<PAGE>
Page 1 of 15
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 2, 1999
- OR -
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8207
THE HOME DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3261426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2455 Paces Ferry Road Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
(770) 433-8211
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
$.05 par value 1,481,685,346 Shares, as of May 28, 1999
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THE HOME DEPOT, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
May 2, 1999
Page
Part I. Financial Information:
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS -
Three-Month Periods Ended May 2,1999 and May 3,1998..............3
CONSOLIDATED CONDENSED BALANCE SHEETS -
As of May 2,1999 and January 31, 1999............................4
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Three-Month Periods Ended May 2, 1999 and May 3,1998.............5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME-
Three-Month Periods Ended May 2, 1999 and May 3,1998.............6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.................7
Item 2. Management's Discussion and Analysis of Result
of Operations and Financial Condition................. 8 - 13
Item 3. Quantitative and Qualitative Disclosures about Market
Risk.......................................................13
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders........13
Item 5. Other Information..........................................13
Item 6. Exhibits and Reports on Form 8-K...........................13
Signature Page......................................................14
Index to Exhibits...................................................15
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In Millions, Except Per Share Data)
Three Months Ended
May 2, May 3,
1999 1998
<S> <C> <C>
Net Sales $ 8,952 $ 7,123
Cost of Merchandise Sold 6,386 5,155
Gross Profit 2,566 1,968
Operating Expenses:
Selling and Store Operating 1,584 1,268
Pre-Opening 22 19
General and Administrative 150 121
Total Operating Expenses 1,756 1,408
Operating Income 810 560
Interest Income (Expense):
Interest and Investment Income 3 7
Interest Expense (8) (11)
Interest, Net (5) (4)
Earnings Before Income Taxes 805 556
Income Taxes 316 219
Net Earnings $ 489 $ 337
Weighted Average Number of Common
Shares Outstanding 1,478 1,466
Basic Earnings Per Share $ 0.33 $ 0.23
Weighted Average Number of Common
Shares Outstanding Assuming Dilution 1,558 1,539
Diluted Earnings Per Share $ 0.32 $ 0.22
Dividends Per Share $ 0.030 $ 0.025
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<TABLE>
<CAPTION>
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In Millions, Except Share Data)
May 2, January 31,
ASSETS 1999 1999
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 604 $ 62
Short-Term Investments --- ---
Receivables, Net 502 469
Merchandise Inventories 4,955 4,293
Other Current Assets 150 109
Total Current Assets 6,211 4,933
Property and Equipment, at cost 9,937 9,422
Less: Accumulated Depreciation
and Amortization (1,342) (1,262)
Net Property and Equipment 8,595 8,160
Long-Term Investments 15 15
Notes Receivable 29 26
Cost in Excess of the Fair Value
of Net Assets Acquired 274 268
Other 75 63
$ 15,199 $ 13,465
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 2,592 $ 1,586
Accrued Salaries and Related Expenses 465 395
Sales Taxes Payable 263 176
Other Accrued Expenses 599 586
Income Taxes Payable 289 100
Current Installments of Long-Term Debt 8 14
Total Current Liabilities 4,216 2,857
Long-Term Debt, excluding
current installments 1,319 1,566
Other Long-Term Liabilities 238 208
Deferred Income Taxes 85 85
Minority Interest 12 9
Stockholders' Equity:
Common Stock, par value $0.05.
Authorized: 2,500,000,000 shares;
issued and outstanding -
1,479,491,000 shares at 5/2/99
and 1,475,452,000 shares at 1/31/99 74 74
Paid-In Capital 2,972 2,854
Retained Earnings 6,321 5,876
Accumulated Other Comprehensive Income (33) (61)
9,334 8,743
Less Shares Purchased for
Compensation Plans (5) (3)
Total Stockholders' Equity 9,329 8,740
$ 15,199 $ 13,465
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<TABLE>
<CAPTION>
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
Three Months Ended
May 2,1999 May 3,1998
Cash Provided From Operations:
<S> <C> <C>
Net Earnings $ 489 $ 337
Reconciliation of Net Earnings to Net Cash
Provided by Operations:
Depreciation and Amortization 107 87
(Increase)Decrease in Receivables, Net (31) 74
Increase in Merchandise Inventories (654) (404)
Increase in Accounts Payable
and Accrued Expenses 1,198 818
Increase in Income Taxes Payable 241 171
Other (47) (23)
Net Cash Provided by Operations 1,303 1,060
Cash Flows From Investing Activities:
Capital Expenditures (550) (424)
Proceeds from Sales of Property and Equipment 19 12
Purchase of Remaining Interest in
The Home Depot Canada --- (261)
Purchases of Investments --- (1)
Proceeds from Maturities of Investments --- 2
Repayments of Advances Secured
by Real Estate, Net (3) 3
Net Cash Used in Investing Activities (534) (669)
Cash Flows From Financing Activities:
Repayments of Commercial Paper Obligations, Net (246) ---
Principal Repayments of Long-Term Debt (6) (4)
Proceeds from Sale of Common Stock, Net 63 47
Cash Dividends Paid to Stockholders (44) (36)
Minority Interest Contributions to Partnership 5 8
Net Cash (Used in) Provided by
Financing Activities (228) 15
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 1 ---
Increase in Cash and Cash Equivalents 542 406
Cash and Cash Equivalents
at Beginning of Period 62 172
Cash and Cash Equivalents at End of Period $ 604 $ 578
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In Millions)
Three Months Ended
May 2, May 3,
1999 1998
<S> <C> <C>
Net Earnings $ 489 $ 337
Other Comprehensive Income:
Foreign Currency Translation Adjustments 28 5
Comprehensive Income $ 517 $ 342
</TABLE>
<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 recurring accruals) considered
necessary for a fair presentation have been included. These
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended January 31, 1999, as
filed with the Securities and Exchange Commission (File No. 1-8207).
