UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1994
- - - OR -
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8207
THE HOME DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3261426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2727 Paces Ferry Road Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
(404) 433-8211
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
$.05 par value 450,969,605 Shares, as of 5/18/94
Page 1 of 14<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
May 1, 1994
Page
Part I. Financial Information:
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS -
Three-Month Period Ended
May 1, 1994 and May 2, 1993............................ 3
CONSOLIDATED CONDENSED BALANCE SHEETS -
As of May 1, 1994 and January 30, 1994................. 4
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS - Three-Month Period Ended
May 1, 1994 and May 2,1993............................. 5
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS................................... 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition..........................................7-10
Part II. Other Information:
Item 4. Submission of Matters to a Vote on Security
Holders...................................... 11
Item 6. Exhibits and Reports on 8-K...................... 11
Signature Page............................................. 12
Index to Exhibits.......................................... 13
Page 2 of 14 <PAGE>
PART I. FINANCIAL INFORMATION
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In Thousands, Except Per Share Data)
Three Months Ended
May 1, 1994 May 2, 1993
Net Sales $2,872,129 $2,180,218
Cost of Merchandise Sold 2,063,372 1,578,518
Gross Profit 808,757 601,700
Operating Expenses:
Selling and Store Operating 519,389 389,245
Pre-opening 9,713 5,498
General and Administrative 51,891 46,615
Total Operating Expenses 580,993 441,358
Operating Income 227,764 160,342
Interest Income (Expense):
Interest Income 8,397 15,770
Interest Expense (8,567) (8,633)
Interest, Net (170) 7,137
Earnings Before Income Taxes 227,594 167,479
Income Taxes 87,860 60,680
Net Earnings $ 139,734 $ 106,799
Earnings Per Common and
Common Equivalent Share $ .31 $ .24
Dividends Per Share $ .03 $ .02
Weighted Average Number of
Common and Common
Equivalent Shares 453,976 452,561
See accompanying notes to consolidated condensed financial
statements.
Page 3 of 14<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In Thousands)
May 1, January 30,
1994 1994
ASSETS
Current Assets:
Cash and Cash Equivalents $ 267,561 $ 99,997
Short-Term Investments,
including current maturities
of long-term investments 62,038 330,976
Accounts Receivable, Net 192,756 198,431
Merchandise Inventories 1,557,771 1,293,477
Other Current Assets 56,601 43,720
Total Current Assets 2,136,727 1,966,601
Property and Equipment, at cost 2,959,119 2,618,428
Less: Accumulated Depreciation
and Amortization (272,145) (247,524)
Net Property and Equipment 2,686,974 2,370,904
Long-Term Investments
held Available for Sale 340,234 281,623
Cost in Excess of the Fair Value of Net
Assets Acquired, Net 83,992 19,503
Other 44,176 62,258
$5,292,103 $4,700,889
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 768,768 $ 521,246
Accrued Salaries
and Related Expenses 216,255 167,489
Sales Taxes Payable 85,437 57,590
Other Accrued Expenses 208,112 184,462
Income Taxes Payable 93,167 40,303
Current Installments
of Long-Term Debt 1,548 1,548
Total Current Liabilities 1,373,287 972,638
Convertible Subordinated Debt 804,990 804,990
Long-Term Debt,
excluding current installments 36,745 37,002
Other Long-Term Liabilities 91,724 44,332
Deferred Income Taxes 31,248 27,827
Stockholders' Equity:
Common Stock - 450,933,000 shares outstanding
at 05/01/94 and 449,364,000 shares outstanding
at 01/30/94 22,546 22,468
Paid-in Capital 1,455,631 1,436,029
Retained Earnings 1,526,794 1,400,575
Cumulative Translation Adjustments (5,309) (121)
Unrealized Holding Loss on Investments (702) ---
2,998,960 2,858,951
Less Notes Receivable from ESOP 44,851 44,851
Total Stockholders' Equity 2,954,109 2,814,100
$5,292,103 $4,700,889
See accompanying notes to consolidated condensed financial
statements.
