-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AJo+cl7ZOpgXic1YKR+u/Wigx8rPheTq3ttkM8IQWtZKCXUCGavuvS+cwUG/35OE Q2LS4FmBlcpmFyNwgw5K5w== 0000354950-97-000003.txt : 19970603 0000354950-97-000003.hdr.sgml : 19970603 ACCESSION NUMBER: 0000354950-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970504 FILED AS OF DATE: 19970602 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME DEPOT INC CENTRAL INDEX KEY: 0000354950 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [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: 97617967 BUSINESS ADDRESS: STREET 1: 2727 PACES FERRY RD CITY: ATLANTA STATE: GA ZIP: 30339-4024 BUSINESS PHONE: 770-433-82 MAIL ADDRESS: STREET 1: 2455 PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30339-4024 10-Q 1 Page 1 of 13 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 4, 1997 - 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 486,339,169 Shares, as of May 29, 1997 Page 1 of 13 THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q May 4, 1997 Page Part I. Financial Information: Item 1. Financial Statements CONSOLIDATED STATEMENTS OF EARNINGS - Three-Month Periods Ended May 4,1997 and April 28, 1996 3 CONSOLIDATED CONDENSED BALANCE SHEETS - As of May 4,1997 and February 2, 1997 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - Three-Month Periods Ended May 4, 1997 and April 28, 1996 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
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 4, April 28, 1997 1996 Net Sales $ 5,657,274 $ 4,362,215 Cost of Merchandise Sold 4,105,480 3,142,285 Gross Profit 1,551,794 1,219,930 Operating Expenses: Selling and Store Operating 1,014,580 815,659 Pre-Opening 13,039 12,859 General and Administrative 97,605 72,100 Total Operating Expenses 1,125,224 900,618 Operating Income 426,570 319,312 Interest Income (Expense): Interest and Investment Income 9,978 4,126 Interest Expense (10,839) (2,329) Interest, Net (861) 1,797 Minority Interest (2,075) (350) Earnings Before Income Taxes 423,634 320,759 Income Taxes 164,800 125,740 Net Earnings $ 258,834 $ 195,019 Earnings Per Common and Common Equivalent Share $ 0.53 $ 0.41 Dividends Per Share $ 0.06 $ 0.05 Weighted Average Number of Common and Common Equivalent Shares 503,218 480,187
See accompanying notes to consolidated condensed financial statements. Page 3 of 13
THE HOME DEPOT INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In Thousands, Except Share Data) May 4, February 2, 1997 1997 ASSETS Current Assets: Cash and Cash Equivalents $ 614,174 $ 146,006 Short-Term Investments 427,366 412,430 Receivables, Net 348,913 388,416 Merchandise Inventories 3,249,236 2,708,283 Other Current Assets 84,433 54,238 Total Current Assets 4,724,122 3,709,373 Property and Equipment, at cost 6,434,961 6,149,816 Less: Accumulated Depreciation and Amortization (784,516) (712,770) Net Property and Equipment 5,650,445 5,437,046 Long-Term Investments ---- 8,480 Notes Receivable 24,684 39,518 Cost in Excess of the Fair Value of Net Assets Acquired 84,246 86,540 Other 65,169 60,753 $10,548,666 $ 9,341,710 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 1,792,742 $ 1,089,736 Accrued Salaries and Related Expenses 243,462 249,356 Sales Taxes Payable 165,447 129,284 Other Accrued Expenses 342,812 322,503 Income Taxes Payable 184,979 48,728 Current Installments of Long-Term Debt 1,834 2,519 Total Current Liabilities 2,731,276 1,842,126 Long-Term Debt, excluding current installments 1,259,534 1,246,593 Other Long-Term Liabilities 163,731 134,034 Deferred Income Taxes 66,309 66,020 Minority Interest 97,593 97,751 Stockholders' Equity: Common Stock, par value $0.05. Authorized: 1,000,000,000 shares; issued and outstanding - 486,190,000 shares at 5/4/97 and 480,515,000 shares at 2/2/97 24,309 24,026 Paid-In Capital 2,574,545 2,523,093 Retained Earnings 3,639,747 3,406,592 Cumulative Translation Adjustments (6,789) 2,173 Unrealized Loss on Investments, Net (824) (168) 6,230,988 5,955,716 Less Shares Held in Employee Benefit Trust (765) (530) Total Stockholders' Equity 6,230,223 5,955,186 $10,548,666 $ 9,341,710
See accompanying notes to consolidated condensed financial statements. Page 4 of 13
THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) Three Months Ended May 4, 1997 April 28, 1996 Cash Provided from Operations: Net Earnings $ 258,834 $ 195,019 Reconciliation of Net Earnings to Net Cash Provided by Operations: Depreciation and Amortization 67,394 52,973 Deferred Income Tax Expense 658 691 Decrease in Receivables, Net 28,013 49,213 Increase in Merchandise Inventories (523,875) (348,348) Increase in Accounts Payable and Accrued Expenses 765,377 556,022 Increase in Income Taxes Payable 141,188 111,786 Other (17,145) 7,679 Net Cash Provided by Operations 720,444 625,035 Cash Flows Used in Investing Activities: Capital Expenditures (265,851) (279,083) Proceeds from Sales of Property and Equipment 9,896 5,396 Proceeds from Sales of Investments ---- 30,737 Purchases of