<PAGE>
Page 1 of 16
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 1999
- OR -
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8207
THE HOME DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3261426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2455 Paces Ferry Road N.W. Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
(770) 433-8211
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
$.05 par value 1,483,034,331 Shares, as of August 20, 1999
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
August 1, 1999
Page
Part I. Financial Information:
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS -
Three-Month and Six-Month Periods
Ended August 1, 1999 and August 2,1998...........................3
CONSOLIDATED CONDENSED BALANCE SHEETS -
As of August 1, 1999 and January 31, 1999 .......................4
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Six-Month Periods
Ended August 1, 1999 and August 2,1998..........................5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME -
Three-Month and Six-Month Periods
Ended August 1, 1999 and August 2,1998...........................6
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS..............................................7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition......................8- 13
Item 3. Quantitative and Qualitative Disclosures about Market
Risk..........................................................13
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders......13 - 14
Item 5. Other Information ............................................14
Item 6. Exhibits and Reports on Form 8-K..............................14
Signature Page.........................................................15
Index to Exhibits......................................................16
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In Millions, Except Per Share Data)
Three Months Ended Six Months Ended
August 1, August 2, August 1, August 2,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Sales $ 10,431 $ 8,139 $ 19,383 $ 15,263
Cost of Merchandise Sold 7,402 5,876 13,788 11,031
Gross Profit 3,029 2,263 5,595 4,232
Operating Expenses:
Selling and Store Operating 1,722 1,353 3,306 2,620
Pre-Opening 32 18 54 37
General and Administrative 159 122 308 244
Total Operating Expenses 1,913 1,493 3,668 2,901
Operating Income 1,116 770 1,927 1,331
Interest Income (Expense):
Interest and Investment
Income 9 9 13 15
Interest Expense (8) (10) (17) (21)
Interest, Net 1 (1) (4) (6)
Earnings Before Income
Taxes 1,117 769 1,923 1,325
Income Taxes 438 302 754 521
Net Earnings $ 679 $ 467 $ 1,169 $ 804
Weighted Average Number of
Common Shares Outstanding 1,482 1,470 1,480 1,468
Basic Earnings Per Share $ 0.46 $ 0.32 $ 0.79 $ 0.55
Weighted Average Number of
Common Shares Outstanding
Assuming Dilution 1,559 1,546 1,558 1,542
Diluted Earnings Per Share $ 0.44 $ 0.31 $ 0.76 $ 0.53
Dividends Per Share $ 0.04 $ 0.03 $ 0.07 $ 0.06
</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)
August 1, January 31,
ASSETS 1999 1999
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 518 $ 62
Short-Term Investments 2 ---
Receivables, Net 545 469
Merchandise Inventories 4,982 4,293
Other Current Assets 150 109
Total Current Assets 6,197 4,933
Property and Equipment, at cost 10,554 9,422
Less: Accumulated Depreciation
and Amortization 1,438 1,262
Net Property and Equipment 9,116 8,160
Long-Term Investments 15 15
Notes Receivable 34 26
Cost in Excess of the Fair Value
of Net Assets Acquired 273 268
Other 74 63
$ 15,709 $ 13,465
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 2,419 $ 1,586
Accrued Salaries and Related Expenses 485 395
Sales Taxes Payable 296 176
Other Accrued Expenses 635 586
Income Taxes Payable 151 100
Current Installments of Long-Term Debt 8 14
Total Current Liabilities 3,994 2,857
Long-Term Debt,
excluding current installments 1,338 1,566
Other Long-Term Liabilities 261 208
Deferred Income Taxes 85 85
Minority Interest 11 9
Stockholders' Equity:
Common Stock, par value $0.05.
Authorized: 5,000,000,000 shares;
issued and outstanding -
1,482,879,000 shares at 8/1/99
and 1,475,452,000 shares at 1/31/99 74 74
Paid-In Capital 3,071 2,854
Retained Earnings 6,941 5,876
Cumulative Translation Adjustments (61) (61)
10,025 8,743
Less Shares Purchased for
Compensation Plans 5 3
Total Stockholders' Equity 10,020 8,740
$ 15,709 $ 13,465
</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)
Six Months Ended
August 1,1999 August 2,1998
Cash Provided From Operations:
<S> <C> <C>
Net Earnings $ 1,169 $ 804
Reconciliation of Net Earnings to Net Cash
Provided by Operations:
Depreciation and Amortization 221 180
(Increase) Decrease in Receivables, Net (74) 132
Increase in Merchandise Inventories (676) (192)
Increase in Accounts Payable and
Accrued Expenses 1,141 642
Increase in Income Taxes Payable 123 40
Other (34) 1
Net Cash Provided by Operation 1,870 1,607
Cash Flows From Investing Activities:
Capital Expenditures (1,196) (891)
Purchase of Remaining Interest
in the Home Depot Canada --- (261)
Purchase of Business Acquired (28) ---
Proceeds From Sales of
Property and Equipment 32 22
Purchases of Investments (4) (1)
Proceeds from Maturities of Investments 2 2
Repayments of Advances
Secured by Real Estate, Net (9) 3
Net Cash Used in Investing Activities (1,203) (1,126)
Cash Flows From Financing Activities:
Repayments of Commercial
Paper Obligations, Net (246) ---
Principal Repayments of Long-Term Debt (7) (4)
Proceeds from Sale of Common Stock, Net 141 84
Cash Dividends Paid to Stockholders (103) (81)
Minority Interest Contributions
to Partnership 5 5
Net Cash (Used in) Provided by
Financing Activities (210) 4
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (1) (3)
Increase in Cash and Cash Equivalents 456 482
Cash and Cash Equivalents
at Beginning of Period 62 172
Cash and Cash Equivalents at End of Period $ 518 $ 654
</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 Six Months Ended
August 1, August 2, August 1, August 2,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Earnings $ 679 $ 467 $ 1,169 $ 804
Other Comprehensive Income:
Foreign Currency
Translation Adjustments (28) (22) --- (19)
Total Other
Comprehensive Income (28) (22) --- (19)
Comprehensive Income $ 651 $ 445 $ 1,169 $ 785
</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 reflects selected sales data, the percentage relationship
between sales and major categories in the Consolidated Statements of
Earnings, and the percentage change in the dollar amounts of each of the
items.