Page 4 of 14
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
May 1, 1994 May 2, 1993
Cash Provided from Operations:
Net Earnings $ 139,734 $ 106,799
Reconciliation of Net Earnings to Net Cash
Provided by Operations:
Depreciation and Amortization 28,374 20,535
Increase in Accounts Payable
and Accrued Expenses 318,635 216,389
Increase in Merchandise
Inventories (210,977) (155,005)
Increase in Income Taxes Payable 59,029 49,813
Increase in Receivables, Net 5,057 6,822
Other 6,734 (6,818)
Total 206,852 131,736
Net Cash Provided by Operations 346,586 238,535
Cash Flows From Investing Activities:
Capital Expenditures (260,246) (192,540)
Payment for Purchase of
Partnership Interest (161,548) ---
Proceeds from Sale of
Short-Term Investments, Net 88,142 71,737
Purchase of Long-Term Investments (46,997) (226,173)
Proceeds from Maturities of
Long-Term Investments 6,916 61,937
Proceeds from Sale of
Long-Term Investments 161,197 131,661
Proceeds from Sale of
Property and Equipment 12,697 6,569
Advances Secured by Real Estate, Net 21,104 12,176
Net Cash Used in
Investing Activities (178,735) (134,633)
Cash Flows From Financing Activities:
Proceeds from Sale of
Common Stock, Net 13,515 17,480
Cash Received from ESOP --- 83
Principal Repayments of Long-Term Debt (287) (424)
Cash Dividends Paid to Stockholders (13,515) (10,020)
Net Cash (Used In) Provided
by Financing Activities (287) 7,119
Increase in Cash and
Cash Equivalents 167,564 111,021
Cash and Cash Equivalents,
Beginning of Period 99,997 121,744
Cash and Cash Equivalents,
End of Period $ 267,561 $ 232,765
See accompanying notes to consolidated condensed financial
statements.
Page 5 of 14 <PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying consolidated condensed financial
statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all of
the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all
adjustments (consisting of normal reoccurring
accruals) considered necessary for a fair
presentation have been included. These statements
should be read in conjunction with the consolidated
financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year
ended January 30, 1994 as filed with the Securities
and Exchange Commission (File No. 1-8207).
2. Acquisition of Interest in Canadian Company
Effective February 28, 1994, the Company entered into
a partnership and, as a result, acquired 75% of
Aikenhead's Home Improvement Warehouse, now known as
Home Depot Canada, which was operating seven
warehouse-style home improvement stores at the time
of the acquisition in Toronto, London and Kitchener,
Ontario, Canada. Subsequent to the acquisition, the
partnership has opened three stores located in
Edmonton and Calgary, Alberta and Vancouver, British
Columbia, respectively.
At any time after the sixth anniversary of the
purchase, the Company has the option to purchase, or
the other partner has the right to cause the Company
to purchase, the remaining 25% of Home Depot Canada.
The option price is based on the lesser of fair
market value or a value to be determined by an
agreed-upon formula as of the option exercise date.
The purchase price paid for the 75% interest in
Home Depot Canada was approximately $162,000,000 and
is being accounted for by the purchase method of
accounting. The excess purchase price over the
estimated fair value of the net assets as of the
acquisition date has been recorded as goodwill and
will be amortized over 40 years.
3. Accounting for Investments
In the first quarter of fiscal 1994, the Company
implemented Statement of Financial Accounting
Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS
115). This standard addresses the accounting and
reporting for investments in equity securities that
have readily determinable fair values and for all
investments in debt securities. Under SFAS 115, the
Company is required to classify its debt and
marketable equity securities in one of three
categories: trading, available for sale, or held to
maturity. Trading securities are bought and held
primarily for the purpose of selling them in the near
term. Held to maturity securities are securities
that the Company has the ability and intent to hold
until maturity.
All other securities not included in
trading or held to maturity are classified
as available for sale. Trading
securities are recorded at fair value with
unrealized gains and losses included
in earnings. Held to maturity securities
are recorded at amortized cost, adjusted
for amortization or accretion of
premiums or discounts. Unrealized gains
and losses on securities available
for sale are excluded from earnings and
are reported as a separate component of
stockholders' equity until realized.
SFAS 115 has not had a significant
impact on the Company's results of
operations.
Page 6 of 14<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The data below reflect selected sales data, the percentage
relationship between sales and major categories in the
Consolidated Statements of Earnings and the percentage change in
the dollar amounts of each of the items.
