-----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, PlSG4hllG9zyzYZcKfX0jYHVtOjs+viQQw9LjbOMsgzHOXIYUCX3B9OV07GVBG+0 cPwdfDTafNv7x1rvrtFYDQ== 0001104659-05-042535.txt : 20050901 0001104659-05-042535.hdr.sgml : 20050901 20050901160933 ACCESSION NUMBER: 0001104659-05-042535 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20050731 FILED AS OF DATE: 20050901 DATE AS OF CHANGE: 20050901 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: 051064930 BUSINESS ADDRESS: STREET 1: 2455 PACES FERRY ROAD 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 a05-15064_110q.htm 10-Q

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended July 31, 2005

 

 

 

- OR -

 

 

 

o

 

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
incorporation or organization)

 

(I.R.S. Employer 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 ý  No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý  No o

 

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 2,140,328,585 Shares, as of August 26, 2005

 

 



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

 

INDEX TO FORM 10-Q

 

Part I. Financial Information

 

 

Item 1.

Financial Statements

 

 

 

CONSOLIDATED STATEMENTS OF EARNINGS—
  Three and Six Months Ended July 31, 2005 and August 1, 2004

3

 

CONSOLIDATED BALANCE SHEETS—
  As of July 31, 2005 and January 30, 2005

4

 

CONSOLIDATED STATEMENTS OF CASH FLOWS—
  Six Months Ended July 31, 2005 and August 1, 2004

5

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME—
  Three and Six Months Ended July 31, 2005 and August 1, 2004

6

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7 – 9

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11 – 17

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

18

Item 4.

Controls and Procedures

 

18

 

 

 

 

Part II. Other Information

 

 

Item 1.

Legal Proceedings

19

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

Item 4.

Submission of Matters to a Vote of Security Holders

 

20 – 21

Item 6.

Exhibits

 

22

 

 

 

 

Signatures

 

23

 

 

 

Index to Exhibits

 

24

 

2



 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

(Amounts In Millions, Except Per Share Data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2005

 

August 1,
2004

 

July 31,
2005

 

August 1,
2004

 

NET SALES

 

$

22,305

 

$

19,960

 

$

41,278

 

$

37,510

 

Cost of Merchandise Sold

 

14,896

 

13,299

 

27,514

 

25,081

 

GROSS PROFIT

 

7,409

 

6,661

 

13,764

 

12,429

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

 

4,219

 

3,899

 

8,238

 

7,626

 

Depreciation

 

347

 

305

 

684

 

600

 

Total Operating Expenses

 

4,566

 

4,204

 

8,922

 

8,226

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

2,843

 

2,457

 

4,842

 

4,203

 

 

 

 

 

 

 

 

 

 

 

Interest Income (Expense):

 

 

 

 

 

 

 

 

 

Interest and Investment Income

 

23

 

14

 

37

 

24

 

Interest Expense

 

(43

)

(17

)

(70

)

(31

)

Interest, net

 

(20

)

(3

)

(33

)

(7

)

 

 

 

 

 

 

 

 

 

 

EARNINGS BEFORE PROVISION FOR
INCOME TAXES

 

2,823

 

2,454

 

4,809

 

4,196

 

Provision for Income Taxes

 

1,055

 

909

 

1,794

 

1,553

 

NET EARNINGS

 

$

1,768

 

$

1,545

 

$

3,015

 

$

2,643

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares

 

2,140

 

2,207

 

2,151

 

2,225

 

BASIC EARNINGS PER SHARE

 

$

0.83

 

$

0.70

 

$

1.40

 

$

1.19

 

 

 

 

 

 

 

 

 

 

 

Diluted Weighted Average Common Shares

 

2,150

 

2,214

 

2,161

 

2,232

 

DILUTED EARNINGS PER SHARE

 

$

0.82

 

$

0.70

 

$

1.40

 

$

1.18

 

 

 

 

 

 

 

 

 

 

 

Dividends Declared Per Share

 

$

0.10

 

$

0.085

 

$

0.20

 

$

0.17

 

 

See accompanying Notes to Consolidated Financial Statements.

 

3



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(Amounts In Millions, Except Per Share Data)

 

 

 

July 31,
2005

 

January 30,
2005

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and Cash Equivalents

 

$

736

 

$

506

 

Short-Term Investments

 

1,582

 

1,659

 

Receivables, net

 

2,182

 

1,499

 

Merchandise Inventories

 

11,252

 

10,076

 

Other Current Assets

 

652

 

450

 

Total Current Assets

 

16,404

 

14,190

 

 

 

 

 

 

 

Property and Equipment, at cost

 

29,615

 

28,437

 

Less Accumulated Depreciation and Amortization

 

5,968

 

5,711

 

Net Property and Equipment

 

23,647

 

22,726

 

Notes Receivable

 

356

 

369

 

Cost in Excess of the Fair Value of Net Assets Acquired

 

1,994

 

1,394

 

Other Assets

 

288

 

228

 

Total Assets

 

$

42,689

 

$

38,907

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts Payable

 

$

7,705

 

$

5,766

 

Accrued Salaries and Related Expenses

 

1,068

 

1,055

 

Sales Taxes Payable

 

557

 

412

 

Deferred Revenue

 

1,762

 

1,546

 

Income Taxes Payable

 

390

 

161

 

Current Installments of Long-Term Debt

 

14

 

11

 

Other Accrued Expenses

 

1,804

 

1,578

 

Total Current Liabilities

 

13,300

 

10,529

 

 

 

 

 

 

 

Long-Term Debt, excluding current installments

 

2,168

 

2,148

 

Deferred Income Taxes

 

1,301

 

1,309

 

Other Long-Term Liabilities

 

781

 

763

 

Total Liabilities

 

17,550

 

14,749

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common Stock, par value $0.05; authorized: 10,000 shares; issued 2,393 shares at July 31, 2005 and 2,385 shares at January 30, 2005; outstanding 2,143 shares at July 31, 2005 and 2,185 shares at January 30, 2005

 

120

 

119

 

Paid-In Capital

 

6,958

 

6,650

 

Retained Earnings

 

26,546

 

23,962

 

Accumulated Other Comprehensive Income

 

263

 

227

 

Unearned Compensation

 

(127

)

(108

)

Treasury Stock at cost, 250 shares at July 31, 2005 and 200 shares at January 30, 2005

 

(8,621

)

(6,692

)

Total Stockholders’ Equity

 

25,139

 

24,158

 

Total Liabilities and Stockholders’ Equity

 

$

42,689

 

$

38,907

 

 

See accompanying Notes to Consolidated Financial Statements.

