-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WGKeTgTHyKKJb+8nnFnmOoTBfGWoION38c4EUT+aL6LkoHmzodCA51jziBQVW5mH 1glSAMUTHmi6GFIPY+WUcA== 0000354950-94-000003.txt : 19940616 0000354950-94-000003.hdr.sgml : 19940616 ACCESSION NUMBER: 0000354950-94-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940501 FILED AS OF DATE: 19940606 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME DEPOT INC CENTRAL INDEX KEY: 0000354950 STANDARD INDUSTRIAL CLASSIFICATION: 5211 IRS NUMBER: 953261426 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08207 FILM NUMBER: 94533071 BUSINESS ADDRESS: STREET 1: 2727 PACES FERRY RD CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 4044338211 10-Q 1 THE HOME DEPOT 1995 1ST QTR 10-Q FILING 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 1, 1994 - - - 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) (404) 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 450,969,605 Shares, as of 5/18/94 Page 1 of 14 THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q May 1, 1994 Page Part I. Financial Information: Item 1. Financial Statements CONSOLIDATED STATEMENTS OF EARNINGS - Three-Month Period Ended May 1, 1994 and May 2, 1993............................ 3 CONSOLIDATED CONDENSED BALANCE SHEETS - As of May 1, 1994 and January 30, 1994................. 4 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - Three-Month Period Ended May 1, 1994 and May 2,1993............................. 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 on Security Holders...................................... 11 Item 6. Exhibits and Reports on 8-K...................... 11 Signature Page............................................. 12 Index to Exhibits.......................................... 13 Page 2 of 14 PART I. FINANCIAL INFORMATION THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In Thousands, Except Per Share Data) Three Months Ended May 1, 1994 May 2, 1993 Net Sales $2,872,129 $2,180,218 Cost of Merchandise Sold 2,063,372 1,578,518 Gross Profit 808,757 601,700 Operating Expenses: Selling and Store Operating 519,389 389,245 Pre-opening 9,713 5,498 General and Administrative 51,891 46,615 Total Operating Expenses 580,993 441,358 Operating Income 227,764 160,342 Interest Income (Expense): Interest Income 8,397 15,770 Interest Expense (8,567) (8,633) Interest, Net (170) 7,137 Earnings Before Income Taxes 227,594 167,479 Income Taxes 87,860 60,680 Net Earnings $ 139,734 $ 106,799 Earnings Per Common and Common Equivalent Share $ .31 $ .24 Dividends Per Share $ .03 $ .02 Weighted Average Number of Common and Common Equivalent Shares 453,976 452,561 See accompanying notes to consolidated condensed financial statements. Page 3 of 14 THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In Thousands) May 1, January 30, 1994 1994 ASSETS Current Assets: Cash and Cash Equivalents $ 267,561 $ 99,997 Short-Term Investments, including current maturities of long-term investments 62,038 330,976 Accounts Receivable, Net 192,756 198,431 Merchandise Inventories 1,557,771 1,293,477 Other Current Assets 56,601 43,720 Total Current Assets 2,136,727 1,966,601 Property and Equipment, at cost 2,959,119 2,618,428 Less: Accumulated Depreciation and Amortization (272,145) (247,524) Net Property and Equipment 2,686,974 2,370,904 Long-Term Investments held Available for Sale 340,234 281,623 Cost in Excess of the Fair Value of Net Assets Acquired, Net 83,992 19,503 Other 44,176 62,258 $5,292,103 $4,700,889 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 768,768 $ 521,246 Accrued Salaries and Related Expenses 216,255 167,489 Sales Taxes Payable 85,437 57,590 Other Accrued Expenses 208,112 184,462 Income Taxes Payable 93,167 40,303 Current Installments of Long-Term Debt 1,548 1,548 Total Current Liabilities 1,373,287 972,638 Convertible Subordinated Debt 804,990 804,990 Long-Term Debt, excluding current installments 36,745 37,002 Other Long-Term Liabilities 91,724 44,332 Deferred Income Taxes 31,248 27,827 Stockholders' Equity: Common Stock - 450,933,000 shares outstanding at 05/01/94 and 449,364,000 shares outstanding at 01/30/94 22,546 22,468 Paid-in Capital 1,455,631 1,436,029 Retained Earnings 1,526,794 1,400,575 Cumulative Translation Adjustments (5,309) (121) Unrealized Holding Loss on Investments (702) --- 2,998,960 2,858,951 Less Notes Receivable from ESOP 44,851 44,851 Total Stockholders' Equity 2,954,109 2,814,100 $5,292,103 $4,700,889 See accompanying notes to consolidated condensed financial statements. Page 4 of 14 THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Three Months Ended May 1, 1994 May 2, 1993 Cash Provided from Operations: Net Earnings $ 139,734 $ 106,799 Reconciliation of Net Earnings to Net Cash Provided by Operations: Depreciation and Amortization 28,374 20,535 Increase in Accounts Payable and Accrued Expenses 318,635 216,389 Increase in Merchandise Inventories (210,977) (155,005) Increase in Income Taxes Payable 59,029 49,813 Increase in Receivables, Net 5,057 6,822 Other 6,734 (6,818) Total 206,852 131,736 Net Cash Provided by Operations 346,586 238,535 Cash Flows From Investing Activities: Capital Expenditures (260,246) (192,540) Payment for Purchase of Partnership Interest (161,548) --- Proceeds from Sale of Short-Term Investments, Net 88,142 71,737 Purchase of Long-Term Investments (46,997) (226,173) Proceeds from Maturities of Long-Term Investments 6,916 61,937 Proceeds from Sale of Long-Term Investments 161,197 131,661 Proceeds from Sale of Property and Equipment 12,697 6,569 Advances Secured by Real Estate, Net 21,104 12,176 Net Cash Used in Investing Activities (178,735) (134,633) Cash Flows From Financing Activities: Proceeds from Sale of Common Stock, Net 13,515 17,480 Cash Received from ESOP --- 83 Principal Repayments of Long-Term Debt (287) (424) Cash Dividends Paid to Stockholders (13,515) (10,020) Net Cash (Used In) Provided by Financing Activities (287) 7,119 Increase in Cash and Cash Equivalents 167,564 111,021 Cash and Cash Equivalents, Beginning of Period 99,997 121,744 Cash and Cash Equivalents, End of Period $ 267,561 $ 232,765 See accompanying notes to consolidated condensed financial statements. Page 5 of 14 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 reoccurring 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 30, 1994 as filed with the Securities and Exchange Commission (File No. 1-8207). 2. Acquisition of Interest in Canadian Company Effective February 28, 1994, the Company entered into a partnership and, as a result, acquired 75% of Aikenhead's Home Improvement Warehouse, now known as Home Depot Canada, which was operating seven warehouse-style home improvement stores at the time of the acquisition in Toronto, London and Kitchener, Ontario, Canada. Subsequent to the acquisition, the partnership has opened three stores located in Edmonton and Calgary, Alberta and Vancouver, British Columbia, respectively. At any time after the sixth anniversary of the purchase, the Company has the option to purchase, or the other partner has the right to cause the Company to purchase, the remaining 25% of Home Depot Canada. The option price is based on the lesser of fair market value or a value to be determined by an agreed-upon formula as of the option exercise date. The purchase price paid for the 75% interest in Home Depot Canada was approximately $162,000,000 and is being accounted for by the purchase method of accounting. The excess purchase price over the estimated fair value of the net assets as of the acquisition date has been recorded as goodwill and will be amortized over 40 years. 3. Accounting for Investments In the first quarter of fiscal 1994, the Company implemented Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). This standard addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Under SFAS 115, the Company is required to classify its debt and marketable equity securities in one of three categories: trading, available for sale, or held to maturity. Trading securities are bought and held primarily for the purpose of selling them in the near term. Held to maturity securities are securities that the Company has the ability and intent to hold until maturity. All other securities not included in trading or held to maturity are classified as available for sale. Trading securities are recorded at fair value with unrealized gains and losses included in earnings. Held to maturity securities are recorded at amortized cost, adjusted for amortization or accretion of premiums or discounts. Unrealized gains and losses on securities available for sale are excluded from earnings and are reported as a separate component of stockholders' equity until realized. SFAS 115 has not had a significant impact on the Company's results of operations. Page 6 of 14 THE HOME DEPOT, INC. AND SUBSIDIARIES 