Percentage
Three Months Ended Increase
May 1, May 2, in $ Amounts
1994 1993
Three Months
Selected Consolidated
Statements of Earnings Data
Net Sales 100.0% 100.0% 31.7%
Gross Profit 28.1 27.6 34.4
Operating Expenses:
Selling and Store Operating 18.1 17.9 33.4
Pre-Opening .3 .2 76.7
General and Administrative 1.8 2.1 11.3
Total Operating Expense 20.2 20.2 31.6
Operating Income 7.9 7.4 42.1
Interest Income (Expense):
Interest Income .3 .7 (46.8)
Interest Expense (.3) (.4) (0.8)
Interest, Net - .3 (102.4)
Earnings Before Income Tax 7.9 7.7 35.9
Income Taxes 3.0 2.8 44.8
Net Earnings 4.9% 4.9% 30.8%
Selected Consolidated Sales Data
Number of Customer
Transactions 70,859,000 55,869,000 26.8%
Average Amount of
Sales Per Transaction $40.53 $39.02 3.9
Weighted Average
Weekly Sales Per
Operating Store $796,000 $765,000 4.1
Weighted Average Sales
Per Square Foot $ 409 $ 405 1.0
Page 7 of 14
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
RESULTS OF OPERATIONS
Sales for the first quarter of fiscal 1994 increased 32% to $2,872,129,000
compared to sales of $2,180,218,000 for the first quarter of fiscal 1993.
This sales increase was attributable to new stores (287 at the end of the first
quarter of fiscal 1994 compared to 224 at the end of the first quarter of fiscal
1993) and a comparable store for store sales increase of 7%. The percentage
increase in comparable store sales would have been 10% after excluding all
sales from the ten stores in southern Florida that were significantly affected
by Hurricane Andrew.
Gross profit as a percent of sales was 28.1% for the first quarter of fiscal
1994 compared to 27.6% for the comparable period of fiscal 1993. This
gross profit increase as a percent of sales resulted primarily from a reduction
in the penetration of lumber and building materials sales and improved
inventory shrinkage results.
Operating expenses as a percent of sales were 20.2% for both the first
quarter of fiscal 1994 and fiscal 1993. Selling and store operating expenses
as a percent of sales increased to 18.1% for the first quarter of fiscal 1994
compared to 17.9% for the comparable period in fiscal 1993. This increase
was attributable to, among other things, additional expenses associated with
five store relocations compared to two store relocations during the
comparable quarter of fiscal 1993. Pre-opening expenses as a percent of
sales were 0.3% for the first quarter of fiscal 1994 compared to 0.2% for the
comparable period of fiscal 1993. This increase was attributable to 16 new
store openings plus five relocations compared to 10 store openings plus two
relocations in the comparable period of fiscal 1993. General and
administrative expenses decreased to 1.8% for the first quarter of fiscal 1994
compared to 2.1% for the comparable period of fiscal 1993. This decrease
was due to higher sales volumes with continued emphasis on controlling costs
and the inclusion in the first quarter of fiscal 1993 expenses associated with
a mainframe computer replacement.
Interest income as a percent of sales decreased to 0.3% for the first quarter
of fiscal 1994 from 0.7% for the first quarter of fiscal 1993. This decrease
was attributable to a lower investment base and lower effective yields.
Interest expense as a percent of sales decreased to 0.3% for the first quarter
of fiscal 1994 compared to 0.4% for the first quarter of fiscal 1993. This
decrease was attributable to higher capitalized interest due to more owned
stores under construction, partially offset by interest on capitalized leases.
Page 8 of 14<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
RESULTS OF OPERATIONS--(Continued)
The Company's combined Federal and state effective income tax rate
increased to 38.6% for the first quarter of fiscal 1994 from 36.2% for the
comparable period of fiscal 1993. This increase was attributable to the
implementation of the Omnibus Budget Reconciliation Act of 1993 and a
reduction of tax advantaged investments. In addition, the Federal and state
effective tax rate for the first quarter of fiscal 1993 would have been 37.5%,
however Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" was implemented which reduced the Federal and state
effective tax rate to 36.2%.
Net earnings as a percent of sales was 4.9% for both the first quarter of
fiscal 1994 and fiscal 1993. Earnings per share was $.31 for the first quarter
of fiscal 1994 compared to $.24 for the first quarter of fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from store operations provides the Company with a
significant source of liquidity. Additionally, a significant portion of the
Company's inventory is financed under vendor credit terms.
During the first three months of fiscal 1994, the Company opened 16 stores,
acquired seven stores in Canada and relocated five of its existing stores.
