-----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, ExnYNEsIRCIgCeXPuDe9+7nNGjUvqP4d51FFfPPoqxLgSbwCJhF410TYlREAm5Hu TFT96GLVi8R/BWeznrMXYw== 0000354950-99-000005.txt : 19990830 0000354950-99-000005.hdr.sgml : 19990830 ACCESSION NUMBER: 0000354950-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990801 FILED AS OF DATE: 19990827 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: 99700510 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 16 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 August 1, 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 N.W. 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 1,483,034,331 Shares, as of August 20, 1999 THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q August 1, 1999 Page Part I. Financial Information: Item 1. Financial Statements CONSOLIDATED STATEMENTS OF EARNINGS - Three-Month and Six-Month Periods Ended August 1, 1999 and August 2,1998...........................3 CONSOLIDATED CONDENSED BALANCE SHEETS - As of August 1, 1999 and January 31, 1999 .......................4 CONSOLIDATED STATEMENTS OF CASH FLOWS - Six-Month Periods Ended August 1, 1999 and August 2,1998..........................5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - Three-Month and Six-Month Periods Ended August 1, 1999 and August 2,1998...........................6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS..............................................7 Item 2. Management's Discussion and Analysis of Results 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 - 14 Item 5. Other Information ............................................14 Item 6. Exhibits and Reports on Form 8-K..............................14 Signature Page.........................................................15 Index to Exhibits......................................................16
PART I. FINANCIAL INFORMATION Item 1. Financial Statements THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In Millions, Except Per Share Data) Three Months Ended Six Months Ended August 1, August 2, August 1, August 2, 1999 1998 1999 1998 Net Sales $ 10,431 $ 8,139 $ 19,383 $ 15,263 Cost of Merchandise Sold 7,402 5,876 13,788 11,031 Gross Profit 3,029 2,263 5,595 4,232 Operating Expenses: Selling and Store Operating 1,722 1,353 3,306 2,620 Pre-Opening 32 18 54 37 General and Administrative 159 122 308 244 Total Operating Expenses 1,913 1,493 3,668 2,901 Operating Income 1,116 770 1,927 1,331 Interest Income (Expense): Interest and Investment Income 9 9 13 15 Interest Expense (8) (10) (17) (21) Interest, Net 1 (1) (4) (6) Earnings Before Income Taxes 1,117 769 1,923 1,325 Income Taxes 438 302 754 521 Net Earnings $ 679 $ 467 $ 1,169 $ 804 Weighted Average Number of Common Shares Outstanding 1,482 1,470 1,480 1,468 Basic Earnings Per Share $ 0.46 $ 0.32 $ 0.79 $ 0.55 Weighted Average Number of Common Shares Outstanding Assuming Dilution 1,559 1,546 1,558 1,542 Diluted Earnings Per Share $ 0.44 $ 0.31 $ 0.76 $ 0.53 Dividends Per Share $ 0.04 $ 0.03 $ 0.07 $ 0.06
See accompanying notes to consolidated condensed financial statements.
THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In Millions, Except Share Data) August 1, January 31, ASSETS 1999 1999 Current Assets: Cash and Cash Equivalents $ 518 $ 62 Short-Term Investments 2 --- Receivables, Net 545 469 Merchandise Inventories 4,982 4,293 Other Current Assets 150 109 Total Current Assets 6,197 4,933 Property and Equipment, at cost 10,554 9,422 Less: Accumulated Depreciation and Amortization 1,438 1,262 Net Property and Equipment 9,116 8,160 Long-Term Investments 15 15 Notes Receivable 34 26 Cost in Excess of the Fair Value of Net Assets Acquired 273 268 Other 74 63 $ 15,709 $ 13,465 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 2,419 $ 1,586 Accrued Salaries and Related Expenses 485 395 Sales Taxes Payable 296 176 Other Accrued Expenses 635 586 Income Taxes Payable 151 100 Current Installments of Long-Term Debt 8 14 Total Current Liabilities 3,994 2,857 Long-Term Debt, excluding current installments 1,338 1,566 Other Long-Term Liabilities 261 208 Deferred Income Taxes 85 85 Minority Interest 11 9 Stockholders' Equity: Common Stock, par value $0.05. Authorized: 5,000,000,000 shares; issued and outstanding - 1,482,879,000 shares at 8/1/99 and 1,475,452,000 shares at 1/31/99 74 74 Paid-In Capital 3,071 2,854 Retained Earnings 6,941 5,876 Cumulative Translation Adjustments (61) (61) 10,025 8,743 Less Shares Purchased for Compensation Plans 5 3 Total Stockholders' Equity 10,020 8,740 $ 15,709 $ 13,465
See accompanying notes to consolidated condensed financial statements.
THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Millions) Six Months Ended August 1,1999 August 2,1998 Cash Provided From Operations: Net Earnings $ 1,169 $ 804 Reconciliation of Net Earnings to Net Cash Provided by Operations: Depreciation and Amortization 221 180 (Increase) Decrease in Receivables, Net (74) 132 Increase in Merchandise Inventories (676) (192) Increase in Accounts Payable and Accrued Expenses 1,141 642 Increase in Income Taxes Payable 123 40 Other (34) 1 Net Cash Provided by Operation 1,870 1,607 Cash Flows From Investing Activities: Capital Expenditures (1,196) (891) Purchase of Remaining Interest in the Home Depot Canada --- (261) Purchase of Business Acquired (28) --- Proceeds From Sales of Property and Equipment 32 22 Purchases of Investments (4) (1) Proceeds from Maturities of Investments 2 2 Repayments of Advances Secured by Real Estate, Net (9) 3 Net Cash Used in Investing Activities (1,203) (1,126) Cash Flows From Financing Activities: Repayments of Commercial Paper Obligations, Net (246) --- Principal Repayments of Long-Term Debt (7) (4) Proceeds from Sale of Common Stock, Net 141 84 Cash Dividends Paid to Stockholders (103) (81) Minority Interest Contributions to Partnership 5 5 Net Cash (Used in) Provided by Financing Activities (210) 4 Effect of Exchange Rate Changes on Cash and Cash Equivalents (1) (3) Increase in Cash and Cash Equivalents 456 482 Cash and Cash Equivalents at Beginning of Period 62 172 Cash and Cash Equivalents at End of Period $ 518 $ 654
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 Six Months Ended August 1, August 2, August 1, August 2, 1999 1998 1999 1998 Net Earnings $ 679 $ 467 $ 1,169 $ 804 Other Comprehensive Income: Foreign Currency Translation Adjustments (28) (22) --- (19) Total Other Comprehensive Income (28) (22) --- (19) Comprehensive Income $ 651 $ 445 $ 1,169 $ 785
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 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. Percentage Increase Three Months Six Months (Decrease) in Ended Ended Dollar Amounts Selected Consolidated Statements of August 1, August 2, August 1,August 2, Three Six Earnings Data 1999 1998 1999 1998 Months Months Net Sales 100.0% 100.0% 100.0% 100.0% 28.2% 27.0% Gross Profit 29.0 27.8 28.8 27.7 33.8 32.2 Operating Expenses: Selling and Store Operating 16.5 16.7 17.0 17.2 27.3 26.2 Pre-Opening 0.3 0.2 0.3 0.2 77.8 45.9 General and Administrative 1.5 1.5 1.6 1.6 30.3 26.2 Total Operating Expenses 18.3 18.4 18.9 19.0 28.1 26.4 Operating Income 10.7 9.4 9.9 8.7 44.9 44.8 Interest Income (Expense): Interest and Investment Income 0.1 0.1 0.1 0.1 0.0 (13.3) Interest Expense (0.1) (0.1) (0.1) (0.1) (20.0) (19.0) Interest, Net 0.0 0.0 0.0 0.0 (200.0) (33.3) Earnings Before Income Taxes 10.7 9.4 9.9 8.7 45.3 45.1 Income Taxes 4.2 3.7 3.9 3.4 45.0 44.7 Net Earnings 6.5% 5.7% 6.0% 5.3% 45.4 45.4 Selected Consolidated Sales Data Number of Transactions (000's) 215,486 179,822 400,666 335,810 19.8 19.3 Average Sale Per Transaction $ 48.10 $ 44.98 $ 48.04 $ 45.08 6.9 6.6 Weighted Average Weekly Sales Per Operating Store (000's) $ 978 $ 933 $ 929 $ 894 4.8 3.9 Weighted Average Sales Per Square Foot $ 474 $ 455 $ 450 $ 436 4.2 3.2
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 second quarter of fiscal 1999 increased 28.2% to $10.431 billion from $8.139 billion for the second quarter of fiscal 1998. For the first six months of fiscal 1999, sales increased 27.0% to $19.383 billion from $15.263 billion for the comparable period in fiscal 1998. The sales increase for both periods was primarily attributable to new stores (846 stores open at the end of the second quarter of fiscal 1999 compared with 679 at the end of the second quarter of fiscal 1998) and a comparable store- for-store sales increase of 11% for the second quarter and 10% for the first six months of fiscal 1999. Gross profit as a percent of sales was 29.0% for the second quarter of fiscal 1999 compared with 27.8% for the second quarter of fiscal 1998. For the first six months of fiscal 1999, gross profit as a percent of sales was 28.8% compared with 27.7% for the comparable period of fiscal 1998. The gross profit rate increase for both periods was primarily attributable to the ongoing benefits of product line reviews which have resulted in lower costs of merchandise and more effective product assortments, cost reductions through direct sourcing of imports, the roll-out of tool rental centers, and better shrink results have contributed to the higher gross margin rate. Total operating expenses as a percent of sales decreased to 18.3% for the second quarter of fiscal 1999 from 18.4% for the second quarter of fiscal 1998. For the first six months of fiscal 1999, operating expenses decreased to 18.9% from 19.0% for the comparable period in fiscal 1998. Selling and store operating expenses as a percent of sales decreased to 16.5% for the second quarter of fiscal 1999 from 16.7% for the comparable period in 1998. Net advertising expenses decreased as a percent of sales due to higher co-op support from vendors, increased national advertising and cost leverage achieved from opening new stores in existing markets. Also contributing to the decrease were store payroll salaries and wages, which continue to show productivity