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.
Page 1 of 15 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 May 2, 1999 - 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) 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 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 1,481,685,346 Shares, as of May 28, 1999
THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q May 2, 1999 Page Part I. Financial Information: Item 1. Financial Statements CONSOLIDATED STATEMENTS OF EARNINGS - Three-Month Periods Ended May 2,1999 and May 3,1998..............3 CONSOLIDATED CONDENSED BALANCE SHEETS - As of May 2,1999 and January 31, 1999............................4 CONSOLIDATED STATEMENTS OF CASH FLOWS - Three-Month Periods Ended May 2, 1999 and May 3,1998.............5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME- Three-Month Periods Ended May 2, 1999 and May 3,1998.............6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.................7 Item 2. Management's Discussion and Analysis of Result of Operations and Financial Condition................. 8 - 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk.......................................................13 Part II. Other Information: Item 4. Submission of Matters to a Vote of Security Holders........13 Item 5. Other Information..........................................13 Item 6. Exhibits and Reports on Form 8-K...........................13 Signature Page......................................................14 Index to Exhibits...................................................15
<TABLE> <CAPTION> PART I. FINANCIAL INFORMATION THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In Millions, Except Per Share Data) Three Months Ended May 2, May 3, 1999 1998 <S> <C> <C> Net Sales $ 8,952 $ 7,123 Cost of Merchandise Sold 6,386 5,155 Gross Profit 2,566 1,968 Operating Expenses: Selling and Store Operating 1,584 1,268 Pre-Opening 22 19 General and Administrative 150 121 Total Operating Expenses 1,756 1,408 Operating Income 810 560 Interest Income (Expense): Interest and Investment Income 3 7 Interest Expense (8) (11) Interest, Net (5) (4) Earnings Before Income Taxes 805 556 Income Taxes 316 219 Net Earnings $ 489 $ 337 Weighted Average Number of Common Shares Outstanding 1,478 1,466 Basic Earnings Per Share $ 0.33 $ 0.23 Weighted Average Number of Common Shares Outstanding Assuming Dilution 1,558 1,539 Diluted Earnings Per Share $ 0.32 $ 0.22 Dividends Per Share $ 0.030 $ 0.025 </TABLE> See accompanying notes to consolidated condensed financial statements.
<TABLE> <CAPTION> THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In Millions, Except Share Data) May 2, January 31, ASSETS 1999 1999 <S> <C> <C> Current Assets: Cash and Cash Equivalents $ 604 $ 62 Short-Term Investments --- --- Receivables, Net 502 469 Merchandise Inventories 4,955 4,293 Other Current Assets 150 109 Total Current Assets 6,211 4,933 Property and Equipment, at cost 9,937 9,422 Less: Accumulated Depreciation and Amortization (1,342) (1,262) Net Property and Equipment 8,595 8,160 Long-Term Investments 15 15 Notes Receivable 29 26 Cost in Excess of the Fair Value of Net Assets Acquired 274 268 Other 75 63 $ 15,199 $ 13,465 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 2,592 $ 1,586 Accrued Salaries and Related Expenses 465 395 Sales Taxes Payable 263 176 Other Accrued Expenses 599 586 Income Taxes Payable 289 100 Current Installments of Long-Term Debt 8 14 Total Current Liabilities 4,216 2,857 Long-Term Debt, excluding current installments 1,319 1,566 Other Long-Term Liabilities 238 208 Deferred Income Taxes 85 85 Minority Interest 12 9 Stockholders' Equity: Common Stock, par value $0.05. Authorized: 2,500,000,000 shares; issued and outstanding - 1,479,491,000 shares at 5/2/99 and 1,475,452,000 shares at 1/31/99 74 74 Paid-In Capital 2,972 2,854 Retained Earnings 6,321 5,876 Accumulated Other Comprehensive Income (33) (61) 9,334 8,743 Less Shares Purchased for Compensation Plans (5) (3) Total Stockholders' Equity 9,329 8,740 $ 15,199 $ 13,465 </TABLE> See accompanying notes to consolidated condensed financial statements.
