-----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, GiA5a9oChVlBY44bTuJnQ4bUOP6cWr14uQ/Ktb2HGOI/hrDKZ3HnNSvmlwCfGjM5 xGwbcfBQl0BOH+148A9Jjw== 0000354950-99-000003.txt : 19990604 0000354950-99-000003.hdr.sgml : 19990604 ACCESSION NUMBER: 0000354950-99-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990502 FILED AS OF DATE: 19990603 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: SEC FILE NUMBER: 001-08207 FILM NUMBER: 99639583 BUSINESS ADDRESS: STREET 1: 2455 PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30339-4024 BUSINESS PHONE: 770-433-8211 MAIL ADDRESS: STREET 1: 2455 PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30339-4024 10-Q 1 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
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 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
See accompanying notes to consolidated condensed financial statements.
THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In Millions, Except Share Data) May 2, January 31, ASSETS 1999 1999 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
See accompanying notes to consolidated condensed financial statements.
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: 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
See accompanying notes to consolidated condensed financial statements.
THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In Millions) Three Months Ended May 2, May 3, 1999 1998 Net Earnings $ 489 $ 337 Other Comprehensive Income: Foreign Currency Translation Adjustments 28 5 Comprehensive Income $ 517 $ 342
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).
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 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
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) EX-3.1 2 EXHIBIT 3.1 Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF THE HOME DEPOT, INC., AS AMENDED (Originally incorporated on June 29, 1978 under the name M. B. Associates Incorporated) FIRST: The name of the corporation (which is herein referred to as the "Corporation") is The Home Depot, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, in the County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware. Without limiting in any manner the scope and generality of the foregoing, it is hereby provided that the Corporation shall have the following purposes, objects and powers: To manufacture, purchase or otherwise acquire, invest in, own, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with, any and all goods, wares, merchandise and personal property relating to home improvement services, materials, products, devices, manuals, audio-visual aids, tools and any and all products related thereto of every kind and description. To do all and everything necessary, suitable and proper for the accomplishment of any of the purposes or the attainment of any of the objects or the furtherance of any of the powers herein before set forth, either alone or in association with other corporations, firms or individuals, and to do every other act or acts, thing or things incidental to or growing out of or connected with the aforesaid powers or any part or parts thereof, including, without limitation, the acquisition and operation of businesses exclusively or partially engaged in providing home improvement services, materials, products, devices, manuals, audio-visual aids, tools, and related products or services to consumers. The business or purpose of the Corporation is from time to time to do any one or more of the acts and things herein before set forth, and it shall have power to conduct and carry on said business, or any part thereof, and to have one or more offices, and to exercise any or all of its corporate powers and rights, in the State of Delaware, and in the various other states, territories, colonies and dependencies of the United States, in the District of Columbia, and in all or any foreign countries. The enumeration herein of the objects and purposes of the Corporation shall be construed as powers as well as objects and purposes and shall not be deemed to exclude by inference any powers, objects or purposes which the Corporation is empowered to exercise, whether expressly by force of the laws of the State of Delaware now or hereafter in effect, or impliedly by the reasonable construction of said laws. FOURTH: The total number of shares of stock which the Corporation will have authority to issue is 5,000,000,000, all of which shall be shares of Common Stock of the par value of five cents ($.05) each. FIFTH: The name and mailing address of the sole incorporator is as follows: Kenneth G. Langone c/o INVEMED ASSOCIATES INCORPORATED 375 Park Avenue New York. New York 10022 SIXTH: 1. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than three nor more than fifteen directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the meeting of stockholders at which this Article is adopted,Class I, II and III directors shall be elected to serve until the 1987, 1986 and 1985 annual meetings of stockholders, respectively. 2. At each annual meeting of the stockholders beginning with 1985, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. 3. No person (other than a person nominated by or on behalf of the Board of Directors) shall be eligible for election as a director at any annual or special meeting of stockholders unless a written request that his or her name be placed in nomination is received from a stockholder of record by the Secretary of the Corporation not less than 30 days prior to the date fixed for the meeting, together with the written consent of such person to serve as a director. 