 

4



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

(Amounts In Millions)

 

 

 

Six Months Ended

 

 

 

July 31,
2005

 

August 1,
2004

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net Earnings

 

$

3,015

 

$

2,643

 

Reconciliation of Net Earnings to Net Cash Provided by Operating Activities:

 

 

 

 

 

Depreciation and Amortization

 

729

 

636

 

Impairment Related to Disposition of EXPO Real Estate

 

80

 

 

Stock-Based Compensation Expense

 

81

 

61

 

Changes in Assets and Liabilities, net of the effects of acquisitions:

 

 

 

 

 

Increase in Receivables, net

 

(514

)

(326

)

Increase in Merchandise Inventories

 

(1,040

)

(660

)

Increase in Other Current Assets

 

(196

)

(76

)

Increase in Accounts Payable and Accrued Expenses

 

2,248

 

2,808

 

Increase in Deferred Revenue

 

216

 

292

 

Increase in Income Taxes Payable

 

240

 

152

 

(Decrease) Increase in Deferred Income Taxes

 

(8

)

188

 

Decrease in Other Long-Term Liabilities

 

(15

)

(22

)

Other

 

110

 

36

 

Net Cash Provided by Operating Activities

 

4,946

 

5,732

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Capital Expenditures

 

(1,835

)

(1,537

)

Payments for Businesses Acquired, net

 

(846

)

(712

)

Proceeds from Sales of Property and Equipment

 

98

 

58

 

Purchases of Investments

 

(11,176

)

(15,543

)

Proceeds from Maturities of Investments

 

11,253

 

15,297

 

Net Cash Used in Investing Activities

 

(2,506

)

(2,437

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Repayments of Long-Term Debt

 

(6

)

(5

)

Proceeds from Sale of Common Stock, net

 

190

 

92

 

Repurchase of Common Stock

 

(1,955

)

(2,446

)

Cash Dividends Paid to Stockholders

 

(431

)

(346

)

Net Cash Used in Financing Activities

 

(2,202

)

(2,705

)

 

 

 

 

 

 

Increase in Cash and Cash Equivalents

 

238

 

590

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(8

)

(1

)

Cash and Cash Equivalents at Beginning of Period

 

506

 

1,103

 

Cash and Cash Equivalents at End of Period

 

$

736

 

$

1,692

 

 

See accompanying Notes to Consolidated Financial Statements.

 

5



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

(Amounts In Millions)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2005

 

August 1,
2004

 

July 31,
2005

 

August 1,
2004

 

Net Earnings

 

$

1,768

 

$

1,545

 

$

3,015

 

$

2,643

 

Other Comprehensive Income (Loss)(1):

 

 

 

 

 

 

 

 

 

Foreign Currency Translation Adjustments

 

69

 

48

 

38

 

(10

)

Unrealized Gain (Loss) on Investments

 

 

1

 

(2

)

1

 

Total Other Comprehensive Income (Loss)

 

69

 

49

 

36

 

(9

)

Comprehensive Income

 

$

1,837

 

$

1,594

 

$

3,051

 

$

2,634

 

 


(1)  Components of comprehensive income are reported net of related taxes.

 

See accompanying Notes to Consolidated Financial Statements.

 

6



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying Consolidated 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 fiscal year ended January 30, 2005, as filed with the Securities and Exchange Commission (File No. 1-8207).

 

Stock-Based Compensation

 

Effective February 3, 2003, the Company adopted the fair value method of recording stock-based compensation expense in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”).  The Company selected the prospective method of adoption as described in SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” and accordingly, stock-based compensation expense was recognized for stock options granted, modified or settled and for expense related to the Employee Stock Purchase Plan (“ESPP”) after the beginning of fiscal 2003.  The fair value of stock options and ESPP as determined on the date of grant using the Black-Scholes option-pricing model is being expensed over the vesting period of the related stock options and ESPP.

 

The following table illustrates the effect on Net Earnings and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123 to all stock-based compensation in each period (amounts in millions, except per share data):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2005

 

August 1,
2004

 

July 31,
2005

 

August 1,
2004

 

Net Earnings, as reported

 

$

1,768

 

$

1,545

 

$

3,015

 

$

2,643

 

Add: Stock-based employee compensation expense included in reported Net Earnings, net of related tax effects

 

27

 

21

 

51

 

38

 

Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects

 

(47

)

(59

)

(97

)

(119

)

Pro forma net earnings

 

$

1,748

 

$

1,507

 

$

2,969

 

$

2,562

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share:

 

 

 

 

 

 

 

 

 

Basic—as reported

 

$

0.83

 

$

0.70

 

$

1.40

 

$

1.19

 

Basic—pro forma

 

$

0.82

 

$

0.68

 

$

1.38

 

$

1.15

 

Diluted—as reported

 

$

0.82

 

$

0.70

 

$

1.40

 

$

1.18

 

Diluted—pro forma

 

$

0.81

 

$

0.68

 

$

1.37

 

$

1.15

 

 

Short-Term Investments

 

Short-Term Investments are primarily auction rate securities.  The interest rates on these securities are typically reset to market prevailing rates every 35 days or less, and in all cases every 90 days or less, but have longer stated maturities.  Short-Term Investments are recorded at fair value based on current market rates and are classified as available-for-sale.  Changes in the fair value are included in Accumulated Other Comprehensive Income (Loss), net of applicable taxes in the accompanying Consolidated Financial Statements.  Prior to the end of fiscal 2004, the Company classified auction rate securities in Cash and Cash Equivalents.  Prior period information was reclassified, including the impact on Cash Flows from Investing Activities, to conform with the current year presentation.  There was no impact on Net Earnings or Cash Flows from Operating Activities as a result of the reclassification.

 

7



 

Services Revenue

 

Net sales include services revenue generated through a variety of installation and home maintenance programs.  In these programs, the customer selects and purchases material for a project and the Company provides or arranges professional installation.  These programs are offered through The Home Depot and Expo Design Center (“EXPO”) stores and focus primarily on providing products and services to our do-it-for-me customers.  The Company also arranges for the provision of flooring, countertop and window coverings installation services to production homebuilders through its Creative Touch Interiors brand (formerly Builder Solutions Group).  Under certain programs, when the Company provides or arranges the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in services revenue.  The Company recognizes this revenue when the service for the customer is complete.

 

All payments received prior to the completion of services are recorded in Deferred Revenue in the accompanying Consolidated Balance Sheets.  Services revenue, including the impact of Deferred Revenue, was $1.1 billion and $2.0 billion for the three and six months ended July 31, 2005, respectively, compared to $883 million and $1.7 billion for the three and six months ended August 1, 2004, respectively.

 

Valuation Reserves

 

As of the end of the second quarter of fiscal 2005 and the end of fiscal year 2004, the valuation allowances for Merchandise Inventories and uncollectible accounts receivable were not material.

 

Reclassifications

 

Certain amounts in the prior fiscal period have been reclassified to conform with the presentation adopted in the current fiscal period.

 

2.   BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES

 

The reconciliation of basic to diluted weighted average common shares for the three and six months ended July 31, 2005 and August 1, 2004 was as follows (amounts in millions):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2005

 

August 1,
2004

 

July 31,
2005

 

August 1,
2004

 

Weighted average common shares

 

2,140

 

2,207

 

2,151

 

2,225

 

Effect of potentially dilutive securities:

 

 

 

 

 

 

 

 

 

Stock Plans

 

10

 

7

 

10

 

7

 

Diluted weighted average common shares

 

2,150

 

2,214

 

2,161

 

2,232

 

 

Stock plans include shares granted under the Company’s ESPP and stock incentive plans, as well as shares issued for deferred compensation stock plans.  Options to purchase 33.1 million and 63.9 million shares of common stock for the three months ended July 31, 2005 and August 1, 2004, respectively, were excluded from the computation of Diluted Earnings per Share because their effect would have been anti-dilutive.  Options to purchase 35.9 million and 64.2 million shares of common stock for the six months ended July 31, 2005 and August 1, 2004, respectively, were excluded from the computation of Diluted Earnings per Share because their effect would have been anti-dilutive.

 

8



 

3.  DISPOSITION OF INTEREST IN CERTAIN EXPO REAL ESTATE

 

In May 2005, the Company announced 20 of its EXPO stores would be closed or converted to The Home Depot store format.  In the first six months of fiscal 2005, the Company recorded $80 million of impairment charges in Selling, General and Administrative Expense related to the anticipated disposition of its interest in the underlying real estate and store conversions and $24 million of expense in Cost of Merchandise Sold related to inventory markdowns.  The Company expects to incur an additional estimated $8 million of expense, associated with lease obligations, upon the final disposition of th e real estate during the remainder of fiscal 2005.  Affected customers are being served by existing The Home Depot and EXPO stores.  Management expects the remaining 34 EXPO stores to remain profitable.