improvement in terms of sales generated per labor hour. The Company also leveraged occupancy and certain operating expenses due to the high comparable store sales. Partially offsetting these decreases were higher costs for store bonus plans due to the strong financial results of the Company for the first six months of fiscal 1999. THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) RESULTS OF OPERATIONS - (Continued) In addition, credit card discounts for the first six months of fiscal 1999 were higher than the comparable period of fiscal 1998 as a percent of sales due to a higher penetration of credit card sales and discount rate increases. Selling and store operating expenses as a percent of sales decreased to 17.0% for the first six months of fiscal 1999 from 17.2% for the first six months of fiscal 1998. This decrease was due primarily to lower net advertising and leverage achieved from high comparable store sales, offset partially by higher credit card discounts as described above. Pre-opening expenses as a percent of sales were 0.3% for the second quarter and first six months of fiscal 1999 compared to 0.2% for the second quarter and first six months of fiscal 1998. The Company opened 49 stores and relocated four stores during the second quarter of fiscal 1999 compared with 23 new stores and one store relocation during the second quarter of fiscal 1998. General and administrative expenses as a percent of sales were 1.5% for the second quarter of both fiscal 1999 and fiscal 1998, and 1.6% for the first six months of both fiscal 1999 and fiscal 1998. Net interest as a percent of sales was 0.0% for the second quarter and first six months of both fiscal 1999 and fiscal 1998. As a percent of sales, interest and investment income was 0.1% for both the second quarter and first six months of fiscal 1999 and the comparable periods of fiscal 1998. Interest expense as a percent of sales was 0.1% for all comparable periods. The Company's combined federal and state effective income tax rate decreased to 39.2% for the second quarter and first six months of fiscal 1999 from 39.3% for the comparable periods 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 6.5% and 6.0% for the second quarter and first six months of fiscal 1999, respectively, from 5.7% and 5.3% for the second quarter and first six months of fiscal 1998. The increases as a percent of sales for fiscal 1999 were primarily attributable to higher gross margin rates and lower selling and store operating expenses as a percent of sales, as described above. Diluted earnings per share were $0.44 and $0.76 for the second quarter and first six months of fiscal 1999, respectively, compared to $0.31 and $0.53 for the second quarter and first six months of fiscal 1998, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash flow generated from store operations provides the Company with a significant source of liquidity. Additionally, a significant portion of the Company's inventory is financed under vendor credit terms. During the first six months of fiscal 1999, the Company opened 86 stores, relocated five stores and temporarily closed one store, which is planned to reopened on the same site during the third quarter of fiscal 1999. During the remainder of fiscal 1999, the Company plans to open approximately 83 new stores and relocate one store, for a 22% unit growth rate for the year. It is anticipated that approximately 81% of these locations will be owned, and the remainder will be leased. THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES - (Continued) The Company has 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, 1998 and 1999 under the operating lease agreements and anticipates utilizing these facilities to finance selected new stores during the remainder of fiscal 1999 and in 2000, as well as 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 $3.9 million per store. In addition, each new store will require approximately $3.1 million to finance inventories, net of vendor financing. During fiscal 1996, the Company issued, through a public offering, $1.1 billion of 3.25% Convertible Subordinated Notes due October 1, 2001 ("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. As of August 1, 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 August 1, 1999, the Company had $520 million in cash and cash equivalents and short-term investments, as well as $15 million in long-term investments. Management believes that its current cash position, the proceeds from short-term and long-term investments, internally generated funds, funds available from its $800 million commercial paper program, funds available from the $882 million operating lease agreement, and/or the ability to obtain alternate sources of financing should enable the Company to complete its capital expenditure programs, including store expansions and renovations, through the next several fiscal years. THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) 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 August 1, 1999, the Company had expended approximately $10.1 million to effect the plan. As of August 1, 1999, the Company had 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, created an appropriate testing environment, completed testing and installed year 2000 compliant software in the production environment. 