4. Except to the extent prohibited by law, the Board of Directors shall have the right (which, to the extent exercised, shall be exclusive) to establish the rights, powers, duties, rules and procedures that from time to time shall govern the Board of Directors and each of its members, including without limitation the vote required for any action by the Board of Directors, the determination by resolution of the Board of Directors of the officers of the Corporation and their respective titles and duties, the determination by resolution of the Board of Directors of the manner of choosing the officers of the Corporation and the terms of their respective offices, the determination by resolution of the Board of Directors of the terms and conditions under which the Corporation shall exercise the powers granted to it as of January I, 1984 by Section 145 of the Delaware General Corporation Law, as such powers may exist from time to time after January 1, 1984, and that from time to time shall affect the directors' power otherwise to manage the business and affairs of the Corporation; and, notwithstanding any other provision of this Certificate of Incorporation to the contrary, no by-law shall be adopted by stockholders which shall interpret or qualify, or impair or impede the implementation of, the foregoing. Any inconsistency between, on the one side, a document which implements the provisions of this paragraph 4 and sets forth the rights, powers, duties, rules and/or procedures governing the Board of Directors and, on the other side, any by-law or other corporate document shall be construed in favor of the document setting forth such rights, powers, duties, rules and/or procedures. 5. No action shall be taken by stockholders of the Corporation except at an annual or special meeting of the stockholders of the Corporation. Except to the extent, if any, otherwise required by law, a special meeting of the stockholders of the Corporation may be called only by the Chairman of the Board of Directors, the President or the Board of Directors of the Corporation. 6. No amendment to the Certificate of Incorporation of the Corporation shall amend, alter, change or repeal any of the provisions of this Article SIXTH, unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote of the holders of eighty percent (80%) of all shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article SIXTH as one class; provided that this paragraph 6 shall not apply to, and such eighty percent (80%) vote or consent shall not be required for, any amendment, alteration, change or repeal unanimously recommended to the stockholders by the Board of Directors of the Corporation if each of such directors is a person who would be eligible to serve as a continuing director as hereinafter defined in paragraph 7 of this Article SIXTH. 7. As used in paragraph 6 of this Article SIXTH, (a) the term "continuing director" shall mean either a person who was a member of the Board of Directors of the Corporation elected by the stockholders of the Corporation prior to the time that an "other entity" acquired in excess of ten percent (10%) of the stock of the Corporation entitled to vote in the election of directors, or a person recommended to succeed any continuing director by a majority of continuing directors; (b) the term "other entity" shall include any corporation, person or other entity (other than the Corporation, any of its subsidiaries or a trustee holding stock for the benefit of employees of the Corporation or its subsidiaries, or any one of them, pursuant to one or more employee benefit plans or arrangements) and any other entity with which it or its "affiliate" or "associate" (as defined below) has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of stock of the Corporation, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on January 1, 1984, together with the successors and assigns of such persons in any transaction or series of transactions not involving a "public offering" of the Corporation's stock within the meaning of the Securities Act of 1933, provided that "other entity" does not include any one or any group of more than one of the persons who were directors of the Corporation as of January 1, 1984, or any one or any group of more than one continuing director (as defined above); (c) an other entity (as defined above) shall be deemed to be the beneficial owner of any shares of stock of the Corporation which such other entity has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise; and (d) the outstanding shares of any class of stock of the Corporation shall include shares deemed owned through application of clause (c) above but shall not include any other shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. 8. A majority of the continuing directors shall have the power and duty to determine for the purposes of this Article SIXTH on the basis of information known to them whether (a) such other entity beneficially owns more than ten percent (10%) of the outstanding shares of stock of the Corporation entitled to vote in the election of directors, (b) an other entity is an "affiliate" or "associate" (as defined above) of another, or (c) an other entity has an agreement, arrangement or understanding with another. SEVENTH: The Board of Directors shall have power to make, alter or repeal the by-laws of the Corporation, except as may otherwise be provided in the by-laws. EIGHTH: 1. The affirmative vote or, if permitted under this Certificate of Incorporation, consent of the holders of eighty percent (80%) of all shares of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article EIGHTH as one class, shall be required for the adoption or authorization of (i) a business combination (as hereinafter defined) with any other entity (as hereinafter defined) if, as of the record date for the determination of stockholders entitled to notice thereof and to vote thereon, or, if so permitted, consent thereto, such other entity is the beneficial owner, directly or indirectly, of more than twenty percent (20%) of the outstanding shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article