The Home Depot, Inc is an American home improvement chain based in Atlanta. It operates 2,284 DIY stores (as of April 2018) in North America (USA, Canada, Mexico, Puerto Rico) and claims to be the largest DIY store chain in the world. The company has over 400,000 employees.
The Home Depot also owns home improvement stores and user stores, such as the EXPO Design Center, Landscape Supply Garden Center, and a number of specialized stores.
The company was founded in Atlanta in 1978 by Bernie Marcus and Arthur Blank. It grew rapidly, with annual sales of $1 billion in 1986. In fiscal 2017, sales were $ 100.9 billion.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 5, 2002
- OR -
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8207
THE HOME DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware
95-3261426
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
2455 Paces Ferry Road
Atlanta, Georgia
30339
(Address of principal executive offices)
(Zip Code)
(770) 433-8211
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
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 ý No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
$.05 par value 2,354,902,829 Shares, as of June 3, 2002
THE HOME DEPOT, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
MAY 5, 2002
Part I. Financial Information:
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS -
Three-Month Period Ended May 5, 2002 and April 29, 2001
CONSOLIDATED CONDENSED BALANCE SHEETS -
As of May 5, 2002 and February 3, 2002
CONSOLIDATED STATEMENTS OF CASH FLOWS -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME-
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Report on Form 8-K
Signature Page
Index to Exhibits
2
PART 1. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In Millions, Except Per Share Data)
Three Months Ended
May 5,
2002
April 29,
2001
Net Sales
$
14,282
12,200
Cost of Merchandise Sold
9,922
8,545
Gross Profit
4,360
3,655
Operating Expenses:
Selling and Store Operating
2,745
2,394
Pre-Opening
25
27
General and Administrative
228
207
Total Operating Expenses
2,998
2,628
Operating Income
1,362
1,027
Interest Income (Expense):
Interest and Investment Income
17
6
Interest Expense
(7
)
(3
Interest, Net
10
3
Earnings Before Income Taxes
1,372
1,030
Income Taxes
516
398
Net Earnings
856
632
Weighted Average Number of Common Shares Outstanding
2,349
2,326
Basic Earnings Per Share
0.36
0.27
Weighted Average Number of Common Shares Outstanding Assuming Dilution
2,365
2,347
Diluted Earnings Per Share
Dividends Per Share
0.05
0.04
See accompanying notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
February 3,
ASSETS
Current Assets:
Cash and Cash Equivalents
4,982
2,477
Short-Term Investments
193
69
Receivables, Net
1,082
920
Merchandise Inventories
7,417
6,725
Other Current Assets
254
170
Total Current Assets
13,928
10,361
Property and Equipment, at cost
18,718
18,129
Less: Accumulated Depreciation and Amortization
2,950
2,754
Net Property and Equipment
15,768
15,375
Notes Receivable
137
83
Cost in Excess of the Fair Value of Net Assets Acquired
423
419
Other
153
156
30,409
26,394
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable
5,567
3,436
Accrued Salaries and Related Expenses
869
717
Sales Taxes Payable
410
348
Other Accrued Expenses
958
933
Deferred Revenue
1,024
851
Income Taxes Payable
590
211
Current Installments of Long-Term Debt
5
Total Current Liabilities
9,423
6,501
Long-Term Debt, excluding current installments
1,285
1,250
Other Long-Term Liabilities
438
372
Deferred Income Taxes
189
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.05. Authorized: 10,000 shares; issued and outstanding — 2,352 shares at 5/05/02 and 2,346 shares at 2/03/02
117
Paid-In Capital
5,575
5,412
Retained Earnings
13,538
12,799
Accumulated Other Comprehensive Loss
(127
(220
Unearned Compensation
(29
(26
Total Stockholders’ Equity
19,074
18,082
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operations:
Reconciliation of Net Earnings to Net Cash
Provided by Operations:
Depreciation and Amortization
209
177
Increase in Receivables, Net
(121
(205
Increase in Merchandise Inventories
(693
(692
Increase in Accounts Payable, Accrued Expenses and Deferred Revenue
2,613
1,999
Increase in Income Taxes Payable
422
349
(79
(39
Net Cash Provided by Operations
3,207
2,221
Cash Flows From Investing Activities:
Capital Expenditures
(639
(816
Proceeds from Sales of Property and Equipment
34
39
Proceeds from Sale of Business, Net
22
—
Purchases of Investments
(193
Proceeds from Maturities of Investments
68
8
7
(2
Net Cash Used in Investing Activities
(701
(778
Cash Flows From Financing Activities:
Repayments of Commercial Paper Obligations, Net
(754
Proceeds from Long-Term Debt
504
Repayments of Long-Term Debt
(1
Proceeds from Sale of Common Stock, Net
99
Cash Dividends Paid to Stockholders
(118
(93
Net Cash Used in Financing Activities
(244
Effect of Exchange Rate Changes on Cash and Cash Equivalents
1
Increase in Cash and Cash Equivalents
2,505
1,196
Cash and Cash Equivalents at Beginning of Period
167
Cash and Cash Equivalents at End of Period
1,363
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Other Comprehensive Income (1) :
Foreign Currency Translation Adjustments
88
Cumulative Effect of Adopting SFAS 133
(5
Change in Fair Value of Derivatives Accounted for as Hedges
(6
Derivative Losses Reclassified to Earnings
Total Other Comprehensive Income
91
(36
Comprehensive Income
947
596
(1) Components of comprehensive income are reported net of related taxes.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation - The accompanying consolidated condensed financial statements have been prepared in accordance with the instructions to Form 10–Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10–K for the year ended February 3, 2002, as filed with the Securities and Exchange Commission (File No. 1–8207).