 

4.  ACQUISITIONS

 

The following acquisitions completed by the Company during the second quarter of fiscal 2005 were accounted for under the purchase method of accounting.  Pro forma results of operations for the three and six months ended July 31, 2005 and August 1, 2004 would not have been materially different as a result of these acquisitions and therefore are not presented.

 

In May 2005, the Company acquired Lakeside Contractors Supply, Inc., a leading distributor of specialty hardware, tools and materials for professional contractors in the Chicago metropolitan area.  This acquisition will be operated as part of White Cap Construction Supply under The Home Depot Supply brand.

 

In June 2005, the Company acquired:

 

                  Landmark Interiors, Inc., a leading provider of design center services and interior product sales and installation to production homebuilders in Phoenix.  This acquisition will be operated as part of Creative Touch Interiors under The Home Depot Supply brand.

                  Contractors’ Warehouse, a retailer catering to the small contractor and remodeling tradesman in California.  This acquisition will be operated under The H ome Depot Supply brand.

                  Crown Bolt, Inc., a distributor of fasteners, hardware and other related products.  This acquisition will be operated under The Home Depot Supply brand.

                  Utility Supply of America, Inc., the largest catalog supplier of products to the water and wastewater operations market.  This acquisition will be operated under The Home Depot Supply brand.

                  Brafasco, a leading supplier of fasteners and industrial supplies, with 21 branches in Canada and three branches in the U.S.  This acquisition will be operated under The Home Depot Supply brand.

                  Williams Bros. Lumber Company, a leading supplier of lumber and building materials to the home building industry, with 16 branches in Georgia.  This acquisition will be operated under The Home Depot Supply brand.

                  Viplex Industries, Inc., a replacement window installer located in California.  This acquisition will be operated as part of our services business.

 

In July 2005, the Company acquired Brock Tool & Supply, Inc., a distributor of tools, fasteners and equipment in the Maryland area.  This acquisition will be operated as part of White Cap Construction Supply under The Home Depot Supply brand.

 

The total aggregate purchase price for acquisitions during the six months ended July 31, 2005 was $882 million.  As a result, the Company recorded Cost in Excess of Fair Value of Net Assets Acquired related to these acquisitions of $592 million on the accompanying Consolidated Balance Sheets.

 

5.  SUBSEQUENT EVENTS

 

In August 2005, the Company issued $1.0 bi llion of 4 5/8% Senior Notes due August 15, 2010 at a discount of $4.6 million with interest payable semi-annually on February 15 and August 15 of each year.

 

In August 2005, the Company acquired National Waterworks, Inc., the nation’s leading distributor of products used to build, repair and maintain water and wastewater transmission systems, for a purchase price of $1.35 billion.  This acquisition will be operated under The Home Depot Supply brand.

 

9



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

The Home Depot, Inc.:

 

We have reviewed the accompanying Consolidated Balance Sheet of The Home Depot, Inc. and subsidiaries as of July 31, 2005, and the related Consolidated Statements of Earnings, and Comprehensive Income for the three and six-month periods ended July 31, 2005 and August 1, 2004, and the related Consolidated Statement of Cash Flows for the six-month periods ended July 31, 2005 and August 1, 2004.  These Consolidated Financial Statements are the responsibility of the Company’s management.

 

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

 

Based on our reviews, we are not aware of any material modifications that should be made to the Consolidated Financial Statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

 

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheet of The Home Depot, Inc. and subsidiaries as of January 30, 2005, and the related Consolidated Statements of Earnings, Stockholders’ Equity and Comprehensive Income, and Cash Flows for the year then ended (not presented herein); and in our report dated March 11, 2005, we expressed an unqualified opinion on those Consolidated Financial Statements.  In our opinion, the information set forth in the accompanying Consolidated Balance Sheet as of January 30, 2005, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.

 

/s/ KPMG LLP

 

KPMG LLP

Atlanta, Georgia

 

August 15, 2005

 

10



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

 

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENTS

 

Certain statements contained herein, including those regarding Net Sales growth, increases in comparable store sales, impact of cannibalization, commodity price inflation and deflation, implementation of store initiatives, net earnings performance, including depreciation expense, stock-based compensation expense, store openings and closures, capital allocation and expenditures, the effect of adopting certain accounting standards, strategic direction and the demand for our products and services, constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on currently available information and are based on our current expectations and projections about future events. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our historical experience and expectations. These risks and uncertainties include, but are not limited to: economic conditions in North America; changes in our cost structure; the availability of sourcing channels consistent with our strategy of differentiation; conditions affecting new store development; conditions affecting customer transactions and average ticket, including, but not limited to, weather conditions; the success of our technology initiatives in improving operations and customers’ in-store experience; our ability to identify and respond to evolving trends in demographics and consumer preferences; the relative success of our expansion strategy, including our ability to identify acquisition opportunities, particularly in markets outside the United States (“U.S.”), and our ability to complete acquisitions on financially attractive terms and integrate them with our other businesses; our ability to create appropriate distribution channels for key sales platforms; our ability to attract, train and retain highly qualified associates; the impact of new accounting standards; and the impact of competition, decisions by management related to possible asset impairments, regulation and litigation matters. Undue reliance should not be placed on such forward-looking statements as they speak only as of the date made. Additional information regarding these and other risks and uncertainties is contained in our periodic filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 30, 2005.

 

EXECUTIVE SUMMARY AND SELECTED CONSOLIDATED STATEMENTS OF EARNINGS DATA

 

For the second quarter of fiscal 2005, we reported record Net Earnings of $1.8 billion and Diluted Earnings per Share of $0.82 compared to Net Earnings of $1.5 billion and Diluted Earnings per Share of $0.70 for the second quarter of fiscal 2004.  For the first six months of fiscal 2005, we reported Net Earnings of $3.0 billion and Diluted Earnings per Share of $1.40 compared to Net Earnings of $2.6 billion and Diluted Earnings per Share of $1.18 for the first six months of fiscal 2004.  Net Sales increased 11.7% to a record $22.3 billion for the second quarter of fiscal 2005 from $20.0 billion for the second quarter of fiscal 2004. For the first six months of fiscal 2005, Net Sales increased 10.0% to a record $41.3 billion from $37.5 billion for the first six months of fiscal 2004.  Comparable store sales increased 4.0% and 3.1% for the second quarter and first six months of fiscal 2005, respectively.

 

We enhanced our business by maintaining an aggressive pace of introducing innovative and distinctive new merchandise, supported by continued investments in store modernization and technology, including major merchandising resets that reflect emerging consumer trends.  These investments in our core business are paying off as evidenced by certain key operating performance measurements, including average ticket, which increased 5.1% in the second quarter of fiscal 2005 to $57.54, a second quarter record.  For the first six months of fiscal 2005, our average ticket was $57.87, an increase of 5.4% over the comparable period for fiscal 2004.  We also achieved a gross profit of 33.2% and a record operating margin of 12.7% for the second quarter of fiscal 2005.  For the first six months of fiscal 2005, we achieved gross profit of 33.3% and a record operating margin of 11.7%.

 

We extended our business by opening new stores and by offering a variety of installation and home maintenance programs through our The Home Depot and EXPO Design Center (“EXPO”) stores.  Our services revenue increased 27.6% to $1.1 billion for the second quarter of fiscal 2005 and increased 21.9% to $2.0 billion for the first six months of fiscal 2005.  In both periods we saw sustained growth in categories such as roofing, countertops, kitchens, windows and soft flooring.  We opened 44 net new stores during the second quarter of fiscal 2005, bringing our total store count to 1,955 compared to 1,788 at the end of the second quarter of fiscal 2004.