During the remainder of fiscal 1994, the Company plans to open
approximately 54 additional new stores and relocate four existing stores. Of
the planned 70 new stores and nine relocations, it is expected that 69 will be
owned and 10 will be leased. The Company currently plans to open
approximately 85 new stores and may relocate 10 stores during fiscal 1995.
Although some of these locations will be leased directly, it is expected that
many may be obtained through the purchase of pre-existing leasehold
interests, the acquisition of land parcels and the construction or purchase of
buildings during fiscal 1994. While the cost of new stores to be constructed
and owned by the Company varies widely, principally due to land costs, new
store costs (including land, building and fixtures) are currently estimated to
average approximately $12,800,000 per location. The Company may
purchase leasehold interests at varying amounts depending upon the value of
such properties. The cost to remodel (including leasehold interests) and
fixture stores to be leased is expected to average approximately $4,000,000
per store. In addition, each new store will require approximately $2,500,000
to finance inventories, net of vendor financing.
Page 9 of 14<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES--(Continued)
In addition, the Company paid approximately $162,000,000 on February 28,
1994 in conjunction with the acquisition of a 75% interest in Aikenhead's
Home Improvement Warehouse (now known as Home Depot Canada) in
Canada. After six years, the Company has the option to purchase, or the
other partner has the right to cause the Company to purchase, the remaining
25% of Home Depot Canada. At the time of acquisition, Aikenhead's was
operating seven stores and the Company anticipates having 12 stores in
Canada by the end of fiscal 1994. These Canadian stores have been included
in the planned store totals discussed above.
As of May 1, 1994, the Company had $329,599,000 in cash and short-term
investments as well as $340,234,000 in long-term investments. Management
believes that its current cash position, the proceeds from short-term and long-
term investments, internally generated funds, and/or the ability to obtain
alternate sources of financing should enable the Company to complete its
capital expenditure programs, including store expansion and renovation,
through the next several fiscal years.
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe inflation has had a material
effect on sales or results of operations.
Page 10 of 14<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
During the first quarter of fiscal 1994, no matters were
submitted to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Earnings per Common and Common
Equivalent Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
May 1, 1994.
Page 11 of 14 <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE HOME DEPOT, INC.
(Registrant)
By: /s/ Arthur M. Blank
Arthur M. Blank
President
/s/ Ronald M. Brill
Ronald M. Brill
Executive Vice President
Chief Financial Officer
(Date)
Page 12 of 14 <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE HOME DEPOT, INC.
(Registrant)
By:
Arthur M. Blank
President
Ronald M. Brill
Executive Vice President
Chief Financial Officer
(Date)
Page 12 of 14<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit Description Page
11.1 Computation of Earnings per Common and Common
Equivalent Share...................................... 14
Page 13 of 14
Exhibit 11.1
THE HOME DEPOT, INC. AND SUBSIDIARIES
Computation of Earnings
Per Common and Common Equivalent Share
(In Thousands, Except Per Share Data)
Three Months Ended
May 1, 1994 May 2, 1993
Primary
Net earnings applicable
to common and common
equivalent shares $139,734 $106,799
Shares:
Weighted average number
of common and common
equivalent shares
assuming average
market price for period 453,976 452,561
Primary earnings
per common and common
equivalent share $ .308 $ .236
Fully Diluted
Net earnings applicable
to common and common
equivalent shares $139,734 $106,799
Tax effected interest
expense attributable to
convertible subordinated notes $5,260 $5,157
$144,994 $111,956
Shares:
Weighted average number
of common and common
equivalent shares at higher
of ending or average
market price 454,068 452,561
Additional shares from
convertible subordinated notes 20,774 20,774
474,842 473,335
Fully diluted earnings
per common & common
equivalent share $ .305 $ .236
(1) Common equivalent shares represent shares granted under three stock
option plans and an employee stock purchase plan.
(2) The Company's 4.5% convertible notes, issued in 1992 are common stock
equivalents. Fully diluted earnings per share shows the effect on
earnings per share assuming conversion of the 4.5% convertible notes
as of the beginning of the accounting periods presented. For the
three month period ended May 1, 1994, shares issuable upon conversion
of the notes were dilutive, but had no impact on earnings per share.
For the three month period ended May 2, 1993, shares issuable upon
conversion of the notes were anti-dilutive.
Page 14 of 14