2. Implementation of New Accounting Standards
On February 4, 2002, the Company adopted Statements of Financial Accounting Standards Nos. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets,” and 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets.” Under SFAS 142, goodwill is not amortized and is instead evaluated for impairment at least annually. The adoption of SFAS 142 did not have a material impact on the Company’s financial results. SFAS 144 amends Accounting Principles Board Opinion No. 30 (“APB 30”), “Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” while retaining many of the fundamental provisions of SFAS 121, “Accounting for the Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed Of,” for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while resolving significant implementation issues. SFAS 144 retains the basic provisions of APB 30 on the presentation of discontinued operations in the income statement, but expands the scope to include all distinguishable components of an entity that will be eliminated from ongoing operations in a disposal transaction. The adoption of SFAS 144 did not have a material impact on the Company’s financial results.
3. Acquisition
On March 20, 2002, the Company signed a definitive agreement to acquire Maderería Del Norte, S.A. de C.V., a four-store chain of home improvement stores in Mexico. The transaction is expected to close in the second quarter of fiscal 2002 upon receipt of regulatory approval.
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The data below reflect selected sales data, the percentage relationship between sales and major categories in the Consolidated Statements of Earnings and the percentage change in the dollar amounts of each of the items.
Percentage
Increase
Selected Consolidated
(Decrease) in
Statements of Earnings Data
Dollar Amounts
100.0
%
17.1
30.5
30.0
19.3
19.2
19.6
14.7
0.2
(7.4
1.6
1.7
10.1
21.0
21.5
14.1
9.5
8.5
32.6
0.1
0.0
183.3
133.3
233.3
9.6
33.2
3.6
3.3
29.6
6.0
5.2
35.4
Selected Consolidated Sales Data
Number of Transactions (000’s)
283,542
249,477
13.7
Average Sale Per Transaction
50.40
48.64
Weighted Average Weekly Sales
Per Operating Store (000’s)
808
807
Weighted Average Sales
Per Square Foot
384
386
(0.5
FORWARD-LOOKING STATEMENTS
Certain written and oral statements made by us or our authorized executive officers on our behalf constitute “forward-looking statements” as defined under federal securities laws. Words or phrases such as “should result,” “are expected to,” “we anticipate,” “we estimate,” “we project” or similar expressions are intended to identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, unanticipated weather conditions; stability of costs and availability of sourcing channels; the ability to attract, train and retain highly-qualified associates; conditions affecting the availability, acquisition, development and ownership of real estate; general economic conditions; the impact of competition; and regulatory and litigation matters. You should not place undue reliance on forward-looking statements, since such statements speak only as of the date of the making of such statements. Additional information concerning these risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended February 3, 2002.
RESULTS OF OPERATIONS
Net sales for the first quarter of fiscal 2002 increased 17.1% to $14.3 billion from $12.2 billion for the first quarter of fiscal 2001. The sales increase was primarily attributable to new stores opened since the end of the first fiscal quarter last year (1,386 stores open at the end of the first quarter of fiscal 2002 compared to 1,178 at the end of the first quarter of fiscal 2001) and a comparable store-for-store sales increase of 5%. The increase in comparable store-for-store sales reflects favorable weather conditions which resulted in strong sales in paint, lumber, lawn and garden during the quarter. Sales in flooring, kitchen and bath were also favorably impacted by merchandising and credit initiatives held during the quarter. These initiatives drove sales of larger ticket items, including sales of carpet and kitchen installations, contributing to a 3.6% increase over the first quarter of fiscal 2001 in average customer ticket to $50.40. We recognize revenue for installation jobs upon the completion of the project and, as a result of an increase in the volume of installation projects, our deferred revenue liability grew by approximately $200 million.
Gross profit as a percent of sales was 30.5% for the first quarter of fiscal 2002 compared to 30.0% for the first quarter of fiscal 2001. The gross profit rate increase was primarily attributable to the benefits of centralized purchasing, as we lowered our cost of merchandise through tools like online auctions and special buys, rationalized our merchandise assortment and built strategic alliances and stronger relationships with key supplier partners. In addition, the increase in the number of tool rental centers continues to provide margin benefits. At the end of the first quarter of fiscal 2002, we were operating 491 tool rental centers compared to 381 at the end of the first quarter of fiscal 2001. We expect to have tool rental centers in approximately 600 stores by the end of fiscal 2002.