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<TABLE>
<CAPTION>
THE HOME DEPOT, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The data below reflect selected sales data, the percentage relationship
between sales and major categories in the Consolidated Statements of
Earnings and the percentage change in the dollar amounts of each of the
items.
Three Months Ended
Percentage
Increase
May 2, May 3, (Decrease)in
1999 1998 Dollar Amounts
Selected Consolidated
Statements of Earnings Data
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 25.7%
Gross Profit 28.7 27.6 30.4
Operating Expenses:
Selling and Store Operating 17.7 17.8 24.9
Pre-Opening 0.2 0.2 15.8
General and Administrative 1.7 1.7 24.0
Total Operating Ex 19.6 19.7 24.7
Operating Income 9.1 7.9 44.6
Interest Income (Expense):
Interest and Investment Income 0.0 0.1 (57.1)
Interest Expense (0.1) (0.2) (27.3)
Interest, Net (0.1) (0.1) 25.0
Earnings Before Income Taxes 9.0 7.8 44.8
Income Taxes 3.5 3.1 44.3
Net Earnings 5.5% 4.7% 45.1
Selected Consolidated Sales Data
Number of Transactions (000's) 185,200 156,209 18.6%
Average Sale Per Transaction $ 47.97 $ 45.19 6.2
Weighted Average Weekly Sales
Per Operating Store (000's) $ 878 $ 854 2.8
Weighted Average Sales
Per Square Foot $ 425 $ 417 1.9
</TABLE>
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
FORWARD-LOOKING STATEMENTS
Certain written and oral statements made by The Home Depot, Inc. and
subsidiaries (the "Company") or with the approval of an authorized executive
officer of the Company may constitute "forward-looking statements" as
defined under the Private Securities Litigation Reform Act of 1995. Words
or phrases such as "should result," "are expected to," "we anticipate," "we
estimate," "we project," or similar expressions are intended to identify
forward-looking statements. These statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
the Company's historical experience and its present expectations or
projections. These risks and uncertainties include, but are not limited to,
unanticipated weather conditions, stability of costs and availability of
sourcing channels, our ability to attract,train and retain highly qualified
associates, conditions affecting the availability, acquisition,development
and ownership of real estate, year 2000 problems, general economic
conditions, the impact of competition and regulatory and litigation matters.
Caution should be taken not to place undue reliance on any such forward-
looking statements, since such statements speak only as of the date of the
making of such statements. Additional information concerning these risks and
uncertainties is contained in the Company's Annual Report on Form 10-K for
the year ended January 31, 1999, as filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
Sales for the first quarter of fiscal 1999 increased 25.7% to $8.952 billion
from $7.123 billion for the first quarter of fiscal 1998. The sales
increase for the period was primarily attributable to 141 new stores (total
of 797 stores at the end of the first quarter of fiscal 1999 compared with
656 at the end of the first quarter of fiscal 1998) and a comparable store-
for-store sales increase of 9% for the first quarter of fiscal 1999.
Gross profit as a percent of sales was 28.7% for the first quarter of fiscal
1999 compared with 27.6% for the first quarter of fiscal 1998. The gross
profit rate increase for the period was primarily attributable to sales mix
changes and to lower costs of merchandise resulting from continued product
line reviews and other merchandising initiatives including direct sourcing
of imports.