<TABLE> <CAPTION> THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Millions) Three Months Ended May 2,1999 May 3,1998 Cash Provided From Operations: <S> <C> <C> Net Earnings $ 489 $ 337 Reconciliation of Net Earnings to Net Cash Provided by Operations: Depreciation and Amortization 107 87 (Increase)Decrease in Receivables, Net (31) 74 Increase in Merchandise Inventories (654) (404) Increase in Accounts Payable and Accrued Expenses 1,198 818 Increase in Income Taxes Payable 241 171 Other (47) (23) Net Cash Provided by Operations 1,303 1,060 Cash Flows From Investing Activities: Capital Expenditures (550) (424) Proceeds from Sales of Property and Equipment 19 12 Purchase of Remaining Interest in The Home Depot Canada --- (261) Purchases of Investments --- (1) Proceeds from Maturities of Investments --- 2 Repayments of Advances Secured by Real Estate, Net (3) 3 Net Cash Used in Investing Activities (534) (669) Cash Flows From Financing Activities: Repayments of Commercial Paper Obligations, Net (246) --- Principal Repayments of Long-Term Debt (6) (4) Proceeds from Sale of Common Stock, Net 63 47 Cash Dividends Paid to Stockholders (44) (36) Minority Interest Contributions to Partnership 5 8 Net Cash (Used in) Provided by Financing Activities (228) 15 Effect of Exchange Rate Changes on Cash and Cash Equivalents 1 --- Increase in Cash and Cash Equivalents 542 406 Cash and Cash Equivalents at Beginning of Period 62 172 Cash and Cash Equivalents at End of Period $ 604 $ 578 </TABLE> See accompanying notes to consolidated condensed financial statements.
<TABLE> <CAPTION> THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In Millions) Three Months Ended May 2, May 3, 1999 1998 <S> <C> <C> Net Earnings $ 489 $ 337 Other Comprehensive Income: Foreign Currency Translation Adjustments 28 5 Comprehensive Income $ 517 $ 342 </TABLE>
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 31, 1999, as filed with the Securities and Exchange Commission (File No. 1-8207).
<TABLE> <CAPTION> THE HOME DEPOT, INC. AND SUBSIDIARIES 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. Three Months Ended Percentage Increase May 2, May 3, (Decrease)in 1999 1998 Dollar Amounts Selected Consolidated Statements of Earnings Data <S> <C> <C> <C> Net Sales 100.0% 100.0% 25.7% Gross Profit 28.7 27.6 30.4 Operating Expenses: Selling and Store Operating 17.7 17.8 24.9 Pre-Opening 0.2 0.2 15.8 General and Administrative 1.7 1.7 24.0 Total Operating Ex 19.6 19.7 24.7 Operating Income 9.1 7.9 44.6 Interest Income (Expense): Interest and Investment Income 0.0 0.1 (57.1) Interest Expense (0.1) (0.2) (27.3) Interest, Net (0.1) (0.1) 25.0 Earnings Before Income Taxes 9.0 7.8 44.8 Income Taxes 3.5 3.1 44.3 Net Earnings 5.5% 4.7% 45.1 Selected Consolidated Sales Data Number of Transactions (000's) 185,200 156,209 18.6% Average Sale Per Transaction $ 47.97 $ 45.19 6.2 Weighted Average Weekly Sales Per Operating Store (000's) $ 878 $ 854 2.8 Weighted Average Sales Per Square Foot $ 425 $ 417 1.9 </TABLE>
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) FORWARD-LOOKING STATEMENTS Certain written and oral statements made by The Home Depot, Inc. and subsidiaries (the "Company") or with the approval of an authorized executive officer of the Company may constitute "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. 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 the Company's historical experience and its 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, our ability to attract,train and retain highly qualified associates, conditions affecting the availability, acquisition,development and ownership of real estate, year 2000 problems, general economic conditions, the impact of competition and regulatory and litigation matters. Caution should be taken not to place undue reliance on any such 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 the Company's Annual Report on Form 10-K for the year ended January 31, 1999, as filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS Sales for the first quarter of fiscal 1999 increased 25.7% to $8.952 billion from $7.123 billion for the first quarter of fiscal 1998. The sales increase for the period was primarily attributable to 141 new stores (total of 797 stores at the end of the first quarter of fiscal 1999 compared with 656 at the end of the first quarter of fiscal 1998) and a comparable store- for-store sales increase of 9% for the first quarter of fiscal 1999. Gross profit as a percent of sales was 28.7% for the first quarter of fiscal 1999 compared with 27.6% for the first quarter of fiscal 1998. The gross profit rate increase for the period was primarily attributable to sales mix changes and to lower costs of merchandise