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 Three Months Ended Increase May 1, May 2, in $ Amounts 1994 1993 Three Months Selected Consolidated Statements of Earnings Data Net Sales 100.0% 100.0% 31.7% Gross Profit 28.1 27.6 34.4 Operating Expenses: Selling and Store Operating 18.1 17.9 33.4 Pre-Opening .3 .2 76.7 General and Administrative 1.8 2.1 11.3 Total Operating Expense 20.2 20.2 31.6 Operating Income 7.9 7.4 42.1 Interest Income (Expense): Interest Income .3 .7 (46.8) Interest Expense (.3) (.4) (0.8) Interest, Net - .3 (102.4) Earnings Before Income Tax 7.9 7.7 35.9 Income Taxes 3.0 2.8 44.8 Net Earnings 4.9% 4.9% 30.8% Selected Consolidated Sales Data Number of Customer Transactions 70,859,000 55,869,000 26.8% Average Amount of Sales Per Transaction $40.53 $39.02 3.9 Weighted Average Weekly Sales Per Operating Store $796,000 $765,000 4.1 Weighted Average Sales Per Square Foot $ 409 $ 405 1.0 Page 7 of 14 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 first quarter of fiscal 1994 increased 32% to $2,872,129,000 compared to sales of $2,180,218,000 for the first quarter of fiscal 1993. This sales increase was attributable to new stores (287 at the end of the first quarter of fiscal 1994 compared to 224 at the end of the first quarter of fiscal 1993) and a comparable store for store sales increase of 7%. The percentage increase in comparable store sales would have been 10% after excluding all sales from the ten stores in southern Florida that were significantly affected by Hurricane Andrew. Gross profit as a percent of sales was 28.1% for the first quarter of fiscal 1994 compared to 27.6% for the comparable period of fiscal 1993. This gross profit increase as a percent of sales resulted primarily from a reduction in the penetration of lumber and building materials sales and improved inventory shrinkage results. Operating expenses as a percent of sales were 20.2% for both the first quarter of fiscal 1994 and fiscal 1993. Selling and store operating expenses as a percent of sales increased to 18.1% for the first quarter of fiscal 1994 compared to 17.9% for the comparable period in fiscal 1993. This increase was attributable to, among other things, additional expenses associated with five store relocations compared to two store relocations during the comparable quarter of fiscal 1993. Pre-opening expenses as a percent of sales were 0.3% for the first quarter of fiscal 1994 compared to 0.2% for the comparable period of fiscal 1993. This increase was attributable to 16 new store openings plus five relocations compared to 10 store openings plus two relocations in the comparable period of fiscal 1993. General and administrative expenses decreased to 1.8% for the first quarter of fiscal 1994 compared to 2.1% for the comparable period of fiscal 1993. This decrease was due to higher sales volumes with continued emphasis on controlling costs and the inclusion in the first quarter of fiscal 1993 expenses associated with a mainframe computer replacement. Interest income as a percent of sales decreased to 0.3% for the first quarter of fiscal 1994 from 0.7% for the first quarter of fiscal 1993. This decrease was attributable to a lower investment base and lower effective yields. Interest expense as a percent of sales decreased to 0.3% for the first quarter of fiscal 1994 compared to 0.4% for the first quarter of fiscal 1993. This decrease was attributable to higher capitalized interest due to more owned stores under construction, partially offset by interest on capitalized leases. Page 8 of 14 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 38.6% for the first quarter of fiscal 1994 from 36.2% for the comparable period of fiscal 1993. This increase was attributable to the implementation of the Omnibus Budget Reconciliation Act of 1993 and a reduction of tax advantaged investments. In addition, the Federal and state effective tax rate for the first quarter of fiscal 1993 would have been 37.5%, however Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" was implemented which reduced the Federal and state effective tax rate to 36.2%. Net earnings as a percent of sales was 4.9% for both the first quarter of fiscal 1994 and fiscal 1993. Earnings per share was $.31 for the first quarter of fiscal 1994 compared to $.24 for the first quarter of fiscal 1993. 