Total operating expenses as a percent of sales decreased to 19.6% for the
first quarter of fiscal 1999 from 19.7% for the first quarter of fiscal
1998. Selling and store operating expenses as a percent of sales decreased
to 17.7% for the first quarter of fiscal 1999 from 17.8% for the first
quarter of fiscal 1998. Net advertising expenses decreased as a percent of
sales due to increased national advertising, cost leverage achieved from
opening new stores in existing markets, and higher vendor co-op advertising
support. Partially offsetting this decrease were higher credit card
discounts due to higher penetrations of credit sales and increases in non-
private label credit card discount rates. Pre-opening expenses as a percent
of sales were 0.2% for the first quarter of both fiscal 1999 and fiscal
1998. The Company opened 37 new stores and relocated 1 store during the
first quarter of fiscal 1999 compared with 32 new stores opened during the
first quarter of fiscal 1998. General and administrative expenses as a
percent of sales were 1.7% for the first quarter of both fiscal 1999 and
fiscal 1998. Certain variable G&A expenses were lower than last year as a
percent of sales, which offset increased cost of staffing and investments
for various growth initiatives.
Net interest expense as a percent of sales was 0.1% for the first quarter of
both fiscal 1999 and fiscal 1998. As a percent of sales, interest and
investment income for the first quarter of fiscal 1999 decreased to 0.0%
from
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THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
RESULTS OF OPERATIONS - (Continued)
0.1% for the first quarter of fiscal 1998, primarily due to lower investment
balances. Interest expense as a
percent of sales decreased to 0.1% for the first quarter of fiscal 1999 from
0.2% for the comparable period of
fiscal 1998. The decrease was primarily attributable to leverage achieved
from higher sales in fiscal 1999 and to higher capitalized interest expense
during fiscal 1999.
The Company's combined federal and state effective income tax rate decreased
to 39.2% for the first quarter of fiscal 1999 from 39.3% for the comparable
period of fiscal 1998. During the fourth quarter of fiscal 1998, an
adjustment was made to lower the annual effective tax rate to 39.2%.
Net earnings as a percent of sales increased to 5.5% for the first quarter
of fiscal 1999 from 4.7% for the first quarter of fiscal 1998. The increase
as a percent of sales for fiscal 1999 was primarily attributable to higher
gross margin rates and lower selling and store operating expenses as
described above.
Diluted earnings per share was $0.32 for the first quarter of fiscal 1999
compared to $0.22 for the first quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from store operations provides the Company with a
significant source of liquidity. Additionally, a significant portion of the
Company's inventory is financed under vendor credit terms. During the first
quarter of fiscal 1999, the Company opened 37 stores, relocated 1 store and
temporarily closed 1 store, which will be reopened on the same site during
the third quarter of fiscal 1999. During the remainder of fiscal 1999, the
Company plans to open approximately 130 new stores and relocate 6 stores,
for a growth rate of approximately 22%. It is currently anticipated that
approximately 85% of these locations will be owned, and the remainder will
be leased.
During the last three fiscal years, the Company entered into two operating
lease agreements totaling $882 million for the purpose of financing
construction costs of certain new stores. Under the operating lease
agreements, the lessor purchases the properties, pays for the construction
costs and subsequently leases the facilities to the Company. The leases
provide for substantial residual value guarantees and include purchase
options at original cost on each property.
The Company financed a portion of new stores opened in fiscal 1997 and 1998
under the operating lease agreements and anticipates utilizing these
facilities to finance selected new stores in fiscal 1999 and 2000 and an
office building in fiscal 1999. In addition, some planned locations for
fiscal 1999 will be leased individually, and it is expected that many
locations may be obtained through the acquisition of land parcels and
construction or purchase of buildings. While the cost of new stores to be
constructed and owned by the Company varies widely, principally due to land
costs, new store costs are currently estimated to average approximately
$13.0 million per location. The cost to remodel and/or fixture stores
to be leased is expected to average approximately $3.6 million per store.
In addition, each new store will require approximately $3.1 million to
finance inventories, net of vendor financing.
<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)
During fiscal 1996, the Company issued, through a public offering, $1.1
billion of 3.25% Convertible Subordinated Notes due October 1, 2001 (the
"3.25% Notes"). The 3.25% Notes were issued at par and are convertible into
shares of the Company's common stock at any time prior to maturity,
unless previously redeemed by the Company, at a conversion price of $23.0417
per share, subject to adjustment under certain conditions. The 3.25% Notes
may be redeemed by the Company, at any time on or after October 2, 1999, in
whole or in part, at a redemption price of 100.813% of the principal amount
and after October 1, 2000, at 100% of the principal amount. The Company
used the net proceeds from the offering to repay outstanding commercial
paper obligations, to finance a portion of the Company's capital
expenditure program, including store expansions and renovations, and
for general corporate purposes.
The Company has a commercial paper program that allows borrowings up to a
maximum of $800 million. During the first quarter of fiscal 1999 the
Company repaid $246 million outstanding under the commercial paper program
and as of May 2, 1999, there were no borrowings outstanding under the
program. In connection with the program, the Company has a back-up credit
facility with a consortium of banks for up to $800 million. The credit
facility, which expires in December 2000, contains various restrictive
covenants, none of which is expected to materially impact the Company's
liquidity or capital resources.