resulting from continued product line reviews and other merchandising initiatives including direct sourcing of imports. Total operating expenses as a percent of sales decreased to 19.6% for the first quarter of fiscal 1999 from 19.7% for the first quarter of fiscal 1998. Selling and store operating expenses as a percent of sales decreased to 17.7% for the first quarter of fiscal 1999 from 17.8% for the first quarter of fiscal 1998. Net advertising expenses decreased as a percent of sales due to increased national advertising, cost leverage achieved from opening new stores in existing markets, and higher vendor co-op advertising support. Partially offsetting this decrease were higher credit card discounts due to higher penetrations of credit sales and increases in non- private label credit card discount rates. Pre-opening expenses as a percent of sales were 0.2% for the first quarter of both fiscal 1999 and fiscal 1998. The Company opened 37 new stores and relocated 1 store during the first quarter of fiscal 1999 compared with 32 new stores opened during the first quarter of fiscal 1998. General and administrative expenses as a percent of sales were 1.7% for the first quarter of both fiscal 1999 and fiscal 1998. Certain variable G&A expenses were lower than last year as a percent of sales, which offset increased cost of staffing and investments for various growth initiatives. Net interest expense as a percent of sales was 0.1% for the first quarter of both fiscal 1999 and fiscal 1998. As a percent of sales, interest and investment income for the first quarter of fiscal 1999 decreased to 0.0% from
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) RESULTS OF OPERATIONS - (Continued) 0.1% for the first quarter of fiscal 1998, primarily due to lower investment balances. Interest expense as a percent of sales decreased to 0.1% for the first quarter of fiscal 1999 from 0.2% for the comparable period of fiscal 1998. The decrease was primarily attributable to leverage achieved from higher sales in fiscal 1999 and to higher capitalized interest expense during fiscal 1999. The Company's combined federal and state effective income tax rate decreased to 39.2% for the first quarter of fiscal 1999 from 39.3% for the comparable period of fiscal 1998. During the fourth quarter of fiscal 1998, an adjustment was made to lower the annual effective tax rate to 39.2%. Net earnings as a percent of sales increased to 5.5% for the first quarter of fiscal 1999 from 4.7% for the first quarter of fiscal 1998. The increase as a percent of sales for fiscal 1999 was primarily attributable to higher gross margin rates and lower selling and store operating expenses as described above. Diluted earnings per share was $0.32 for the first quarter of fiscal 1999 compared to $0.22 for the first quarter of fiscal 1998. 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 quarter of fiscal 1999, the Company opened 37 stores, relocated 1 store and temporarily closed 1 store, which will be reopened on the same site during the third quarter of fiscal 1999. During the remainder of fiscal 1999, the Company plans to open approximately 130 new stores and relocate 6 stores, for a growth rate of approximately 22%. It is currently anticipated that approximately 85% of these locations will be owned, and the remainder will be leased. During the last three fiscal years, the Company entered into two operating lease agreements totaling $882 million for the purpose of financing construction costs of certain new stores. Under the operating lease agreements, the lessor purchases the properties, pays for the construction costs and subsequently leases the facilities to the Company. The leases provide for substantial residual value guarantees and include purchase options at original cost on each property. The Company financed a portion of new stores opened in fiscal 1997 and 1998 under the operating lease agreements and anticipates utilizing these facilities to finance selected new stores in fiscal 1999 and 2000 and an office building in fiscal 1999. In addition, some planned locations for fiscal 1999 will be leased individually, and it is expected that many locations may be obtained through the acquisition of land parcels and construction or purchase of buildings. While the cost of new stores to be constructed and owned by the Company varies widely, principally due to land costs, new store costs are currently estimated to average approximately $13.0 million per location. The cost to remodel and/or fixture stores to be leased is expected to average approximately $3.6 million per store. In addition, each new store will require approximately $3.1 million to finance inventories, net of vendor financing.