Investments (23,559) (63) Proceeds from Maturities of Investments 15,926 7,734 Repayments of Advances Secured by Real Estate, Net 28,364 2,051 Net Cash Used in Investing Activities (235,224 ) (233,228) Cash Flows Used in Financing Activities: Repayments of Commercial Paper Obligations, Net ---- (421,570) Repayments of Notes Receivable from ESOP ---- 313 Principal Repayments of Long-Term Debt (35,807) (823) Proceeds from Sale of Common Stock, Net 46,013 42,499 Cash Dividends Paid to Stockholders (28,862) (23,894) Shares Purchased for Employee Benefit Trust (235) (247) Minority Interest Contributions to Partnership 2,233 6,847 Net Cash Used in Financing Activities (16,658) (396,875) Decrease in Effect of Exchange Rate Changes on Cash (394) (29) Increase (Decrease) in Cash and Cash Equivalents 468,168 (5,097) Cash and Cash Equivalents at Beginning of Period 146,006 53,269 Cash and Cash Equivalents at End of Period $ 614,174 $ 48,172
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 February 2, 1997, as filed with the Securities and Exchange Commission (File No. 1-8207). 2. Merger of Maintenance Warehouse On March 14, 1997, the Company acquired Maintenance Warehouse/America Corp. ("Maintenance Warehouse") through the exchange of all the common stock of Maintenance Warehouse for shares of The Home Depot, Inc. Common Stock. Maintenance Warehouse, which had sales of approximately $130 million in 1996, is the leading direct-mail marketer of maintenance, repair and operations products serving the U.S. building and facilities management market. The San Diego-based company will continue to operate under its own name as a subsidiary of the Company. 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. Three Months Ended Percentage Increase May 4, April 28, (Decrease) in 1997 1996 Dollar Amounts Selected Consolidated Statements of Earnings Data Net Sales 100.0% 100.0% 29.7% Gross Profit 27.4 28.0 27.2 Operating Expenses: Selling and Store Operating 18.0 18.7 24.4 Pre-Opening 0.2 0.3 1.4 General and Administrative 1.7 1.7 35.4 Total Operating Expenses 19.9 20.7 24.9 Operating Income 7.5 7.3 33.6 Interest Income (Expense): Interest and Investment Income 0.2 0.1 141.8 Interest Expense (0.2) ---- 365.4 Interest, Net 0.0 0.1 (147.9) Minority Interest 0.0 0.0 492.9 Earnings Before Income Taxes 7.5 7.4 32.1 Income Taxes 2.9 2.9 31.1 Net Earnings 4.6% 4.5% 32.7% Selected Consolidated Sales Data Number of Transactions (000's) 129,744 104,209 24.5% Average Amount of Sale Per Transaction $ 43.45 $ 41.86 3.8 Weighted Average Weekly Sales Per Operating Store (000's) $ 834 $ 782 6.7 Weighted Average Sales Per Square Foot Per Operating Store (000's) $ 410 $ 387 5.9%
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 first quarter of fiscal 1997 increased 30% to $5,657,274,000 compared to sales of $4,362,215,000 for the first quarter of fiscal 1996. The sales increase for the quarter was primarily attributable to new stores (536 at the end of the first quarter of fiscal 1997 compared to 441 at the end of the first quarter of fiscal 1996) and a comparable store-for-store sales increase of 11%. Relative to last year, the Company experienced more normal weather for the spring season in most regions, which contributed to the stronger year-over-year sales trends. Gross profit as a percent of sales was 27.4% for the first quarter of fiscal 1997 compared to 28.0% for the comparable period of fiscal 1996. The gross profit rate decrease was primarily attributable to an earlier spring season versus last year, which resulted in higher sales penetrations of lumber and seasonal merchandise, which are lower margin categories. Operating expenses as a percent of sales decreased to 19.9% for the first quarter of fiscal 1997 from 20.7% for the first quarter of fiscal 1996. Selling and store operating expenses as a percent of sales were 18.0% for the first quarter of fiscal 1997 compared to 18.7% for the first quarter of fiscal 1996. This decrease was partially attributable to the high comparable store-for-store sales increase and milder weather, which resulted in lower utilities and facility maintenance expenses as a percent of sales. As a percent of sales, net advertising expense for the first quarter of fiscal 1997 was lower than last year due to strong sales and increased co-op advertising. In addition, estimated unrecoverable costs for store relocations were lower than last year as a percent of sales. As a percent of sales, pre-opening expenses were 0.2% for the first quarter of fiscal 1997 compared to 0.3% for the comparable period last year. The decrease was attributable to efficiencies achieved in the store opening process and a higher proportion of store openings in markets with lower labor costs during the first quarter relative to plans for the rest of the year. The Company opened 24 new stores and relocated one store during the first quarter of fiscal 1997 compared to 18 new stores and four store relocations for the first quarter