As of May 2, 1999, the Company had $604 million in cash and cash
equivalents, as well as $15 million in long-term investments. Management
believes that its current cash position, the proceeds from long-term
investments, internally generated funds, funds available from its $800
million commercial paper program, funds available from the operating lease
agreements, and the ability to obtain alternate sources of financing should
enable the Company to complete its capital expenditure programs, including
store openings and renovations, through the next several fiscal years.
YEAR 2000
The Company is currently addressing a universal situation commonly referred
to as the "Year 2000 Problem." The Year 2000 Problem relates to the
inability of certain computer software programs to properly recognize and
process date-sensitive information relative to the year 2000 and beyond.
During fiscal 1997, the Company developed a plan to devote the necessary
resources to identify and modify internal systems impacted by the Year 2000
Problem, or implement new systems to become year 2000 compliant in a timely
manner. This compliance plan consists of four major areas of focus:
systems, desktops, facilities and supplier management. The total cost of
executing this plan is estimated at $13 million, and as of May 2, 1999, the
Company had expended approximately $9.6 million to effect the plan.
The Company has substantially completed the systems portion of the
compliance plan. In implementing the systems portion of the plan, the
Company completed an inventory of all software programs operating on its
systems, identified year 2000 problems, and then created an appropriate
testing environment. Additionally, as of May 2, 1999, the Company had
substantially completed the final phases of the compliance plan, which
involve testing and installing year 2000 compliant software in the
production environment.
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
YEAR 2000 - (Continued)
All desktop applications critical to the Company's overall business have
been inventoried and evaluated under the method described above, and as of
January 31, 1999, this process was complete. The compliance plan for
desktop infrastructure was also substantially complete at the end of the
first quarter of fiscal 1999.
Substantially all critical facilities systems, including, but not limited
to, security systems, energy management, material handling, copiers and
faxes, have been inventoried and are being tested. As of May 2, 1999, this
process was over 60% complete. The Company anticipates completing the
facilities systems portion of its compliance plan before the end of the
second quarter of fiscal 1999.
The Company is assessing the year 2000 compliance status of its suppliers,
many of which participate in electronic data interchange ("EDI") or similar
programs with the Company. The Company will conduct substantial testing with
EDI merchandise suppliers and transportation carriers. With respect to
merchandise suppliers participating in EDI programs with the Company, the
Company is conducting point-to-point testing of these EDI systems for year
2000 compliance.
The Company's risks involved with not solving the Year 2000 Problem include,
but are not limited to, the following: loss of local or regional
electrical power, loss of telecommunication services, delays or
cancellations of merchandise shipments, manufacturing shutdowns, delays in
processing customer transactions, bank errors and computer errors by
suppliers. Because the Company's year 2000 compliance is dependent upon
certain third parties (including infrastructure providers) also being year
2000 compliant on a timely basis, there can be no assurance that the
Company's efforts will prevent a material adverse impact on its results of
operations, financial condition or business.
The Company is modifying its existing disaster recovery plans to include
year 2000 contingency planning. Also, the Company is identifying critical
activities that would normally be conducted during the first two weeks of
January 2000, which may be completed instead in December 1999. The Company
expects its year 2000 contingency planning to be substantially complete by
the end of the second quarter of fiscal 1999 and to test and modify
contingency plans throughout the remainder of 1999.
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe inflation has had a
material effect on sales or results of operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not entered into any transactions using derivative financial
instruments or derivative commodity instruments and believes that its exposure
to market risk associated with other financial instruments(such as investments)
and interest rate risk is not material.
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
During the first quarter of fiscal 1999, no matters were submitted to a
vote of security holders.
Item 5. OTHER INFORMATION
On May 13, 1999, the Board of Directors appointed William S. Davila to serve
as a member of the Board. Mr. Davila's term will expire at the Annual
Meeting of Stockholders in 2001. Mr. Davila is the retired President and
Chief Operating Officer of The Vons Companies, Inc., and he serves on the
Boards of Directors of Wells Fargo Bank, Pacific Gas & Electric Corporation
and Hormel Foods Corporation.
Item 6. EXHIBITS
3.1 Restated Certificate of Incorporation of The Home Depot,Inc.,
as amended
11.1 Computation of Basic and Diluted Earnings Per Share
27. Financial Data Schedule (only submitted to SEC in
electronic format)
<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 & CEO
/s/ Marshall L. Day
Marshall L. Day
Senior Vice President
Finance & Accounting
June 2, 1999
(Date)
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit Description
3.1 Restated Certificate of Incorporation of The Home Depot, Inc.,
as amended
11.1 Computation of Basic and Diluted Earnings Per Share
27. Financial Data Schedule (only submitted to SEC in electronic
format)
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
THE HOME DEPOT, INC., AS AMENDED
(Originally incorporated on June 29, 1978 under the name M. B. Associates
Incorporated)
FIRST: The name of the corporation (which is herein referred to as the
"Corporation") is The Home Depot, Inc.