 

We continue to invest in our stores to improve store efficiency and the overall customer shopping experience.  In 2004, we enhanced the front-end of our stores through self-checkout and a new point-of-sales system.  In 2005, we continued the roll-out of our back-end automated receiving (“BEAR”) project, which is in over 1,000 stores and will be in all stores in the U.S. by the end of the third quarter of fiscal 2005 and in all stores in Canada by the end of 2005.  Among other things, this initiative improves operational execution and productivity through the automation of our receiving process in the stores, enabling us to reallocate resources to the selling floor. 

 

11



 

In support of the enhancement of our business through store modernization and technology as well as the extension of our business with new store openings and the roll-out of certain initiatives, we spent $1.8 billion for capital expenditures during the first six months of fiscal 2005.

 

We have expanded our market by capturing a growing share of the professional residential, commercial and heavy construction markets, which operate under our Home Depot Supply brand, and by continuing our expansion outside of the U.S.  As part of this expansion in the second quarter of fiscal 2005, we made several acquisitions that will operate under our Home Depot Supply brand.  The total cash paid for businesses acquired for the first six months of fiscal 2005 was $846 million.  Additionally, at the end of the second quarter of fiscal 2005, 170 of our stores were located in Canada and Mexico as compared to 147 for the comparable period of fiscal 2004.

 

In May 2005, we announced 20 of our EXPO stores would be closed or converted to The Home Depot store format.  In the first six months of fiscal 2005, we recorded $80 million of impairment charges in Selling, General and Administrative Expense related to the anticipated disposition of our interest in the underlying real estate and store conversions and $24 million of expense in Cost of Merchandise Sold related to inventory markdowns.  We expect to incur an additional estimated $8 million of expense, associated with lease obligations, upon the final disposition of the real estate during the remainder of fiscal 2005.  Affected EXPO customers are being served by existing The Home Depot and EXPO stores.  We expect the remaining 34 EXPO stores to remain profitable.

 

Our financial condition remains strong as evidenced by our $2.3 billion in Cash and Short-Term Investments at July 31, 2005.  At the end of the second quarter of fiscal 2005, our total debt-to-equity ratio was 8.7% and our return on invested capital (computed on beginning long-term debt and equity for the trailing four quarters) was 23.0% compared to 20.4% for the second quarter of fiscal 2004, a 260 basis point improvement.  In August 2005, we issued $1.0 billion of 4 5/8% Senior Notes due August 15, 2010 at a discount of $4.6 million.  On a pro forma basis including this debt issuance, our debt-to-equity ratio as of July 31, 2005 would have been 12.7%.

 

We believe the selected sales data, the percentage relationship between Net Sales and major categories in the Consolidated Statements of Earnings and the percentage change in the dollar amounts of each of the items presented as follows is important in evaluating the performance of our business operations.  We operate in one business segment and believe the information presented in our Management’s Discussion and Analysis of Financial Condition and Results of Operations provides an understanding of our business segment, our operations and our financial condition.

 

12



 

 

 

 

 

 

 

% Increase

 

 

 

% of Net Sales

 

(Decrease) in Dollar

 

 

 

Three Months Ended

 

Six Months Ended

 

Amounts

 

 

 

July 31,
2005

 

August 1,
2004

 

July 31,
2005

 

August 1,
2004

 

Three
Months

 

Six
Months

 

NET SALES

 

100.0

%

100.0

%

100.0

%

100.0

%

11.7

%

10.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

33.2

 

33.4

 

33.3

 

33.1

 

11.2

 

10.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

 

18.9

 

19.6

 

20.0

 

20.3

 

8.2

 

8.0

 

Depreciation

 

1.6

 

1.5

 

1.6

 

1.6

 

13.8

 

14.0

 

Total Operating Expenses

 

20.5

 

21.1

 

21.6

 

21.9

 

8.6

 

8.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

12.7

 

12.3

 

11.7

 

11.2

 

15.7

 

15.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and Investment Income

 

0.1

 

0.1

 

0.1

 

0.1

 

64.3

 

54.2

 

Interest Expense

 

(0.2

)

(0.1

)

(0.2

)

(0.1

)

152.9

 

125.8

 

Interest, net

 

(0.1

)

(0.0

)

(0.1

)

(0.0

)

566.7

 

371.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS BEFORE PROVISION FOR INCOME TAXES

 

12.6

 

12.3

 

11.6

 

11.2

 

15.0

 

14.6

 

Provision for Income Taxes

 

4.7

 

4.6

 

4.3

 

4.2

 

16.1

 

15.5

 

NET EARNINGS

 

7.9

%

7.7

%

7.3

%

7.0

%

14.4

%

14.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SELECTED SALES DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Customer Transactions (in millions)(1)

 

372

 

359

 

693

 

675

 

3.6

%

2.7

%

Average Ticket(1)

 

$

57.54

 

$

54.73

 

$

57.87

 

$

54.91

 

5.1

 

5.4

 

Weighted Average Weekly Sales Per Operating Store (000s)(1)

 

$

855

 

$

860

 

$

807

 

$

818

 

(0.6

)

(1.3

)

Weighted Average Sales per Square Foot(1)

 

$

421.13

 

$

419.77

 

$

397.49

 

$

399.27

 

0.3

 

(0.4

)

Comparable Store Sales Increase (%)(2)

 

4.0

%

4.8

%

3.1

%

6.1

%

N/A

 

N/A

 

 


(1)   Excludes all non-store locations since their inclusion may cause distortion of the data presented due to operational differences from our retail stores.  The total number of the excluded locations and their total square footage are immaterial to our total number of locations and total square footage.

 

(2)   Includes Net Sales at locations open greater than 12 months, including relocated and remodeled stores, and Net Sales of all of the subsidiaries of The Home Depot, Inc.  Stores and subsidiaries become comparable on the Monday following the 365th day of operation.   We believe comparable store sales is a meaningful measurement of our operating performance and is a common measurement of operating performance in the retail industry.  This measurement is intended only as supplemental information and is not a substitute for Net Sales or Net Earnings presented in accordance with generally accepted accounting principles.

 

13



 

RESULTS OF OPERATIONS

 

Net Sales for the second quarter of fiscal 2005 increased 11.7% to a record $22.3 billion from $20.0 billion for the second quarter of fiscal 2004.  For the first six months of fiscal 2005, sales increased 10.0% to a record $41.3 billion from $37.5 billion for the comparable period in fiscal 2004.  Net Sales growth for the second quarter and the first six months of fiscal 2005 was driven by an increase in comparable store sales of 4.0% and 3.1%, respectively, as well as sales from stores open for less than one year and sales from our newly acquired businesses.  We plan to open 175 new stores during fiscal 2005 and currently estimate fiscal 2005 Net Sales growth of 9% to 12% driven by comparable store sales growth, sales from new store openings, sales from certain stores opened during fiscal 2004 and sales from our newly acquired businesses.

 

Our average ticket for the second quarter of fiscal 2005 increased 5.1% to a second quarter record of $57.54 and increased 5.4% to $57.87 for the first six months of fiscal 2005.  Our comparable store sales growth was positive in 9 of 10 selling departments for both the second quarter and the first six months of fiscal 2005.  Building materials and hardware were particularly strong categories for the second quarter and first six months of fiscal 2005.  Building materials posted a strong comparable store sales increase through sales of gypsum, concrete, roofing and insulation, due in part to increased commodity prices.  The beginning of the hurricane season contributed to increased sales of generators, flashlights and other related safety products which contributed to strong comparable store sales in hardware.  Additionally, for the second quarter of fiscal 2005, we experienced strong comparable store sales in our garden/seasonal category driven by new products, improved assortments and the arrival of seasonal weather across most major markets.  Live goods, barbecue grills, outdoor watering merchandise, walk behind mowers, gas trimmers and related accessories, along with patio furniture contributed to the performance in this category.

