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) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 27, 1996 - OR - _ 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 (I.R.S. Employer incorporation or organization) Identification Number) 2727 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 X 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 480,328,265 Shares, as of November 14, 1996 Page 1 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q October 27, 1996 Page Part I. Financial Information: Item 1. Financial Statements CONSOLIDATED STATEMENTS OF EARNINGS - Three-Month and Nine-Month Periods Ended October 27, 1996 and October 29, 1995 3 CONSOLIDATED CONDENSED BALANCE SHEETS - As of October 27, 1996 and January 28, 1996 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - Nine-Month Periods Ended October 27, 1996 and October 29, 1995 5 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7 - 10 Part II. Other Information: Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signature Page 12 Index to Exhibits 13 Page 2 of 13
<TABLE> <CAPTION> PART I. FINANCIAL INFORMATION THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In Thousands, Except Per Share Data) Three Months Ended Nine Months Ended October 27, October 29, October 27, October 29, 1996 1995 1996 1995 <S> <C> <C> <C> <C> Net Sales $4,921,831 $3,997,790 $14,576,963 $11,718,474 Cost of Merchandise Sold 3,583,580 2,921,233 10,581,887 8,521,350 Gross Profit 1,338,251 1,076,557 3,995,076 3,197,124 Operating Expenses: Selling and Store Operating 880,635 714,581 2,601,352 2,080,258 Pre-Opening 14,638 14,774 37,640 40,794 General and Administrative 81,889 66,911 234,097 199,470 Total Operating Expenses 977,162 796,266 2,873,089 2,320,522 Operating Income 361,089 280,291 1,121,987 876,602 Interest Income (Expense): Interest and Investment Income 5,856 4,890 12,815 13,745 Interest Expense (2,834) (318) (5,568) (3,772) Interest, Net 3,022 4,572 7,247 9,973 Earnings Before Income Taxes 364,111 284,863 1,129,234 886,575 Income Taxes 142,740 109,390 442,670 340,450 Net Earnings $ 221,371 $ 175,473 $ 686,564 $ 546,125 Earnings Per Common and Common Equivalent Share $ 0.46 $ 0.37 $ 1.42 $ 1.15 Dividends Per Share $ 0.06 $ 0.05 $ 0.17 $ 0.14 Weighted Average Number of Common and Common Equivalent Shares 487,925 477,671 483,577 477,469 </TABLE> See accompanying notes to consolidated condensed financial statements. Page 3 of 13
<TABLE> <CAPTION> THE HOME DEPOT INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In Thousands, Except Share Data) October 27, January 28, 1996 1996 ASSETS <S> <C> <C> Current Assets: Cash and Cash Equivalents $ 716,700 $ 53,269 Short-Term Investments 65,845 54,756 Receivables, Net 379,197 325,384 Merchandise Inventories 2,657,349 2,180,318 Other Current Assets 54,910 58,242 Total Current Assets 3,874,001 2,671,969 Property and Equipment, at cost 5,846,711 4,968,895 Less: Accumulated Depreciation and Amortization (659,803) (507,871) Net Property and Equipment 5,186,908 4,461,024 Long-Term Investments 136,871 25,436 Notes Receivable 39,944 54,715 Cost in Excess of the Fair Value of Net Assets Acquired 87,308 87,238 Other 56,284 53,651 $ 9,381,316 $7,354,033 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 1,356,748 $ 824,808 Accrued Salaries and Related Expenses 238,249 198,208 Sales Taxes Payable 159,881 113,066 Other Accrued Expenses 325,717 242,859 Income Taxes Payable 39,290 35,214 Current Installments of Long-Term Debt 2,540 2,327 Total Current Liabilities 2,122,425 1,416,482 Long-Term Debt, excluding current installments 1,247,208 720,080 Other Long-Term Liabilities 151,649 115,917 Deferred Income Taxes 55,980 37,225 Minority Interest 92,065 76,563 Stockholders' Equity: Common Stock, par value $0.05. Authorized: 1,000,000,000 shares; issued and outstanding - 480,205,000 shares at 10/27/96 and 477,106,000 shares at 1/28/96 24,010 23,855 Paid-In Capital 2,510,079 2,407,815 Retained Earnings 3,184,240 2,579,059 Cumulative Translation Adjustments 2,671 (6,131) Unrealized Loss on Investments, Net (53) (47) 5,720,947 5,004,551 Less: Notes Receivable from ESOP 8,465 16,539 Shares Held in Employee Benefit Trust 493 246 Total Stockholders' Equity 5,711,989 4,987,766 $ 9,381,316 $7,354,033 </TABLE> See accompanying notes to consolidated condensed financial statements. Page 4 of 13