EIGHTH as one class, or (ii) a proposed dissolution of the Corporation or a proposed amendment of the Certificate of Incorporation of the Corporation which would either change the entitlement of the holders of shares of Common Stock of the Corporation to vote in the election of directors or would authorize the Corporation to issue either shares of capital stock (other than shares of its Common Stock) or bonds, debentures or other obligations, which, if issued, would or could be entitled to vote in the election of directors if, as of the record date for the determination of stockholders entitled to notice of and to vote on or, if so permitted, consent to such proposed dissolution or such proposed amendment, an other entity (as hereinafter defined) is the beneficial owner, directly or indirectly, of more than twenty percent (20%) of the outstanding shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article EIGHTH as one class; provided that such eighty percent (80%) voting requirement shall not be applicable to the adoption or authorization of a business combination if: (a) The cash, or fair market value of other consideration, to be received per share by holders of shares of any class of capital stock of the Corporation in such business combination bears the same or a greater percentage relationship to the market price of such shares of capital stock immediately prior to the announcement of such business combination as the highest per share price (including brokerage commissions and/or soliciting dealers' fees) which such other entity has theretofore paid for any of such shares of capital stock already owned by it bears to the market price of such shares of capital stock immediately prior to the commencement of acquisition of such shares of capital stock by such other entity; (b) The cash, or fair market value of other consideration, to be received per share by holders of shares of any class of capital stock of the Corporation in such business combination is not less than the highest per share price (including brokerage commissions and/or soliciting dealers' fees) paid by such other entity in acquiring any of its holdings of such shares of capital stock; (c) After such other entity has acquired such greater-than- twenty percent (20%) interest and prior to the consummation of such business combination: (i) such other entity shall have taken steps to ensure that the Corporation's Board of Directors included- at all times representation by continuing director(s) (as hereinafter defined) proportionate to the stockholdings of the Corporation's stockholders not affiliated with such other entity (with a continuing director to occupy any resulting fractional board position); (ii) such other entity shall not have acquired any newly issued shares of capital stock, directly or indirectly, from the Corporation (except upon conversion of securities acquired by it prior to obtaining such greater-than-twenty percent (20%) interest or as a result of a pro rata stock dividend or stock split); and (iii) such other entity shall not have acquired any additional shares of the Corporation's outstanding capital stock or securities convertible into capital stock except as a part of the transaction which results in such other entity acquiring such greater-than- twenty percent (20%) interest; and (d) Such other entity shall not have received the benefit, directly or indirectly (except proportionately as a stockholder) of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation. The provisions of this Article EIGHTH shall also apply to a business combination with any other entity which at any time has been the beneficial owner, directly or indirectly, of more than twenty percent (20%) of the outstanding shares of stock of the Corporation entitled to vote in the election of directors, considered for the purpose of this Article EIGHTH as one class, notwithstanding the fact that such other entity has reduced its shareholdings below twenty percent (20%) if, as of the record date for the determination of stockholders entitled to notice of and to vote on or, if so permitted, consent to the business combination, such other entity is an "affiliate" of the Corporation (as hereinafter defined). 2. As used in this Articl e EIGHTH, (a) the term "other entity" shall include any corporation, person or other entity (other than the Corporation, any of its subsidiaries or a trustee holding stock for the benefit of employees of the Corporation or its subsidiaries or any one of them, pursuant to one or more employee benefit plans or arrangements)and any other entity with which it or its "affiliate" or "associate"(as defined below) has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of stock of the. Corporation, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on January 1, 1984, together with the successors and assigns of such persons in any transaction or series of transactions not involving a "public offering" of the Corporation's stock within the meaning of the Securities Act of 1933, provided that "other entity" does not include any one or any group of more than one of the persons who were directors of the Corporation as of January 1, 1984, or any one or any group of more than one continuing director (as defined below), (b) an other entity (as defined above) shall be deemed to be the beneficial owner of any shares of stock of the Corporation which such other entity has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise; (c) the outstanding shares of any class of stock of the Corporation shall include shares deemed owned through application of clause (b) above but shall not include any other shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise; (d) the term, "business combination" shall include any merger or consolidation of the Corporation with or into any other corporation, or the sale or lease of all or