 

Our comparable store sales growth reflects the impact of cannibalization.  In order to meet our customer service objectives, we strategically open stores near market areas served by existing stores (“cannibalize”) to enhance service levels, gain incremental sales and increase market penetration.  Our new stores cannibalized approximately 17% of our existing stores as of the second quarter of fiscal 2005, and we estimate that store cannibalization reduced the second quarter of fiscal 2005 comparable store sales by approximately 1.4%.  Additionally, we believe that our sales performance has been, and could continue to be, negatively impacted by the level of competition that we encounter in various markets.  However, due to the highly-fragmented U.S. home improvement industry, in which we estimate our market share is approximately 12%, measuring the impact on our sales by our competitors is extremely difficult.

 

The growth in Net Sales for the second quarter and first six months of fiscal 2005 reflects growth in services revenue, which increased 27.6% to $1.1 billion from $883 million for the second quarter of fiscal 2004 and increased 21.9% to $2.0 billion from $1.7 billion for the first six months of fiscal 2004.  The growth in services revenue in both periods was driven by strength in a number of areas including roofing, countertops, kitchens, windows and soft flooring.

 

We continue to invest in our stores to improve store efficiency and the overall customer shopping experience.  In 2004, we enhanced the front-end of our stores through self-checkout and a new point of sales system.  In 2005, we continued the roll-out of our back-end automated receiving (“BEAR”) project, which is in over 1,000 stores and will be in all stores in the U.S. by the end of the third quarter of fiscal 2005 and in all stores in Canada by the end of 2005.  Among other things, this initiative improves operational execution and productivity through the automation of our receiving process in the stores, enabling us to reallocate resources to the selling floor.

 

14



 

Gross Profit increased 11.2% to $7.4 billion for the second quarter of fiscal 2005 from $6.7 billion for the second quarter of fiscal 2004.  Gross Profit increased 10.7% to $13.8 billion for the first six months of fiscal 2005 from $12.4 billion for the first six months of fiscal 2004.  Gross Profit as a percentage of Net Sales was 33.2% for the second quarter of fiscal 2005 compared to 33.4% for the second quarter of fiscal 2004, a decrease of 15 basis points.  For the first six months of fiscal 2005, Gross Profit as a percentage of Net Sales was 33.3% compared with 33.1% for the comparable period of fiscal 2004, an increase of 20 basis points.  The decline in our gross profit rate for the second quarter of fiscal 2005 was primarily attributable to our strategic decision to exit the in-store wallpaper business and use the space in our stores for higher growth opportunities.  As a result, at the end of the second quarter of fiscal 2005, we provided for the markdowns that will be necessary to sell through the wallpaper inventory.  Our gross profit rate also reflects the seasonal nature of our business, where the arrival of warm weather and an early hurricane season drove an increased penetration of lower margin products in the second quarter of fiscal 2005, like live goods, generators and air conditioning units.  The gross profit rate for the first six months of fiscal 2005 increased over the prior year due to a lower penetration of lower margin categories.  This was partially offset by $24 million of markdowns that were taken for the first six months of fiscal 2005 in connection with our decision to close or convert 20 EXPO stores.  The cost of our deferred credit programs also applied downward pressure on gross profit for the second quarter and first six months of fiscal 2005.  Our deferred interest programs offer no interest/no payment programs through our private label credit card.  We believe these programs deliver long-term benefits, including higher average tickets and customer loyalty.  For the second quarter and first six months of fiscal 2005, penetration of our private label credit sales was 24.6% and 24.9%, respectively, as compared to penetration of 23.4% and 24.1% for the same periods of fiscal 2004.  Improved inventory management, which resulted in lower shrink levels, contributed to the increase in our gross profit rate for the first six months of fiscal 2005 and partially offset the decrease in our gross profit rate for the second quarter of fiscal 2005.

 

Selling, General and Administrative Expense increased 8.2% to $4.2 billion for the second quarter of fiscal 2005 from $3.9 billion for the second quarter of fiscal 2004.  For the first six months of fiscal 2005, Selling, General and Administrative Expense increased 8.0% to $8.2 billion from $7.6 billion for the first six months of fiscal 2004.  As a percentage of Net Sales, Selling, General and Administrative Expense was 18.9% for the second quarter of fiscal 2005 compared to 19.6% for the same period in fiscal 2004.  As a percentage of Net Sales, Selling, General and Administrative Expense was 20.0% for the first six months of fiscal 2005 compared to 20.3% for the same period in fiscal 2004.  The reduction of Selling, General and Administrative Expense as a percentage of Net Sales for both the second quarter and first six months of fiscal 2005 was primarily a result of continued strong expense control through cost takeout and waste elimination and gains in operating efficiencies.  We also continue to see benefits from our private label credit card.  In the second quarter and first six months of fiscal 2005, we recorded $2 million and $45 million of income, respectively, related to gift card breakage as a reduction of Selling, General and Administrative Expense.  The first quarter of fiscal 2005 was the first period in which we recognized gift card breakage, and therefore, the amount recognized in the first quarter of fiscal 2005 includes the breakage income related to gift cards sold since the inception of our gift card program.  For the first six months of fiscal 2005, we recorded $80 million of impairment charges in connection with our decision to close or convert 20 EXPO stores.

 

Depreciation increased 13.8% to $347 million for the second quarter of fiscal 2005 from $305 million for the second quarter of fiscal 2004.  For the first six months of fiscal 2005, Depreciation increased 14.0% to $684 million from $600 million for the same period in fiscal 2004.  Depreciation as a percentage of Net Sales was 1.6% for the second quarter of fiscal 2005 and 1.5% for the second quarter of fiscal 2004. As a percentage of Net Sales, Depreciation was 1.7% for the first six months of fiscal 2005 compared to 1.6% for the first six months of fiscal 2004.  The increase as a percentage of Net Sales for both periods was primarily due to our investments in store modernization and technology.

 

15



 

Interest expense increased to $43 million for the second quarter of fiscal 2005 from $17 million in the prior year.  We recorded $19 million of interest expense in the second quarter of fiscal 2005 related to the IRS examination of the Company’s 2002 and 2001 U.S. federal income tax returns.

 

Our combined federal, foreign and state effective income tax rate increased to 37.3% for the first six months of fiscal 2005 from 37.0% for the comparable period of fiscal 2004.  This increase was primarily due to an increase in our effective state income tax rate.

 

The American Jobs Creation Act of 2004 (“AJC Act”) provides a one-time 85 percent dividends-received deduction that would apply to qualified cash dividends received from controlled foreign corporations if the funds are reinvested in the United States.  The deduction can result in an effective income tax rate of 5.25% on the repatriation of foreign earnings, a rate much lower than the normal statutory tax rate of 35%.  At this time we are evaluating whether some or all of our unrepatriated foreign earnings will be repatriated under this new law.

 

The AJC Act also provides a new deduction for qualified domestic production activities.  When fully phased-in, the deduction will be up to nine percent of the lesser of qualified production activities income or taxable income.  We are currently assessing the potential impact of the AJC Act on our Provision for Income Taxes.

 

Diluted Earnings per Share were $0.82 and $1.40 for the second quarter and first six months of fiscal 2005, respectively, compared to $0.70 and $1.18 for the second quarter and first six months of fiscal 2004, respectively.  Diluted Earnings per Share were favorably impacted for the second quarter and first six months of fiscal 2005 by the repurchase of shares of our common stock in fiscal 2004 and 2005.  Over the past four years, we have repurchased 250 million shares of our common stock for a total of $8.6 billion.  As of July 31, 2005, we had $1.4 billion remaining under our authorized Share Repurchase Program.  On August 18, 2005 our Board of Directors authorized an additional $1.0 billion for share repurchases.  For fiscal 2005, we estimate our Diluted Earnings per Share growth will be 14% to 17%.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash flow generated from operations provides a significant source of liquidity.  During the first six months of fiscal 2005, Net Cash Provided by Operating Activities decreased to $4.9 billion compared to $5.7 billion for the same period of fiscal 2004.  The decrease was primarily due to higher working capital balances in the current year, partially offset by stronger Net Earnings.