<TABLE> <CAPTION> THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Nine Months Ended October 27, 1996 October 29, 1995 Cash Provided from Operations: <S> <C> <C> Net Earnings $ 686,564 $ 546,125 Reconciliation of Net Earnings to Net Cash Provided by Operations: Depreciation and Amortization 168,502 129,358 Deferred Income Tax Expense 18,747 12,444 Increase in Receivables, Net (56,057) (73,536) Increase in Merchandise Inventories (473,854) (461,325) Increase in Accounts Payable and Accrued Expenses 732,823 632,911 Increase in Income Taxes Payable 13,252 26,871 Other 35,490 25,523 Net Cash Provided by Operations 1,125,467 838,371 Cash Flows From Investing Activities: Capital Expenditures (874,690) (942,661) Proceeds from Sales of Property and Equipment 17,650 24,015 Purchase of Short-Term Investments, Net (122,532) 27,034 Proceeds from Maturities of Long-Term Investments --- 6,257 Proceeds from Sales of Long-Term Investments --- 8,158 Advances Secured by Real Estate, Net 13,128 (8,962) Net Cash Used in Investing Activities (966,444) (886,159) Cash Flows From Financing Activities: Proceeds from Long-Term Borrowings, Net 1,092,960 --- Repayments of Commercial Paper Obligations, Net (620,000) 100,000 Repayments of Notes Receivable from ESOP 8,074 1,661 Principal Repayments of Long-Term Debt (2,077) (21,524) Proceeds from Sale of Common Stock, Net 93,378 62,995 Cash Dividends Paid to Stockholders (81,383) (65,904) Minority Interest Contributions to Partnership 13,208 18,482 Net Cash Provided by Financing Activities 504,160 95,710 Effect of Exchange Rate Changes on Cash 248 409 Increase in Cash and Cash Equivalents 663,431 48,331 Cash and Cash Equivalents at Beginning of Period 53,269 1,154 Cash and Cash Equivalents at End of Period $ 716,700 $ 49,485 </TABLE> See accompanying notes to consolidated condensed financial statements. Page 5 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 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 January 28, 1996, as filed with the Securities and Exchange Commission (File No. 1-8207). 2. Issuance of Convertible Subordinated Notes: On October 2, 1996, the Company issued at par, through a registered public offering, $1,104,000,000 of its 3.25% Convertible Subordinated Notes, due October 1, 2001 (the "Notes"). The Notes are convertible into shares of the Company's Common Stock at any time prior to maturity, unless previously redeemed, at a conversion price of $69.125 per share, subject to adjustment under certain conditions. The Notes may be redeemed at any time on or after October 2, 1999, at the option of the Company, in whole or in part, at a redemption price of 100.813% of their principal amount and after October 1, 2000, at 100% of the principal amount. The Notes are not subject to any sinking fund provisions. The net proceeds from the sale of the Notes were used to repay outstanding commercial paper and will be used to finance a portion of the Company's capital expenditure programs, including planned store expansions and renovations, and for general corporate purposes. In the interim, the net proceeds are being invested in both long and short-term interest-bearing securities. 3. Operating Lease Agreement: In June 1996, the Company entered into a $300,000,000 operating lease agreement for the purpose of financing construction costs of new stores. Under the agreement, the lessor purchases the properties, pays for the construction costs and thereafter leases the facilities to the Company. The lease provides for substantial residual value guarantees and includes purchase options at original cost on each property. This agreement primarily covers selected new stores planned to open in 1996 and 1997. Page 6 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The data below reflects 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. <TABLE> <CAPTION> Percentage Increase (Decrease) in Three Months Ended Nine Months Ended Dollar Amounts Oct. 27, Oct. 29, Oct. 27, Oct. 29, Three Nine 1996 1995 1996 1995 Months Months Selected Consolidated Statements of Earnings Data <S> <C> <C> <C> <C> <C> <C> Net Sales 100.0% 100.0% 100.0% 100.0% 23.1% 24.4% Gross Profit 27.2 26.9 27.4 27.3 24.3 25.0 Operating Expenses: Selling and Store Operating 17.9 17.9 17.8 17.7 23.2 25.0 Pre-Opening 0.3 0.3 0.3 0.4 (0.9) (7.7) General and Administrative 1.7 1.7 1.6 1.7 22.4 17.4 Total Operating Expenses 19.9 19.9 19.7 19.8 22.7 23.8 Operating Income 7.3 7.0 7.7 7.5 28.8 28.0 Interest Income (Expense): Interest and Investment Income 0.1 0.1 0.1 0.1 19.8 (6.8) Interest Expense --- --- (0.1) --- 791.2 47.6 Interest, Net 0.1 0.1 0.0 0.1 (33.9) (27.3) Earnings Before Income Taxes 7.4 7.1 7.7 7.6 27.8 27.4 Income Taxes 2.9 2.7 3.0 2.9 30.5 30.0 Net Earnings 4.5% 4.4% 4.7% 4.7% 26.2 25.7 Selected Consolidated Sales Data Number of Transactions (000's) 115,656 94,767 344,705 278,015 22.1 24.0 Average Amount of Sale Per Transaction $ 42.56 $ 42.19 $ 42.29 $ 42.15 0.9 0.3 Weighted Average Weekly Sales Per Operating Store (000's) $ 815 $ 792 $ 836 $ 818 2.9 2.2 Weighted Average Sales Per Square Foot $ 403 $ 393 $ 413 $ 406 2.6 1.7 </TABLE> Page 7 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) RESULTS OF OPERATIONS Sales for the third quarter of fiscal 1996 increased 23% to $4,921,831,000 compared to sales of $3,997,790,000 for the third quarter of fiscal 1995. For the first nine months of fiscal 1996, sales increased 24% to $14,576,963,000 from sales of $11,718,474,000 for the comparable period in fiscal 1995. The sales increase for both periods was primarily attributable to new stores (479 at the end of the third quarter of fiscal 1996 compared to 401 at the end of the third quarter of fiscal 1995) and a comparable store-for-store sales increase of 7% for both the third quarter and first nine months of fiscal 1996. Gross profit as a percent of sales was 27.2% for the third quarter of fiscal 1996 compared to 26.9% for the comparable period of fiscal 1995. The increase for the quarter was primarily attributable to, among other things, more effective buying practices initiated in the first and second quarters of 1996 and other merchandising initiatives which reduced the Company's cost of merchandise. For the first nine months of fiscal 1996, gross profit as a percent of sales was 27.4% compared to 27.3% for the comparable period of fiscal 1995. Operating expenses as a percent to sales were 19.9% for the third quarter of both fiscal 1996 and fiscal 1995. For the first nine months of fiscal 1996 operating expenses as a percent to sales were down slightly to 19.7% from 19.8% for the same period of fiscal 1995. Selling and store operating expenses as a percent to sales were 17.9% for both the third quarter of fiscal 1996 and the third quarter of fiscal 1995. Increases in selling and store operating expenses from the previous year include minority interest expense, which resulted from higher operating profits from the Canadian partnership. In addition, property taxes were higher than the previous year due to the addition of more stores in states with higher property tax rates and valuations. These increases were offset by lower net advertising expenses resulting from increased vendor participation and economies realized from more national advertising, as well as more favorable claims experience under the Company's self-funded insurance programs. Pre-opening expenses as a percent to sales were 0.3% for both the third quarter and first nine months of fiscal 1996. For fiscal 1995 pre-opening expenses were 0.3% for the third quarter and 0.4% for the nine month period. The Company opened 23 new stores during the third quarter of fiscal 1996 compared to 22 new stores and one store relocation for the third quarter of fiscal 1995. General and administrative expenses as a percent to sales were 1.7% and 1.6% for the third quarter and first nine months of fiscal 1996, respectively, versus 1.7% for the comparable periods of fiscal 1995. Net interest income as a percent to sales was 0.1% in the third fiscal quarter of 1996 and 1995. Interest expense increased due to the issuance of $1,104,000,000 of 3.25% Convertible Subordinated Notes during October 1996. Interest expense was offset by investment income generated from the proceeds of the Notes. Page 8 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) RESULTS OF OPERATIONS - (Continued) The Company's combined Federal and state effective income tax rate increased to 39.2% for the third quarter and first nine months of fiscal 1996 from 38.4% for the comparable periods of fiscal 1995. In the fourth quarter of fiscal 1995, the Company adjusted its combined Federal and state effective income tax rate to 38.8% for the fiscal year. The increase in the rate for the third quarter and first nine months of fiscal 1996 from the adjusted 1995 tax rate was due to a higher effective state tax rate. Net earnings as a percent of sales were 4.5% and 4.7% for the third quarter and first nine months of fiscal 1996, respectively, compared to 4.4% and 4.7% for the same periods of fiscal 1995. Earnings per share were $0.46 and $1.42 for the third quarter and first nine months of fiscal 1996, respectively, compared to $0.37 and $1.15 for the third quarter and first nine months of fiscal 1995, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash flow generated from store operations provides the Company with a significant source of liquidity. Additionally, a significant portion of the Company's inventory is financed under vendor credit terms. During the first