered from our vendors to the customer's job site directly, reducing handling, lead-time and cost while building loyalty with the pro customer. We opened 62 new stores in fiscal 2008, including 6 relocations, closed 15 stores as part of our store rationalization actions and closed one store in Mexico due to a fire, bringing our total store count at the end of fiscal 2008 to 2,274. As of the end of fiscal 2008, 262, or approximately 12%, of our stores were located in Canad