any substantial part of the assets of the Corporation to, or any sale or lease to the Corporation or any subsidiary thereof in exchange for securities of the Corporation of any assets (except assets having an aggregate fair market value of less than $5,000,000) of, any other entity; (e) the term "continuing director" shall mean either a person who was a member of the Board of Directors of the Corporation elected by the stockholders of the Corporation prior to the time that an other entity acquired in excess of ten percent (10%) of the stock of the Corporation entitled to vote in the election of directors, or a person recommended to succeed any continuing director by a majority of continuing directors; and (f) for the purposes of subparagraphs l(a) and (b) of this Article EIGHTH the term "other consideration to be received" shall mean capital stock of the Corporation retained by its stockholders (other than such other entity) in the event of a business combination with such other entity in which the Corporation is the surviving corporation. 3. A majority of the continuing directors shall have the power and duty to determine for the purposes of this Article EIGHTH on the basis of information known to them whether (a) such other entity beneficially owns more than ten percent (10%) or twenty percent (20%) of the outstanding shares of stock of the Corporation entitled to vote in the election of directors, (b) an other entity is an "affiliate" or "associate" (as defined above) of another, (c) an other entity has an agreement, arrangement or understanding with another, or (d) the assets being acquired by the Corporation, or any subsidiary thereof, have an aggregate fair market value of less than $5,000,000. 4. No amendment to the Certificate of Incorporation of the Corporation shall amend, alter, change or repeal any of the provisions of this Article EIGHTH, unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote or consent of the holders of eighty percent (80%) of all shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article EIGHTH as one class; provided that this paragraph 4 shall not apply to, and such eighty percent (80%) vote or (if permitted under this Certificate of Incorporation) consent shall not be required for, any amendment, alteration, change or repeal unanimously recommended to the stockholders by the Board of Directors of the Corporation if all of such directors are persons who would be eligible to serve as "continuing directors" within the meaning of paragraph 2 of this Article EIGHTH. 5. Nothing contained in this Article EIGHTH shall be construed to relieve any other entity from any fiduciary obligation imposed by law. 6. The provisions of this Article EIGHTH shall not apply to: (a) The adoption or authorization of any business combination described in paragraph 1 of this Article EIGHTH if the Board of Directors of the Corporation shall have approved by resolution a memorandum of understanding with the other corporation, person or entity with whom such business combination is proposed prior to the time that such other corporation, person or entity shall have become a beneficial owner of five percent (5%) or more of the outstanding shares of any class of capital stock of the Corporation entitled to vote in the election of directors; or (b) The adoption or authorization of any business combination, proposed dissolution or proposed amendment described in paragraph 1 of this Article EIGHTH, if such business combination, proposed dissolution or proposed amendment is approved, prior to its adoption or authorization by the stockholders of the Corporation, by a resolution of the Board of Directors of the Corporation which is approved by at least two- thirds of those members of the Board of Directors of the Corporation who are not, at the time of their approval, involved with and/or representing an other entity which, at such time, is the beneficial owner, directly or indirectly, of more than twenty percent (20%) of the outstanding shares of stock of the Corporation then entitled to vote in the election of directors. NINTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. EX-11.1 3
Exhibit 11.1 THE HOME DEPOT, INC. AND SUBSIDIARIES COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE (In Millions, Except Per Share Data) Three Months Ended May 2, May 3, 1999 1998 BASIC Net Earnings Available to Common Shareholders $ 489 $ 337 Weighted Average Number of Common Shares Outstanding 1,478 1,466 Basic Earnings Per Share $ 0.33 $ 0.23 DILUTED Net Earnings Available to Common Shareholders $ 489 $ 337 Tax Effected Interest Expense Attributable to 3.25% Convertible Subordinated Notes 5 6 Net Earnings Available to Common Shareholders Assuming Dilution $ 494 $ 343 Weighted Average Number of Common Shares Outstanding 1,478 1,466 Effect of Potentially Dilutive Securities: 3.25% Convertible Subordinated Notes 48 48 Employee Stock Plans 32 25 Weighted Average Number of Common Shares Outstanding Assuming Dilution 1,558 1,539 Diluted Earnings Per Share $ 0.32 $ 0.22 (1) Employee stock plans represent shares granted under the Company's employee stock purchase plan and stock option plans, as well as shares issued for deferred compensation stock plans. For fiscal years 1999 and 1998, shares issuable upon conversion of the Company's 3.25% Notes, issued in October 1996, were included in weighted average shares assuming dilution for purposes of calculating diluted earnings per share. To calculate diluted earnings per share, net earnings are adjusted for tax-effected net interest and issue costs on the 3.25% Notes and divided by weighted average shares assuming dilution.
EX-27 4
5 1,000,000 3-MOS Jan-30-2000 May-2-1999 604 0 502 0 4,955 6,211 9,937 1,342 15,199 4,216 1,319 0 0 74 9,255 15,199 8,952 8,952 6,386 6,386 1,756 0 5 805 316 489 0 0 0 489 0.33 0.32
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