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, in the
County of New Castle. The name of its registered agent at that address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
Without limiting in any manner the scope and generality of the
foregoing, it is hereby provided that the Corporation shall have the
following purposes, objects and powers:
To manufacture, purchase or otherwise acquire, invest in, own, pledge,
sell, assign and transfer or otherwise dispose of, trade, deal in and deal
with, any and all goods, wares, merchandise and personal property
relating to home improvement services, materials, products, devices,
manuals, audio-visual aids, tools and any and all products related thereto
of every kind and description.
To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of the
objects or the furtherance of any of the powers herein before set forth,
either alone or in association with other corporations, firms or
individuals, and to do every other act or acts, thing or things incidental
to or growing out of or connected with the aforesaid powers or any part or
parts thereof, including, without limitation, the acquisition and operation
of businesses exclusively or partially engaged in providing home
improvement services, materials, products, devices, manuals, audio-visual
aids, tools, and related products or services to consumers.
The business or purpose of the Corporation is from time to time to do
any one or more of the acts and things herein before set forth, and it
shall have power to conduct and carry on said business, or any part
thereof, and to have one or more offices, and to exercise any or all of its
corporate powers and rights, in the State of Delaware, and in the various
other states, territories, colonies and dependencies of the United States,
in the District of Columbia, and in all or any foreign countries.
The enumeration herein of the objects and purposes of the
Corporation shall be construed as powers as well as objects and purposes
and shall not be deemed to exclude by inference any powers, objects or
purposes which the Corporation is empowered to exercise, whether expressly
by force of the laws of the State of Delaware now or hereafter in effect,
or impliedly by the reasonable construction of said laws.
FOURTH: The total number of shares of stock which the Corporation will
have authority to issue is 5,000,000,000, all of which shall be shares of
Common Stock of the par value of five cents ($.05) each.
<PAGE>
FIFTH: The name and mailing address of the sole incorporator is as
follows:
Kenneth G. Langone
c/o INVEMED ASSOCIATES INCORPORATED
375 Park Avenue
New York. New York 10022
SIXTH: 1. The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less
than three nor more than fifteen directors, the exact number of directors
to be determined from time to time by resolution adopted by affirmative
vote of a majority of the entire Board of Directors. The directors shall
be divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. At
the meeting of stockholders at which this Article is adopted,Class I, II
and III directors shall be elected to serve until the 1987, 1986 and 1985
annual meetings of stockholders, respectively.
2. At each annual meeting of the stockholders beginning with
1985, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected
to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the
annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors that results from an increase in the
number of directors may be filled by a majority of the Board of Directors
then in office, and any other vacancy occurring in the Board of Directors
may be filled by a majority of the directors then in office, although less
than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy not resulting from an increase in the number of directors
shall have the same remaining term as that of his predecessor.
3. No person (other than a person nominated by or on behalf of
the Board of Directors) shall be eligible for election as a director at any
annual or special meeting of stockholders unless a written request that his
or her name be placed in nomination is received from a stockholder of
record by the Secretary of the Corporation not less than 30 days prior to
the date fixed for the meeting, together with the written consent of such
person to serve as a director.
4. Except to the extent prohibited by law, the Board of
Directors shall have the right (which, to the extent exercised, shall be
exclusive) to establish the rights, powers, duties, rules and procedures
that from time to time shall govern the Board of Directors and each of its
members, including without limitation the vote required for any action by
the Board of Directors, the determination by resolution of the Board of
Directors of the officers of the Corporation and their respective titles
and duties, the determination by resolution of the Board of Directors of
the manner of choosing the officers of the Corporation and the terms of
their respective offices, the determination by resolution of the Board of
Directors of the terms and conditions under which the Corporation shall
exercise the powers granted to it as of January I, 1984 by Section 145 of
the Delaware General Corporation Law, as such powers may exist from time to
time after January 1, 1984, and that from time to time shall affect the
directors' power otherwise to manage the business and affairs of the
Corporation; and, notwithstanding any other provision of this Certificate
of Incorporation to the contrary, no by-law shall be adopted by
<PAGE>
stockholders which shall interpret or qualify, or impair or impede the
implementation of, the foregoing. Any inconsistency between, on the one
side, a document which implements the provisions of this paragraph 4 and
sets forth the rights, powers, duties, rules and/or procedures governing
the Board of Directors and, on the other side, any by-law or other
corporate document shall be construed in favor of the document setting
forth such rights, powers, duties, rules and/or procedures.
5. No action shall be taken by stockholders of the
Corporation except at an annual or special meeting of the stockholders of
the Corporation. Except to the extent, if any, otherwise required by law, a
special meeting of the stockholders of the Corporation may be called only
by the Chairman of the Board of Directors, the President or the Board of
Directors of the Corporation.