of fiscal 1996. General and administrative expenses as a percent of sales were 1.7% for both the first quarter of fiscal 1997 and fiscal 1996. Net interest as a percent of sales was 0.0% in the first quarter of fiscal 1997 as compared to 0.1% in the first quarter of fiscal 1996. Interest expense increased due to the issuance of $1,104,000,000 of 3.25% Convertible Subordinated Notes ("the 3.25% Notes") during the third quarter of fiscal 1996. Also, capitalized interest was lower than last year primarily because of a lower average borrowing rate resulting from the low interest rate on the 3.25% Notes. Interest expense was partially offset by investment income generated from the proceeds of the 3.25% 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 decreased to 38.9% for the first quarter of fiscal 1997 from 39.2% for the first quarter of fiscal 1996. During the fourth quarter of fiscal 1996, the Company adjusted its combined federal and state effective income tax rate to 38.9% for the fiscal year due to the new Worker's Opportunity tax credit and various state and local tax planning strategies. Net earnings as a percent of sales were 4.6% for the first quarter of fiscal 1997, compared to 4.5% for the first quarter of fiscal 1996. Earnings per share were $0.53 for the first quarter of fiscal 1997, up 29% from $0.41 in the first quarter of fiscal 1996. 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 1997, the Company opened 24 stores and relocated 1 store. During the remainder of fiscal 1997, the Company plans to open approximately 87 additional new stores and relocate 3 existing stores. In fiscal 1998, the Company plans to increase its total number of stores by approximately 21 to 22 percent. 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 1997. 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 $13,100,000 per location. The Company may purchase leasehold interests at varying amounts depending upon the value of such properties. In addition, each new store will require approximately $3,300,000 to finance inventories, net of vendor financing. The cost to remodel (including leasehold interests) and fixture stores to be leased is expected to average approximately $2,400,000 per store. Of the 111 new stores and 4 relocations planned to open in fiscal 1997, it is expected that 74% will be owned and the remainder will be leased. 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. In May 1997, the Company increased its available funding under the operating lease agreement to $600,000,000, which will allow the Company to finance a portion of its 1998 store openings. As of May 4, 1997, the Company had $1,041,540,000 in cash and short-term investments. Management believes that its current cash position, the proceeds from short-term investments, internally generated funds, funds available from the $600,000,000 operating lease agreement, funds available from its $800,000,000 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 first quarter of fiscal 1997, 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 On February 26, 1997, the Company filed a Form 8-K, pursuant to Item 5 - Other Event, reporting on the fiscal 1996 fourth quarter and year end results. 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 June 2, 1997 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 EX-11.1 2
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 4, April 28, 1997 1996 Net earnings applicable to common and common equivalent shares $ 258,834 $ 195,019 Tax effected interest expense, net of interest capitalized, attributable to convertible subordinated notes 5,842 ------ $ 264,676 $ 195,019 Shares: Weighted average number of common and common equivalent shares assuming average market price 487,247 480,187 Additional shares from assumed conversion of convertible subordinated notes 15,971 ----- 503,218 480,187 Primary earnings per common and common equivalent share $ .526 $ .406 (1) Common equivalent shares represent shares granted under the Company's employee stock purchase plan and stock option plans for the three month periods ended May 4,1997, and April 28, 1996. (2) The Company's 3.25% Convertible Subordinated Notes issued on October 2, 1996, are common stock equivalents. For the three months ended May 4, 1997 the notes were dilutive and, accordingly, were assumed to be converted at the beginning of the accounting period for purposes of calculating earnings per share. (3) Fully diluted earnings per share computations are not presented because the impact of a higher ending market price on weighted average common equivalent shares was not material for the three month periods ended May 4, 1997 and April 28, 1996.
EX-27 3
5 1,000 3-MOS FEB-01-1998 MAY-04-1997 614174 427366 348913 0 3249236 4724122 6434961 784516 10548666 2731276 1259534 0 0 24309 6205914 10548666 5657274 5657274 4105480 4105480 1127299 0 861 423634 164800 258834 0 0 0 258834 .53 .53
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