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES - (Continued) During fiscal 1996, the Company issued, through a public offering, $1.1 billion of 3.25% Convertible Subordinated Notes due October 1, 2001 (the "3.25% Notes"). The 3.25% Notes were issued at par and are convertible into shares of the Company's common stock at any time prior to maturity, unless previously redeemed by the Company, at a conversion price of $23.0417 per share, subject to adjustment under certain conditions. The 3.25% Notes may be redeemed by the Company, at any time on or after October 2, 1999, in whole or in part, at a redemption price of 100.813% of the principal amount and after October 1, 2000, at 100% of the principal amount. The Company used the net proceeds from the offering to repay outstanding commercial paper obligations, to finance a portion of the Company's capital expenditure program, including store expansions and renovations, and for general corporate purposes. The Company has a commercial paper program that allows borrowings up to a maximum of $800 million. During the first quarter of fiscal 1999 the Company repaid $246 million outstanding under the commercial paper program and as of May 2, 1999, there were no borrowings outstanding under the program. In connection with the program, the Company has a back-up credit facility with a consortium of banks for up to $800 million. The credit facility, which expires in December 2000, contains various restrictive covenants, none of which is expected to materially impact the Company's liquidity or capital resources. As of May 2, 1999, the Company had $604 million in cash and cash equivalents, as well as $15 million in long-term investments. Management believes that its current cash position, the proceeds from long-term investments, internally generated funds, funds available from its $800 million commercial paper program, funds available from the operating lease agreements, and the ability to obtain alternate sources of financing should enable the Company to complete its capital expenditure programs, including store openings and renovations, through the next several fiscal years. YEAR 2000 The Company is currently addressing a universal situation commonly referred to as the "Year 2000 Problem." The Year 2000 Problem relates to the inability of certain computer software programs to properly recognize and process date-sensitive information relative to the year 2000 and beyond. During fiscal 1997, the Company developed a plan to devote the necessary resources to identify and modify internal systems impacted by the Year 2000 Problem, or implement new systems to become year 2000 compliant in a timely manner. This compliance plan consists of four major areas of focus: systems, desktops, facilities and supplier management. The total cost of executing this plan is estimated at $13 million, and as of May 2, 1999, the Company had expended approximately $9.6 million to effect the plan. The Company has substantially completed the systems portion of the compliance plan. In implementing the systems portion of the plan, the Company completed an inventory of all software programs operating on its systems, identified year 2000 problems, and then created an appropriate testing environment. Additionally, as of May 2, 1999, the Company had substantially completed the final phases of the compliance plan, which involve testing and installing year 2000 compliant software in the production environment.
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) YEAR 2000 - (Continued) All desktop applications critical to the Company's overall business have been inventoried and evaluated under the method described above, and as of January 31, 1999, this process was complete. The compliance plan for desktop infrastructure was also substantially complete at the end of the first quarter of fiscal 1999. Substantially all critical facilities systems, including, but not limited to, security systems, energy management, material handling, copiers and faxes, have been inventoried and are being tested. As of May 2, 1999, this process was over 60% complete. The Company anticipates completing the facilities systems portion of its compliance plan before the end of the second quarter of fiscal 1999. The Company is assessing the year 2000 compliance status of its suppliers, many of which participate in electronic data interchange ("EDI") or similar programs with the Company. The Company will conduct substantial testing with EDI merchandise suppliers and transportation carriers. With respect to merchandise suppliers participating in EDI programs with the Company, the Company is conducting point-to-point testing of these EDI systems for year 2000 compliance. The Company's risks involved with not solving the Year 2000 Problem include, but are not limited to, the following: loss of local or regional electrical power, loss of telecommunication services, delays or cancellations of merchandise shipments, manufacturing shutdowns, delays in processing customer transactions, bank errors and computer errors by suppliers. Because the Company's year 2000 compliance is dependent upon certain third parties (including infrastructure providers) also being year 2000 compliant on a timely basis, there can be no assurance that the Company's efforts will prevent a material adverse impact on its results of operations, financial condition or business. The Company is modifying its existing disaster recovery plans to include year 2000 contingency planning. Also, the Company is identifying critical activities that would normally be conducted during the first two weeks of January 2000, which may be completed instead in December 1999. The Company expects its year 2000 contingency planning to be substantially complete by the end of the second quarter of fiscal 1999 and to test and modify contingency plans throughout the remainder of 1999.
THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) 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. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has not entered into any transactions using derivative financial instruments or derivative commodity instruments and believes that its exposure to market risk associated with other financial instruments(such as investments) and interest rate risk is not material. PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS During the first quarter of fiscal 1999, no matters were submitted to a vote of security holders. Item 5. OTHER INFORMATION On May 13, 1999, the Board of Directors appointed William S. Davila to serve as a member of the Board. Mr. Davila's term will expire at the Annual Meeting of Stockholders in 2001. Mr. Davila is the retired President and Chief Operating Officer of The Vons Companies, Inc., and he serves on the Boards of Directors of Wells Fargo Bank, Pacific Gas & Electric Corporation and Hormel Foods Corporation. Item 6. EXHIBITS 3.1 Restated Certificate of Incorporation of The Home Depot,Inc., as amended 11.1 Computation of Basic and Diluted Earnings Per Share 27. Financial Data Schedule (only submitted to SEC in electronic format)
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 & CEO /s/ Marshall L. Day Marshall L. Day Senior Vice President Finance & Accounting June 2, 1999 (Date)
THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit Description 3.1 Restated Certificate of Incorporation of The Home Depot, Inc., as amended 11.1 Computation of Basic and Diluted Earnings Per Share 27. Financial Data Schedule (only submitted to SEC in electronic format)