 

Net Cash Used in Investing Activities for the first six months of fiscal 2005 was $2.5 billion compared to $2.4 billion for the same period of fiscal 2004.  The increase in Net Cash Used in Investing Activities was due to increases in Capital Expenditures and Payments for Businesses Acquired, partially offset by an increase in the net proceeds from sales and purchases of investments.  Capital Expenditures increased to $1.8 billion in the first six months of fiscal 2005 from $1.5 billion for the same period of fiscal 2004.  The increase in Capital Expenditures is due to more stores under construction in the first six months of fiscal 2005 compared with the first six months of fiscal 2004.

 

16



 

During the first six months of fiscal 2005, Net Cash Used in Financing Activities was $2.2 billion compared with $2.7 billion for the same period of fiscal 2004.  The decrease in Net Cash Used in Financing Activities was primarily due to the repurchase of $2.0 billion of our common stock during the first six months of fiscal 2005 compared with $2.4 billion for the same period of fiscal 2004.  The decrease in Net Cash Used in Financing Activities was partially offset by an increase in Cash Dividends Paid to Stockholders of $85 million to $431 million for the first six months of fiscal 2005 from $346 million for the first six months of fiscal 2004.

 

We have a commercial paper program that allows for borrowings up to a maximum of $1.25 billion.  As of July 31, 2005, there were no borrowings outstanding under the program.  In connection with the program, we have a back-up credit facility with a consortium of banks for borrowings up to $1.0 billion.  The credit facility contains various restrictive covenants, none of which is expected to impact our liquidity or capital resources.  In May 2005, we filed a shelf registration statement with the Securities and Exchange Commission for the future issuance of up to $5.0 billion of debt securities.  In August 2005, we issued $1.0 billion of 4 5/8% Senior Notes due August 15, 2010 at a discount of $4.6 million, leaving approximately $4.0 billion of availability under this shelf registration statement.

 

As of the end of the second quarter of fiscal 2005, our total debt-to-equity ratio was 8.7% compared to 7.3% at the end of the second quarter of fiscal 2004.  The increase in our total debt-to-equity ratio reflects the net increase in Long-Term Debt during the third quarter of fiscal 2004 as a result of the issuance of $1.0 billion of 3 3/4% Senior Notes due September 15, 2009 at a discount of $5 million partially offset by the repayment of $500 million of 6 1/2% Senior Notes.  On a pro forma basis including the August 2005 issuance of $1.0 billion of 4 5/8% Senior Notes, our total debt-to-equity ratio as of July 31, 2005 would have been 12.7%.

 

As of July 31, 2005, we had $2.3 billion in Cash and Short-Term Investments.  We believe that our current cash position, Short-Term Investments and cash flow generated from operations should be sufficient to enable us to complete our capital expenditure programs and any required long-term debt payments through the next several fiscal years.  In addition, we have funds available from the $1.25 billion commercial paper program and the ability to obtain alternative sources of financing through our shelf registration statement and otherwise if required.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (“SFAS 123(R)”).  This statement revises SFAS Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.”  SFAS 123(R) requires all public entities to recognize compensation expense for all share-based payments as measured by the fair value on the grant date over the requisite service period.  In April 2005, the Securities and Exchange Commission issued guidance delaying the effective date of SFAS 123(R), therefore it will now be effective for The Home Depot in the first quarter of fiscal 2006.

 

Effective February 3, 2003, we adopted the fair value of recording stock-based compensation expense in accordance with SFAS 123.  We selected the prospective method of adoption as described in SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure,” and accordingly, stock-based compensation expense was recorded for all share-based payments granted or modified after the beginning of fiscal 2003.  Historically, we have used the Black-Scholes option pricing model to estimate the value of stock options granted to employees.  SFAS 123(R) requires that all share-based payments granted prior to the adoption date that remain unvested at the adoption date also be expensed over the remaining service period.  We currently intend to adopt SFAS 123(R) using the modified-prospective method, therefore in addition to continuing to recognize stock-based compensation expense for all share-based payments awarded since our adoption of SFAS 123 in fiscal 2003, we will also begin expensing unvested options granted prior to 2003 upon the adoption of SFAS 123(R).  We currently estimate the impact of adopting SFAS 123(R) will be a reduction of Earnings before Provision for Income Taxes of $42 million for fiscal 2006.

 

17



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

Our exposure to market risks results primarily from fluctuations in interest rates.  There have been no material changes to our exposure to market risks from those disclosed in our Annual Report on Form 10-K for the year ended January 30, 2005.

 

Item 4.  Controls and Procedures

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of the end of the period covered by this report.  Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule
13a-15(f) and 15d-15(f) under the Securities Exchange Act) during the fiscal quarter ended July 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

18



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

 

PART II. OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

The Company is a party to various legal proceedings arising in the ordinary course of its business, but is not currently a party to any legal proceedings that management believes will have a material adverse effect on its consolidated financial position or its results of operations.

 

In compliance with SEC disclosure requirements, the following is an environmental proceeding involving potential monetary sanctions of $100,000 or greater:

 

On July 20, 2005, the Company received a grand jury subpoena from the United States Attorney’s Office in Los Angeles, California, seeking documents and information relating to the Company’s handling, storage and disposal of hazardous waste.  California state and local government authorities are also investigating this matter, and the Company is cooperating fully with the respective authorities.  Although the Company cannot predict the outcome of this matter, it does not expect that these investigations will have a material adverse effect on the Company’s consolidated financial position or its results of operations.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

(a)  During the second quarter of fiscal 2005, the Company credited the accounts of certain nonemployee directors with 9,932 deferred stock units under The Home Depot, Inc. Nonemployee Directors’ Deferred Stock Compensation Plan pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended.  The deferred stock units were credited to the accounts of such nonemployee directors as a result of such directors having elected to receive board and committee fees in the form of deferred stock units instead of receiving such fees in cash as payment for board and committee meetings held during the second quarter of fiscal 2005.  The deferred stock units convert to shares of common stock on a one-for-one basis following a nonemployee director’s termination of service as described in this plan.

 

(c)          The Company’s common stock repurchase program was initially announced on July 15, 2002.  As of the beginning of the second quarter of fiscal 2005, the Board had approved purchases up to $9.0 billion.  On both May 25, 2005 and August 18, 2005, the Company’s Board of Directors authorized an additional $1.0 billion in common stock repurchases for a total authorization of $11.0 billion.  The program does not have a prescribed expiration date.  The table below sets forth the Company’s monthly purchases during the second quarter of fiscal 2005:

 

Period

 

Total
Number of
Shares
Purchased

 

Average
Price Paid
Per Share

 

Total Number of
Shares Purchased as
Part of Publicly
Announced Program

 

Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Program (1)

 

May 2, 2005 – May 29, 2005 (“May 2005”)

 

6,900,900

 

$

38.21

 

243,668,302

 

$

1,619,813,120

 

May 30, 2005 – June 26, 2005 (“June 2005”)

 

3,634,100

 

$

39.67

 

247,302,402

 

$

1,475,557,591

 

June 27, 2005 – July 31, 2005 (“July 2005”)

 

2,371,600

 

$

40.65

 

249,674,002

 

$

1,379,103,928

 

 


(1)  Does not include the additional $1.0 billion authorized on August 18, 2005.