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 complete at the end of the second 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 August 1, 1999, this process was approximately 94% complete. The Company currently anticipates completing the facilities systems portion of its compliance plan early during the fourth 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 is conducting 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 currently anticipates that it will have completed testing suppliers and carriers representing approximately 65% of its EDI volume by the end of October 1999. 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 currently expects its year 2000 contingency planning to be substantially complete by the end of September 1999 and to test, modify and test implementation of the 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) is not material. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Company's Annual Meeting of Stockholders held on May 26, 1999, the stockholders elected the following nominees to the Board of Directors with votes cast as follows: Mr. John L. Clendenin: 1,267,015,470 shares for and 10,556,620 shares against; Ms. Bonnie G. Hill: 1,259,464,258 shares for and 18,107,832 shares against; Mr. Kenneth G. Langone: 1,265,812,054 shares for and 11,760,036 shares against; and Mr. Bernard Marcus: 1,265,806,562 shares for and 11,765,528 shares against. There were no abstentions or broker non-votes applicable to the election of directors. The following other directors have terms as director that continue after the meeting: Mr. Arthur M. Blank, Col. Frank Borman, Mr. Ronald M. Brill, Mr. Berry R. Cox, Mr. William S. Davila, Mr. Milledge A. Hart, III and Ms. M. Faye Wilson. The stockholders approved an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares with votes cast as follows: 1,182,070,494 shares for; 91,556,554 shares against; and 3,945,042 shares abstained. There were no broker non- votes. The stockholders approved an amendment to The Home Depot, Inc. Senior Officers' Bonus Pool Plan with votes cast as follows: 1,200,355,660 shares for; 68,420,992 shares against; and 8,795,439 shares abstained. There were no broker non-votes. The stockholders rejected a proposal relating to a report on certain employment matters with votes cast as follows: 107,458,718 shares for; 830,988,994 shares against; 85,097,654 shares abstained; and 254,026,723 broker non-votes. The stockholders rejected a proposal recommending that the Board of Directors take steps to amend the Company's Certificate of Incorporation to eliminate the classes of the Board of Directors with votes cast as follows: 437,631,749 shares for; 570,801,871 shares against; 15,163,347 shares abstained; and 253,975,122 broker non-votes. THE HOME DEPOT, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) PART II. OTHER INFORMATION - (Continued) The stockholders rejected a proposal recommending that the Board of Directors amend the Company's Bylaws to require that the Board of Directors consist of a majority of independent directors with votes cast as follows: 307,487,784 shares for; 642,554,747 shares against; 73,502,290 shares abstained; and 254,027,267 broker non-votes. The stockholders rejected a proposal relating to certain environmental matters with votes cast as follows: 113,143,811 shares for; 846,389,265 shares against; 64,000,289 shares abstained; and 254,038,723 broker non-votes. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11.1 Computation of Basic and Diluted Earnings Per Share 27. Financial Data Schedule (only submitted to SEC in electronic format) (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended August 1, 1999. 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 August 27, 1999 (Date) THE HOME DEPOT, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit Description 11.1 Computation of Basic and Diluted Earnings Per Share 27. Financial Data Schedule (only submitted to SEC in electronic format) EX-11.1 2
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 Six Months Ended August 1, August 2, August 1, August2, 1999 1998 1999 1998 BASIC Net Earnings Available to Common Shareholders $ 679 $ 467 $ 1,169 $ 804 Weighted Average Number of Common Shares Outstanding 1,482 1,470 1,480 1,468 Basic Earnings Per Share $ 0.46 $ 0.32 $ 0.79 $ 0.55 DILUTED Net Earnings Available to Common Shareholders $ 679 $ 467 $ 1,169 $ 804 Tax-Effected Interest Expense Attributable to 3.25% Convertible Subordinated Notes 5 6 10 12 Net Earnings Available to Common Shareholders Assuming Dilution $ 684 $ 473 $ 1,179 $ 816 Weighted Average Number of Common Shares Outstanding 1,482 1,470 1,480 1,468 Effect of Potentially Dilutive Securities: 3.25% Convertible Subordinated Notes 48 48 48 48 Employee Stock Plans 29 28 30 26 Weighted Average Number of Common Shares Outstanding Assuming Dilution 1,559 1,546 1,558 1,542 Diluted Earnings Per Share $ 0.44 $ 0.31 $ 0.76 $ 0.53 (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 3
5 1,000,000 6-MOS Jan-30-2000 Aug-1-1999 518 2 545 0 4,982 6,197 10,554 1,438 15,709 3,994 1,338 0 0 74 9,946 15,709 19,383 19,383 13,788 13,788 3,668 0 4 1,923 754 1,169 0 0 0 1,169 0.79 0.76
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