nine months of fiscal 1996, the Company opened 56 stores and relocated 5 stores. The Company currently plans to open approximately 34 new stores and relocate 2 stores during the fourth quarter of fiscal 1996 and open approximately 110 new stores and relocate 7 stores during fiscal 1997. Of the planned 90 new stores and 7 relocations in fiscal 1996, it is expected that 83 will be owned and 14 will be leased. On October 2, 1996, the Company issued at par, through a registered public offering, $1,104,000,000 of its 3.25% Convertible Subordinated Notes, due October 1, 2001 (the "Notes"). The Notes are convertible into shares of the Company's Common Stock at any time prior to maturity, unless previously redeemed, at a conversion price of $69.125 per share, subject to adjustment under certain conditions. The Notes may be redeemed at any time on or after October 2, 1999, at the option of the Company, in whole or in part, at a redemption price of 100.813% of their principal amount and after October 1, 2000, at 100% of the principal amount. The net proceeds from the sale of the Notes of approximately $1,092,960,000 were used to repay outstanding commercial paper obligations and will be used to finance a portion of the Company's capital expenditure programs, including planned store expansions and renovations, and for general corporate purposes. In the interim, the net proceeds have been invested in both long and short-term interest-bearing securities. Page 9 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES - (Continued) In June 1996, the Company entered into a $300,000,000 operating lease agreement for the purpose of financing construction costs of new stores. Under the agreement, the lessor will purchase the properties, pay for the construction costs and subsequently lease the facilities to the Company. The lease provides for substantial residual value guarantees and includes purchase options at original cost on each property. This agreement will primarily cover selected new stores planned to open in 1996 and 1997. In addition to the leasing agreement, some planned locations for the remainder of fiscal 1996 and 1997 will be leased directly, and it is expected that many may be obtained through the purchase of pre-existing leasehold interest, acquisition of land parcels and the construction or purchase of buildings during fiscal 1996. While the cost of new stores to be constructed and owned by the Company varies widely, principally due to land costs, new store costs (including land, building and fixtures) are currently estimated to average approximately $13,400,000 per location. The Company may purchase leasehold interests at varying amounts depending upon the value of such properties. The cost to remodel (including leasehold interests) and fixture stores to be leased is expected to average approximately $2,400,000 per store. In addition, each new store will require approximately $2,800,000 to finance inventories, net of vendor financing. As of October 27, 1996, the Company had $782,545,000 in cash and short-term investments, and $136,871,000 in long-term investments. Management believes that its current cash position, the proceeds from short-term and long-term investments, internally generated funds, funds available from the $300,000,000 operating lease agreement, its commercial paper program, and/or the ability to obtain alternate sources of financing should enable the Company to complete its capital expenditure programs, including store expansion and renovation, through the next several fiscal years. IMPACT OF INFLATION AND CHANGING PRICES Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe inflation has had a material effect on sales or results of operations. Page 10 of 13
PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders During the third quarter of fiscal 1996, no matters were submitted to a vote of security holders. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11.1 Computation of Earnings per Common and Common Equivalent Share 27. Financial Data Schedule (only submitted to SEC in electronic format) (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended October 27, 1996. Page 11 of 13
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. THE HOME DEPOT, INC. (Registrant) By: /s/ Arthur M. Blank Arthur M. Blank President /s/ Marshall L. Day Marshall L. Day Senior Vice President Chief Financial Officer 11/22/96 Page 12 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit Description 11.1 Computation of Earnings per Common and Common Equivalent Share 27. Financial Data Schedule (only submitted to SEC in electronic format) Page 13 of 13