 

In addition to these repurchases, pursuant to the Company’s 1997 and 2005 Omnibus Stock Incentive Plans (the “Plans”), participants may exercise stock options by surrendering shares of The Home Depot common stock that the participants already own as payment of the exercise price.  Participants in the Plans may also surrender shares of The Home Depot common stock as payment of applicable tax withholding on the vesting of restricted stock awards.  Shares so surrendered by participants in the Plans are repurchased pursuant to the terms of the Plans and applicable award agreement and not pursuant to publicly announced share repurchase programs.  For the quarter ended July 31, 2005, the following shares of The Home Depot common stock were surrendered by participants in the Plans: May 2005 – 18,288 shares at an average price per share of $39.84; June 2005 – 25,786 shares at an average price per share of $40.04; July 2005 – 11,069 shares at an average price per share of $42.90.

 

19



 

Item 4. Submission of Matters to a Vote of Security Holders

 

At the Company’s Annual Meeting of Stockholders held on May 26, 2005, shareholders of the Company elected the following nominees to the Board of Directors to serve a one-year term.  Votes cast were as follows:

 

Gregory D. Brenneman

 

 

 

 

Bonnie G. Hill

 

 

 

For:

 

1,817,852,449

 

 

For:

 

1,791,345,102

 

Withheld:

 

76,986,165

 

 

Withheld:

 

103,493,512

 

 

 

 

 

 

 

 

 

 

Richard H. Brown

 

 

 

 

Laban P. Jackson, Jr.

 

 

 

For:

 

1,802,211,964

 

 

For:

 

1,842,332,983

 

Withheld:

 

92,626,650

 

 

Withheld:

 

52,505,631

 

 

 

 

 

 

 

 

 

 

John L. Clendenin

 

 

 

 

Lawrence R. Johnston

 

 

 

For:

 

1,802,536,136

 

 

For:

 

1,818,509,594

 

Withheld:

 

92,302,478

 

 

Withheld:

 

76,329,020

 

 

 

 

 

 

 

 

 

 

Berry R. Cox

 

 

 

 

Kenneth G. Langone

 

 

 

For:

 

1,817,427,384

 

 

For:

 

1,777,945,263

 

Withheld:

 

77,411,230

 

 

Withheld:

 

116,893,351

 

 

 

 

 

 

 

 

 

 

Claudio X. Gonzalez

 

 

 

 

Robert L. Nardelli

 

 

 

For:

 

1,433,664,107

 

 

For:

 

1,809,095,991

 

Withheld:

 

461,174,507

 

 

Withheld:

 

85,742,623

 

 

 

 

 

 

 

 

 

 

Milledge A. Hart

 

 

 

 

Thomas J. Ridge

 

 

 

For:

 

1,808,379,014

 

 

For:

 

1,839,915,824

 

Withheld:

 

86,459,600

 

 

Withheld:

 

54,922,790

 

 

Shareholders ratified the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2005. Votes cast were as follows:

 

For:

 

1,845,053,165

 

 

 

 

 

Against:

 

30,670,760

 

 

 

 

 

Abstention:

 

19,114,689

 

 

 

 

 

 

Shareholders rejected a Company proposal to amend the Company’s Certificate of Incorporation.  Votes cast were as follows:

 

For:

 

938,221,394

 

 

 

 

 

Against:

 

502,721,203

 

 

 

 

 

Abstention:

 

22,782,232

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

Shareholders supported a Company proposal to adopt the Company’s 2005 Omnibus Stock Incentive Plan.  Votes cast were as follows:

 

For:

 

1,145,616,473

 

 

 

 

 

Against:

 

294,766,339

 

 

 

 

 

Abstention:

 

23,342,017

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

20



 

Shareholders rejected a shareholder proposal regarding employment diversity report disclosure. Votes cast were as follows:

 

For:

 

402,548,856

 

 

 

 

 

Against:

 

940,023,762

 

 

 

 

 

Abstention:

 

121,152,210

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

Shareholders rejected a shareholder proposal regarding method of voting for directors. Votes cast were as follows:

 

For:

 

604,270,287

 

 

 

 

 

Against:

 

833,002,192

 

 

 

 

 

Abstention:

 

26,452,350

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

Shareholders rejected a shareholder proposal regarding nondeductible compensation. Votes cast were as follows:

 

For:

 

135,041,697

 

 

 

 

 

Against:

 

1,301,032,346

 

 

 

 

 

Abstention:

 

27,650,786

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

Shareholders supported a shareholder proposal regarding future severance agreements. Votes cast were as follows:

 

For:

 

804,215,809

 

 

 

 

 

Against:

 

634,069,878

 

 

 

 

 

Abstention:

 

25,439,142

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

Shareholders rejected a shareholder proposal regarding performance and time-based restricted shares.  Votes cast were as follows:

 

For:

 

186,398,898

 

 

 

 

 

Against:

 

1,250,694,948

 

 

 

 

 

Abstention:

 

26,630,983

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

Shareholders rejected a shareholder proposal regarding performance-based options. Votes cast were as follows:

 

For:

 

602,431,947

 

 

 

 

 

Against:

 

835,974,818

 

 

 

 

 

Abstention:

 

25,318,063

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

Shareholders rejected a shareholder proposal regarding political nonpartisanship. Votes cast were as follows:

 

For:

 

126,634,342

 

 

 

 

 

Against:

 

1,204,750,796

 

 

 

 

 

Abstention:

 

132,339,690

 

 

 

 

 

Non-votes:

 

431,113,785

 

 

 

 

 

 

21



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

 

Item 6.  Exhibits

 

 

10.1

The Home Depot, Inc. Form of Restricted Stock Award (U.S. Officers) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

10.2

The Home Depot, Inc. Form of Deferred Share Award (Nonemployee Directors) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

10.3

The Home Depot, Inc. Form of Deferred Share Award (U.S. Officers) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

10.4

The Home Depot, Inc. Form of Deferred Share Award (Canada Officers) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

10.5

The Home Depot, Inc. Form of LTIP Performance Unit Award (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

10.6

The Home Depot, Inc. Form of Nonqualified Stock Option (U.S. Officers) (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

10.7

The Home Depot, Inc. Form of Nonqualified Stock Option (Nonemployee Directors) (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

10.8

The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

 

12.1

Statement of Computation of Ratio of Earnings to Fixed Charges.

 

 

 

 

15.1

Letter of KPMG LLP, Acknowledgement of Independent Registered Public Accounting Firm, dated August 15, 2005.

 

 

 

 

31.1

Certification of the Chairman, President and Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

 

 

 

 

31.2

Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

 

 

 

 

32.1

Certification of Chairman, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

32.2

Certification of Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

22



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

 

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/ ROBERT L. NARDELLI

 

 

Robert L. Nardelli

 

 

Chairman, President and

 

 

Chief Executive Officer

 

 

 

 

 

/s/ CAROL B. TOMÉ

 

 

Carol B. Tomé

 

 

Executive Vice President and

 

 

Chief Financial Officer

August 31, 2005

 

 

 

(Date)

 

 

 

 

23



 

THE HOME DEPOT, INC. AND SUBSIDIARIES

 

INDEX TO EXHIBITS

 

Exhibit

 

Description

10.1

 

The Home Depot, Inc. Form of Restricted Stock Award (U.S. Officers) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

10.2

 

The Home Depot, Inc. Form of Deferred Share Award (Nonemployee Directors) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

10.3

 

The Home Depot, Inc. Form of Deferred Share Award (U.S. Officers) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

10.4

 

The Home Depot, Inc. Form of Deferred Share Award (Canada Officers) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

10.5

 

The Home Depot, Inc. Form of LTIP Performance Unit Award (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

10.6

 

The Home Depot, Inc. Form of Nonqualified Stock Option (U.S. Officers) (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

10.7

 

The Home Depot, Inc. Form of Nonqualified Stock Option (Nonemployee Directors) (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

10.8

 

The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on May 27, 2005).