6. No amendment to the Certificate of Incorporation of the
Corporation shall amend, alter, change or repeal any of the provisions of
this Article SIXTH, unless the amendment effecting such amendment,
alteration, change or repeal shall receive the affirmative vote of the
holders of eighty percent (80%) of all shares of stock of the Corporation
entitled to vote in the election of directors, considered for the purposes
of this Article SIXTH as one class; provided that this paragraph 6 shall
not apply to, and such eighty percent (80%) vote or consent shall not be
required for, any amendment, alteration, change or repeal unanimously
recommended to the stockholders by the Board of Directors of the
Corporation if each of such directors is a person who would be eligible to
serve as a continuing director as hereinafter defined in paragraph 7 of
this Article SIXTH.
7. As used in paragraph 6 of this Article SIXTH, (a) the
term "continuing director" shall mean either a person who was a member of
the Board of Directors of the Corporation elected by the stockholders of
the Corporation prior to the time that an "other entity" acquired in excess
of ten percent (10%) of the stock of the Corporation entitled to vote in
the election of directors, or a person recommended to succeed any
continuing director by a majority of continuing directors; (b) the term
"other entity" shall include any corporation, person or other entity (other
than the Corporation, any of its subsidiaries or a trustee holding stock
for the benefit of employees of the Corporation or its subsidiaries, or any
one of them, pursuant to one or more employee benefit plans or
arrangements) and any other entity with which it or its "affiliate" or
"associate" (as defined below) has any agreement, arrangement or
understanding, directly or indirectly, for the purpose of acquiring,
holding, voting or disposing of stock of the Corporation, or which is its
"affiliate" or "associate" as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934 as
in effect on January 1, 1984, together with the successors and assigns of
such persons in any transaction or series of transactions not involving a
"public offering" of the Corporation's stock within the meaning of the
Securities Act of 1933, provided that "other entity" does not include any
one or any group of more than one of the persons who were directors of the
Corporation as of January 1, 1984, or any one or any group of more than one
continuing director (as defined above); (c) an other entity (as defined
above) shall be deemed to be the beneficial owner of any shares of stock of
the Corporation which such other entity has the right to acquire pursuant
to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise; and (d) the outstanding shares of any class of stock
of the Corporation shall include shares deemed owned through application of
clause (c) above but shall not include any other shares which may be
issuable pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise.
<PAGE>
8. A majority of the continuing directors shall have the
power and duty to determine for the purposes of this Article SIXTH on the
basis of information known to them whether (a) such other entity
beneficially owns more than ten percent (10%) of the outstanding shares of
stock of the Corporation entitled to vote in the election of directors, (b)
an other entity is an "affiliate" or "associate" (as defined above) of
another, or (c) an other entity has an agreement, arrangement or
understanding with another.
SEVENTH: The Board of Directors shall have power to make, alter or
repeal the by-laws of the Corporation, except as may otherwise be
provided in the by-laws.
EIGHTH: 1. The affirmative vote or, if permitted under this
Certificate of Incorporation, consent of the holders of eighty percent
(80%) of all shares of the Corporation entitled to vote in the election of
directors, considered for the purposes of this Article EIGHTH as one class,
shall be required for the adoption or authorization of (i) a business
combination (as hereinafter defined) with any other entity (as hereinafter
defined) if, as of the record date for the determination of stockholders
entitled to notice thereof and to vote thereon, or, if so permitted,
consent thereto, such other entity is the beneficial owner, directly or
indirectly, of more than twenty percent (20%) of the outstanding shares of
stock of the Corporation entitled to vote in the election of directors,
considered for the purposes of this Article EIGHTH as one class, or (ii) a
proposed dissolution of the Corporation or a proposed amendment of the
Certificate of Incorporation of the Corporation which would either change
the entitlement of the holders of shares of Common Stock of the Corporation
to vote in the election of directors or would authorize the Corporation to
issue either shares of capital stock (other than shares of its Common
Stock) or bonds, debentures or other obligations, which, if issued, would
or could be entitled to vote in the election of directors if, as of the
record date for the determination of stockholders entitled to notice of and
to vote on or, if so permitted, consent to such proposed dissolution or
such proposed amendment, an other entity (as hereinafter defined) is the
beneficial owner, directly or indirectly, of more than twenty percent (20%)
of the outstanding shares of stock of the Corporation entitled to vote in
the election of directors, considered for the purposes of this Article
EIGHTH as one class; provided that such eighty percent (80%) voting
requirement shall not be applicable to the adoption or authorization of a
business combination if:
(a) The cash, or fair market value of other consideration, to be
received per share by holders of shares of any class of capital stock of
the Corporation in such business combination bears the same or a greater
percentage relationship to the market price of such shares of capital stock
immediately prior to the announcement of such business combination as the
highest per share price (including brokerage commissions and/or soliciting
dealers' fees) which such other entity has theretofore paid for any of such