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 three months of fiscal 1994, the Company opened 16 stores, acquired seven stores in Canada and relocated five of its existing stores. During the remainder of fiscal 1994, the Company plans to open approximately 54 additional new stores and relocate four existing stores. Of the planned 70 new stores and nine relocations, it is expected that 69 will be owned and 10 will be leased. The Company currently plans to open approximately 85 new stores and may relocate 10 stores during fiscal 1995. Although some of these locations will be leased directly, it is expected that many may be obtained through the purchase of pre-existing leasehold interests, the acquisition of land parcels and the construction or purchase of buildings during fiscal 1994. 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 $12,800,000 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 $4,000,000 per store. In addition, each new store will require approximately $2,500,000 to finance inventories, net of vendor financing. Page 9 of 14 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 addition, the Company paid approximately $162,000,000 on February 28, 1994 in conjunction with the acquisition of a 75% interest in Aikenhead's Home Improvement Warehouse (now known as Home Depot Canada) in Canada. After six years, the Company has the option to purchase, or the other partner has the right to cause the Company to purchase, the remaining 25% of Home Depot Canada. At the time of acquisition, Aikenhead's was operating seven stores and the Company anticipates having 12 stores in Canada by the end of fiscal 1994. These Canadian stores have been included in the planned store totals discussed above. As of May 1, 1994, the Company had $329,599,000 in cash and short-term investments as well as $340,234,000 in long-term investments. Management believes that its current cash position, the proceeds from short-term and long- term investments, internally generated funds, 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 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders During the first quarter of fiscal 1994, 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 (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended May 1, 1994. Page 11 of 14 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/ Ronald M. Brill Ronald M. Brill Executive Vice President Chief Financial Officer (Date) Page 12 of 14 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: Arthur M. Blank President Ronald M. Brill Executive Vice President Chief Financial Officer (Date) Page 12 of 14 THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit Description Page 11.1 Computation of Earnings per Common and Common Equivalent Share...................................... 14 Page 13 of 14 EX-99 2 THE HOME DEPOT 1995 1ST QTR 10-Q EXHIBIT 1.11 Exhibit 11.1 THE HOME DEPOT, INC. AND SUBSIDIARIES Computation of Earnings Per Common and Common Equivalent Share (In Thousands, Except Per Share Data) Three Months Ended May 1, 1994 May 2, 1993 Primary Net earnings applicable to common and common equivalent shares $139,734 $106,799 Shares: Weighted average number of common and common equivalent shares assuming average market price for period 453,976 452,561 Primary earnings per common and common equivalent share $ .308 $ .236 Fully Diluted Net earnings applicable to common and common equivalent shares $139,734 $106,799 Tax effected interest expense attributable to convertible subordinated notes $5,260 $5,157 $144,994 $111,956 Shares: Weighted average number of common and common equivalent shares at higher of ending or average market price 454,068 452,561 Additional shares from convertible subordinated notes 20,774 20,774 474,842 473,335 Fully diluted earnings per common & common equivalent share $ .305 $ .236 (1) Common equivalent shares represent shares granted under three stock option plans and an employee stock purchase plan. (2) The Company's 4.5% convertible notes, issued in 1992 are common stock equivalents. Fully diluted earnings per share shows the effect on earnings per share assuming conversion of the 4.5% convertible notes as of the beginning of the accounting periods presented. For the three month period ended May 1, 1994, shares issuable upon conversion of the notes were dilutive, but had no impact on earnings per share. For the three month period ended May 2, 1993, shares issuable upon conversion of the notes were anti-dilutive. Page 14 of 14 -----END PRIVACY-ENHANCED MESSAGE-----