Selling and store operating expenses as a percent of sales were 19.2% for the first quarter of fiscal 2002 compared to 19.6% for the same period in fiscal 2001. The decrease was primarily attributable to continued improvement in labor productivity as measured in sales per labor hour, as a result of initiatives such as Service Performance Improvement, or SPI. In addition, we experienced no wage rate inflation during the quarter as a result of effective wage rate management. These decreases in payroll expense were partially offset by increased workers’ compensation and general liability costs.
9
Pre-opening expenses as a percent of sales were 0.2% for the first quarters of fiscal 2002 and fiscal 2001. We opened 57 stores during the first quarter of fiscal 2002 compared with 44 stores during the first quarter of fiscal 2001. For the first quarter of fiscal 2002, pre-opening expenses averaged $416,000 per store compared to $585,000 for the first quarter of fiscal 2001. As a result of reducing the average pre-opening period by two weeks, our pre-opening costs on a per store basis are down approximately 25% compared to the same period last year. The remainder of the decrease in pre-opening expenses reflects the timing of store openings.
General and administrative expenses as a percent of sales were 1.6% for the first quarter of fiscal 2002 compared to 1.7% for the first quarter of fiscal 2001. The decrease was primarily driven by organizational realignments, including the centralization of our merchandise organization, the sale of our South American operations and the consolidation of our Southeast Division.
As a percent of sales, interest and investment income was 0.1% for the first quarter of fiscal 2002 and 0.0% for the first quarter of fiscal 2001. The increase reflects higher cash balances in the current quarter offset by a lower interest rate environment. Interest expense as a percent of sales was 0.0% for the first quarters of fiscal 2002 and fiscal 2001.
Our combined federal and state effective income tax rate decreased to 37.6% for the first quarter of fiscal 2002 from 38.6% for the first quarter of fiscal 2001. The decrease is attributable to higher tax credits and lower effective state income tax rates. For the remainder of fiscal 2002, we expect the federal and state effective income tax rate to be 37.6%.
Net earnings as a percent of sales were 6.0% for the first quarter of fiscal 2002 compared to 5.2% for the first quarter of fiscal 2001. The increase was primarily attributable to a higher gross profit rate and a decrease in selling and store operating expenses as a percent of sales, as described above.
Diluted earnings per share were $0.36 and $0.27 for the first quarters of fiscal 2002 and 2001, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from store operations provides a significant source of liquidity. During the first quarter of fiscal 2002, cash provided by operations increased to $3.2 billion compared to $2.2 billion in the same period of fiscal 2001. The increase was primarily due to growth in days payable outstanding to 51 days at the end of the first quarter of fiscal 2002 compared to 39 days for the same period last year and a decrease in average inventory per store of approximately 13%.
Cash used in investing activities in the first quarter of fiscal 2002 was $701 million compared to $778 million in the same quarter of the prior year. The decrease was primarily due to timing of expenditures for new stores. We plan to open a total of 200 new stores during fiscal 2002, compared to 204 in fiscal 2001 and expect total capital expenditures to be approximately $3.6 billion in 2002.
Cash used in financing activities in the first quarter of fiscal 2002 was $2 million compared to $244 million in the comparable period last year. In the first quarter of 2001, we repaid $754 million of commercial paper obligations offset by proceeds from the issuance of $500 million of Senior Notes.
We have a commercial paper program that allows borrowings up to a maximum of $1 billion. As of May 5, 2002, there were no borrowings outstanding under the program. In connection with the program, we have a back-up credit facility with a consortium of banks for up to $800 million. The credit facility, which expires in 2004, contains various restrictive covenants, none of which are expected to impact our liquidity or capital resources.
As of May 5, 2002, we had $5.2 billion in cash, cash equivalents and short-term investments. We believe that our current cash position, internally generated funds, funds available from the $1 billion commercial paper program and the ability to obtain alternate sources of financing should enable us to complete our capital expenditure programs through the next several fiscal years.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risks results primarily from fluctuations in interest rates. There have been no material changes to the disclosures made regarding market risk in our Annual Report on Form 10-K for the year ended February 3, 2002.
11
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the first quarter of fiscal 2002, no matters were submitted to a vote of security holders.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Computation of Basic and Diluted Earnings Per Share
(b) Report on Form 8-K
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
By:
/s/ Robert L. Nardelli
Robert L. Nardelli
Chairman, President & CEO
/s/ Carol B. Tomé
Carol B. Tomé
Executive Vice President and
Chief Financial Officer
June 4, 2002
(Date)
13
INDEX TO EXHIBITS
Exhibit
Description
11.1
Computation of Basic and Diluted Earnings Per Share
14