shares of capital stock already owned by it bears to the market price of
such shares of capital stock immediately prior to the commencement of
acquisition of such shares of capital stock by such other entity;
(b) The cash, or fair market value of other consideration, to be
received per share by holders of shares of any class of capital stock of
the Corporation in such business combination is not less than the highest
per share price (including brokerage commissions and/or soliciting dealers'
fees) paid by such other entity in acquiring any of its holdings of such
shares of capital stock;
(c) After such other entity has acquired such greater-than-
twenty percent (20%) interest and prior to the consummation of such
business combination: (i) such other entity shall have taken steps to
ensure that the Corporation's Board of Directors included- at all times
representation by continuing director(s) (as hereinafter defined)
proportionate to the stockholdings of the Corporation's stockholders not
affiliated with such other entity (with a continuing director to occupy any
resulting fractional board position); (ii) such other entity shall not have
acquired any newly issued shares of capital stock, directly or indirectly,
from the Corporation (except upon conversion of securities acquired by it
prior to obtaining such greater-than-twenty percent (20%) interest or as a
result of a pro rata stock dividend or stock split); and (iii) such other
entity shall not have acquired any additional shares of the Corporation's
outstanding capital stock or securities convertible into capital stock
except as a part of the transaction which results in such other entity
acquiring such greater-than- twenty percent (20%) interest; and
<PAGE>
(d) Such other entity shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder) of any
loans, advances, guarantees, pledges or other financial assistance or tax
credits provided by the Corporation.
The provisions of this Article EIGHTH shall also apply to a
business combination with any other entity which at any time has been the
beneficial owner, directly or indirectly, of more than twenty percent (20%)
of the outstanding shares of stock of the Corporation entitled to vote in
the election of directors, considered for the purpose of this Article
EIGHTH as one class, notwithstanding the fact that such other entity has
reduced its shareholdings below twenty percent (20%) if, as of the record
date for the determination of stockholders entitled to notice of and to
vote on or, if so permitted, consent to the business combination, such
other entity is an "affiliate" of the Corporation (as hereinafter defined).
2. As used in this Articl e EIGHTH, (a) the term "other
entity" shall include any corporation, person or other entity (other than
the Corporation, any of its subsidiaries or a trustee holding stock for the
benefit of employees of the Corporation or its subsidiaries or any one of
them, pursuant to one or more employee benefit plans or arrangements)and
any other entity with which it or its "affiliate" or "associate"(as defined
below) has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
stock of the. Corporation, or which is its "affiliate" or "associate" as
those terms are defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934 as in effect on January 1, 1984,
together with the successors and assigns of such persons in any transaction
or series of transactions not involving a "public offering" of the
Corporation's stock within the meaning of the Securities Act of 1933,
provided that "other entity" does not include any one or any group of more
than one of the persons who were directors of the Corporation as of January
1, 1984, or any one or any group of more than one continuing director (as
defined below), (b) an other entity (as defined above) shall be deemed to
be the beneficial owner of any shares of stock of the Corporation which
such other entity has the right to acquire pursuant to any agreement, or
upon exercise of conversion rights, warrants or options, or otherwise; (c)
the outstanding shares of any class of stock of the Corporation shall
include shares deemed owned through application of clause (b) above but
shall not include any other shares which may be issuable pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise; (d) the term, "business combination" shall include any merger or
consolidation of the Corporation with or into any other corporation, or the
sale or lease of all or any substantial part of the assets of the
Corporation to, or any sale or lease to the Corporation or any subsidiary
thereof in exchange for securities of the Corporation of any assets (except
assets having an aggregate fair market value of less than $5,000,000) of,
any other entity; (e) the term "continuing director" shall mean either a
person who was a member of the Board of Directors of the Corporation
elected by the stockholders of the Corporation prior to the time that an
other entity acquired in excess of ten percent (10%) of the stock of the
Corporation entitled to vote in the election of directors, or a person
recommended to succeed any continuing director by a majority of continuing
directors; and (f) for the purposes of subparagraphs l(a) and (b) of this
Article EIGHTH the term "other consideration to be received" shall mean
capital stock of the Corporation retained by its stockholders (other than
such other entity) in the event of a business combination with such other
entity in which the Corporation is the surviving corporation.
<PAGE>
3. A majority of the continuing directors shall have the
power and duty to determine for the purposes of this Article EIGHTH on the
basis of information known to them whether (a) such other entity
beneficially owns more than ten percent (10%) or twenty percent (20%) of
the outstanding shares of stock of the Corporation entitled to vote in the
election of directors, (b) an other entity is an "affiliate" or "associate"
(as defined above) of another, (c) an other entity has an agreement,
arrangement or understanding with another, or (d) the assets being acquired
by the Corporation, or any subsidiary thereof, have an aggregate fair
market value of less than $5,000,000.