 

 

 

12.1

 

Statement of Computation of Ratio of Earnings to Fixed Charges.

 

 

 

15.1

 

Letter of KPMG LLP, Acknowledgement of Independent Registered Public Accounting Firm, dated August 15, 2005.

 

 

 

31.1

 

Certification of the Chairman, President and Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

 

 

 

31.2

 

Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

 

 

 

32.1

 

Certification of Chairman, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

24


EX-12.1 2 a05-15064_1ex12d1.htm EX-12.1

Exhibit 12.1

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

RATIO OF EARNINGS TO FIXED CHARGES

($ in millions, except ratio data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months
Ended
July 31, 2005

 

 

 

Fiscal Year (1)

 

 

 

 

2000

 

2001

 

2002

 

2003

 

2004

 

 

Earnings Before Income Taxes

 

$

4,217

 

$

4,957

 

$

5,872

 

$

6,843

 

$

7,912

 

$

4,809

 

Less:

Capitalized Interest

 

(72

)

(84

)

(59

)

(50

)

(40

)

(19

)

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority Interest Income

 

(2

)

 

 

 

 

 

 

Portion of Rental Expense under operating leases deemed to be the equivalent of interest

 

112

 

122

 

132

 

145

 

170

 

93

 

 

Interest Expense

 

90

 

110

 

96

 

112

 

110

 

90

 

Adjusted Earnings

 

$

4,345

 

$

5,105

 

$

6,041

 

$

7,050

 

$

8,152

 

$

4,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Charges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

$

90

 

$

110

 

$

96

 

$

112

 

$

110

 

$

90

 

 

Portion of Rental Expense under operating leases deemed to be the equivalent of interest

 

112

 

122

 

132

 

145

 

170

 

93

 

Total Fixed Charges

 

$

202

 

$

232

 

$

228

 

$

257

 

$

280

 

$

183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Earnings to Fixed Charges (2)

 

21.5

x

22.0

x

26.5

x

27.4

x

29.1

x

27.1

x

 


(1)     Fiscal years 2004, 2003, 2002, 2001 and 2000 refer to the fiscal years ended January 30, 2005, February 1, 2004, February 2, 2003, February 3, 2002 and January 28, 2001, respectively.  Fiscal year 2001 consisted of 53 weeks.

 

(2)     For purposes of computing the ratios of earnings to fixed charges, “earnings” consist of earnings before income taxes and minority interest plus fixed charges, excluding capitalized interest.  “Fixed charges” consist of interest incurred on indebtedness including capitalized interest, amortization of debt expenses and one-third the portion of rental expense under operating leases, which is deemed to be the equivalent of interest.  The ratios of earnings to fixed charges are calculated as follows:

 

(earnings before income taxes and minority interest)+(fixed charges)-(capitalized interest)

(fixed charges)

 


EX-15.1 3 a05-15064_1ex15d1.htm EX-15.1

Exhibit 15.1

 

ACKNOWLEDGEMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of The Home Depot, Inc.:

 

We acknowledge our awareness of the incorporation by reference of our report dated August 15, 2005, included within the Quarterly Report on Form 10-Q of The Home Depot, Inc. for the quarter ended July 31, 2005, in the following Registration Statements:

 

DESCRIPTION

 

REGISTRATION
STATEMENT NUMBER

 

Form S-3

 

 

 

DepotDirect stock purchase program

 

333-03497

 

DepotDirect stock purchase program

 

333-81485

 

Debt securities

 

333-124699

 

 

 

 

 

Form S-8

 

 

 

The Home Depot, Inc. Non-U.S. Employee Stock Purchase Plan

 

033-58807

 

The Home Depot Futurebuilder

 

333-01385

 

The Home Depot, Inc. Employee Stock Purchase Plan

 

333-16695

 

The Maintenance Warehouse Futurebuilder

 

333-91943

 

The Home Depot Futurebuilder

 

333-85759

 

The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan

 

333-61733

 

The Home Depot Futurebuilder for Puerto Rico

 

333-56207

 

The Home Depot Canada Registered Retirement Savings Plan

 

333-38946

 

The Home Depot, Inc. Restated and Amended Employee Stock Purchase Plan

 

333-56724

 

The Home Depot, Inc. Restated and Amended Employee Stock Purchase Plan

 

333-110423

 

The Home Depot, Inc. Non-Qualified Stock Option and Deferred Stock Units Plan and Agreement

 

333-56722

 

The Home Depot, Inc. Deferred Stock Units Plan and Agreement

 

333-62316

 

The Home Depot, Inc. Deferred Stock Units Plan and Agreement

 

333-62318

 

The Home Depot, Inc. Deferred Stock Units Plan and Agreement

 

333-72016

 

The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan

 

333-125331

 

The Home Depot Futurebuilder

 

333-125332

 

 

Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

 

 

/s/ KPMG LLP

 

KPMG LLP

Atlanta, Georgia

August 15, 2005

 


EX-31.1 4 a05-15064_1ex31d1.htm EX-31.1

Exhibit 31.1

 

CERTIFICATION

 

I, Robert L. Nardelli, certify that:

 

1.                                       I have reviewed this quarterly report on Form 10-Q of The Home Depot, Inc.;

 

2.                                       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.                                       The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)                                      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)                                     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)                                      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)                                     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.                                       The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

 

a)                                      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)                                     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 31, 2005

 

 

 

 

 

 

/s/ ROBERT L. NARDELLI

 

Robert L. Nardelli

 

 

Chairman, President and

 

 

Chief Executive Officer

 

 

 

 

 


EX-31.2 5 a05-15064_1ex31d2.htm EX-31.2

Exhibit 31.2

 

CERTIFICATION

 

I, Carol B. Tomé, certify that:

 

1.                                       I have reviewed this quarterly report on Form 10-Q of The Home Depot, Inc.;

 

2.                                       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.                                       The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)                                      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)                                   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)                                      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)                                     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.                                       The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

 

a)                                      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)                                     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 31, 2005

 

 

 

 

/s/ CAROL B. TOMÉ

 

Carol B. Tomé

 

Executive Vice President and

 

Chief Financial Officer

 


EX-32.1 6 a05-15064_1ex32d1.htm EX-32.1

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 *

 

In connection with the Quarterly Report of The Home Depot, Inc. (the “Company”) on Form 10-Q (“Form 10-Q”) for the period ended July 31, 2005 as filed with the Securities and Exchange Commission on the date hereof, I, Robert L. Nardelli, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1)           The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)           The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ ROBERT L. NARDELLI

 

 

Robert L. Nardelli

 

 

 

Chairman, President and

 

 

 

Chief Executive Officer

 

 

 

August 31, 2005

 

 

 

 


*         A signed original of this written statement required by Section 906 has been provided to The Home Depot, Inc. and will be retained by The Home Depot, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 


EX-32.2 7 a05-15064_1ex32d2.htm EX-32.2

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 *

 

In connection with the Quarterly Report of The Home Depot, Inc. (the “Company”) on Form 10-Q (“Form 10-Q”) for the period ended July 31, 2005 as filed with the Securities and Exchange Commission on the date hereof, I, Carol B. Tomé, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1)           The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)           The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ CAROL B. TOMÉ

 

 

Carol B. Tomé

 

Executive Vice President and

 

Chief Financial Officer

 

August 31, 2005

 

 


*         A signed original of this written statement required by Section 906 has been provided to The Home Depot, Inc. and will be retained by The Home Depot, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 


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