4. No amendment to the Certificate of Incorporation of the
Corporation shall amend, alter, change or repeal any of the provisions of
this Article EIGHTH, unless the amendment effecting such amendment,
alteration, change or repeal shall receive the affirmative vote or consent
of the holders of eighty percent (80%) of all shares of stock of the
Corporation entitled to vote in the election of directors, considered for
the purposes of this Article EIGHTH as one class; provided that this
paragraph 4 shall not apply to, and such eighty percent (80%) vote or (if
permitted under this Certificate of Incorporation) consent shall not be
required for, any amendment, alteration, change or repeal unanimously
recommended to the stockholders by the Board of Directors of the
Corporation if all of such directors are persons who would be eligible to
serve as "continuing directors" within the meaning of paragraph 2 of this
Article EIGHTH.
5. Nothing contained in this Article EIGHTH shall be
construed to relieve any other entity from any fiduciary obligation imposed
by law.
6. The provisions of this Article EIGHTH shall not apply to:
(a) The adoption or authorization of any business combination
described in paragraph 1 of this Article EIGHTH if the Board of Directors
of the Corporation shall have approved by resolution a memorandum of
understanding with the other corporation, person or entity with whom such
business combination is proposed prior to the time that such other
corporation, person or entity shall have become a beneficial owner of five
percent (5%) or more of the outstanding shares of any class of capital
stock of the Corporation entitled to vote in the election of directors; or
(b) The adoption or authorization of any business combination,
proposed dissolution or proposed amendment described in paragraph 1 of this
Article EIGHTH, if such business combination, proposed dissolution or
proposed amendment is approved, prior to its adoption or authorization by
the stockholders of the Corporation, by a resolution of the Board of
Directors of the Corporation which is approved by at least two- thirds of
those members of the Board of Directors of the Corporation who are not, at
the time of their approval, involved with and/or representing an other
entity which, at such time, is the beneficial owner, directly or
indirectly, of more than twenty percent (20%) of the outstanding shares of
stock of the Corporation then entitled to vote in the election of
directors.
NINTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
<TABLE>
<CAPTION>
Exhibit 11.1
THE HOME DEPOT, INC. AND SUBSIDIARIES
COMPUTATION OF BASIC AND DILUTED
EARNINGS PER SHARE
(In Millions, Except Per Share Data)
Three Months Ended
May 2, May 3,
1999 1998
BASIC
<S> <C> <C>
Net Earnings Available to Common
Shareholders $ 489 $ 337
Weighted Average Number of
Common Shares Outstanding 1,478 1,466
Basic Earnings Per Share $ 0.33 $ 0.23
DILUTED
Net Earnings Available to Common
Shareholders $ 489 $ 337
Tax Effected Interest Expense Attributable
to 3.25% Convertible Subordinated Notes 5 6
Net Earnings Available to Common
Shareholders Assuming Dilution $ 494 $ 343
Weighted Average Number of
Common Shares Outstanding 1,478 1,466
Effect of Potentially Dilutive Securities:
3.25% Convertible Subordinated Notes 48 48
Employee Stock Plans 32 25
Weighted Average Number of Common Shares
Outstanding Assuming Dilution 1,558 1,539
Diluted Earnings Per Share $ 0.32 $ 0.22
(1) Employee stock plans represent shares granted under the Company's
employee stock purchase plan and stock option plans, as well as shares
issued for deferred compensation stock plans. For fiscal years 1999 and
1998, shares issuable upon conversion of the Company's 3.25% Notes, issued
in October 1996, were included in weighted average shares assuming
dilution for purposes of calculating diluted earnings per share. To
calculate diluted earnings per share, net earnings are adjusted for
tax-effected net interest and issue costs on the 3.25% Notes and divided
by weighted average shares assuming dilution.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jan-30-2000
<PERIOD-END> May-2-1999
<CASH> 604
<SECURITIES> 0
<RECEIVABLES> 502
<ALLOWANCES> 0
<INVENTORY> 4,955
<CURRENT-ASSETS> 6,211
<PP&E> 9,937
<DEPRECIATION> 1,342
<TOTAL-ASSETS> 15,199
<CURRENT-LIABILITIES> 4,216
<BONDS> 1,319
0
0
<COMMON> 74
<OTHER-SE> 9,255
<TOTAL-LIABILITY-AND-EQUITY> 15,199
<SALES> 8,952
<TOTAL-REVENUES> 8,952
<CGS> 6,386
<TOTAL-COSTS> 6,386
<OTHER-EXPENSES> 1,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 805
<INCOME-TAX> 316
<INCOME-CONTINUING> 489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 489
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.32
</TABLE>