Percentage
Increase
Three Months Six Months (Decrease) in
Ended Ended Dollar Amounts
Selected Consolidated
Statements of August 1, August 2, August 1,August 2, Three Six
Earnings Data 1999 1998 1999 1998 Months Months
<S> <C> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0% 28.2% 27.0%
Gross Profit 29.0 27.8 28.8 27.7 33.8 32.2
Operating Expenses:
Selling and
Store Operating 16.5 16.7 17.0 17.2 27.3 26.2
Pre-Opening 0.3 0.2 0.3 0.2 77.8 45.9
General and
Administrative 1.5 1.5 1.6 1.6 30.3 26.2
Total Operating
Expenses 18.3 18.4 18.9 19.0 28.1 26.4
Operating Income 10.7 9.4 9.9 8.7 44.9 44.8
Interest Income
(Expense):
Interest and
Investment Income 0.1 0.1 0.1 0.1 0.0 (13.3)
Interest Expense (0.1) (0.1) (0.1) (0.1) (20.0) (19.0)
Interest, Net 0.0 0.0 0.0 0.0 (200.0) (33.3)
Earnings Before
Income Taxes 10.7 9.4 9.9 8.7 45.3 45.1
Income Taxes 4.2 3.7 3.9 3.4 45.0 44.7
Net Earnings 6.5% 5.7% 6.0% 5.3% 45.4 45.4
Selected Consolidated
Sales Data
Number of
Transactions (000's) 215,486 179,822 400,666 335,810 19.8 19.3
Average Sale
Per Transaction $ 48.10 $ 44.98 $ 48.04 $ 45.08 6.9 6.6
Weighted Average
Weekly Sales Per
Operating Store
(000's) $ 978 $ 933 $ 929 $ 894 4.8 3.9
Weighted Average
Sales Per
Square Foot $ 474 $ 455 $ 450 $ 436 4.2 3.2
</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 second quarter of fiscal 1999 increased 28.2% to $10.431
billion from $8.139 billion for the second quarter of fiscal 1998. For the
first six months of fiscal 1999, sales increased 27.0% to $19.383 billion
from $15.263 billion for the comparable period in fiscal 1998. The sales
increase for both periods was primarily attributable to new stores (846
stores open at the end of the second quarter of fiscal 1999 compared with
679 at the end of the second quarter of fiscal 1998) and a comparable store-
for-store sales increase of 11% for the second quarter and 10% for the first
six months of fiscal 1999.
Gross profit as a percent of sales was 29.0% for the second quarter of
fiscal 1999 compared with 27.8% for the second quarter of fiscal 1998. For
the first six months of fiscal 1999, gross profit as a percent of sales was
28.8% compared with 27.7% for the comparable period of fiscal 1998. The
gross profit rate increase for both periods was primarily attributable to
the ongoing benefits of product line reviews which have resulted in lower
costs of merchandise and more effective product assortments, cost reductions
through direct sourcing of imports, the roll-out of tool rental centers, and
better shrink results have contributed to the higher gross margin rate.
Total operating expenses as a percent of sales decreased to 18.3% for the
second quarter of fiscal 1999 from 18.4% for the second quarter of fiscal
1998. For the first six months of fiscal 1999, operating expenses decreased
to 18.9% from 19.0% for the comparable period in fiscal 1998.
Selling and store operating expenses as a percent of sales decreased to
16.5% for the second quarter of fiscal 1999 from 16.7% for the comparable
period in 1998. Net advertising expenses decreased as a percent of sales
due to higher co-op support from vendors, increased national advertising and
cost leverage achieved from opening new stores in existing markets. Also
contributing to the decrease were store payroll salaries and wages, which
continue to show productivity improvement in terms of sales generated per
labor hour. The Company also leveraged occupancy and certain operating
expenses due to the high comparable store sales. Partially offsetting these
decreases were higher costs for store bonus plans due to the strong
financial results of the Company for the first six months of fiscal 1999.
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
RESULTS OF OPERATIONS - (Continued)
In addition, credit card discounts for the first six months of fiscal 1999
were higher than the comparable period of fiscal 1998 as a percent of sales
due to a higher penetration of credit card sales and discount rate
increases. Selling and store operating expenses as a percent of sales
decreased to 17.0% for the first six months of fiscal 1999 from 17.2% for
the first six months of fiscal 1998. This decrease was due primarily to
lower net advertising and leverage achieved from high comparable store
sales, offset partially by higher credit card discounts as described above.
Pre-opening expenses as a percent of sales were 0.3% for the second quarter
and first six months of fiscal 1999 compared to 0.2% for the second quarter
and first six months of fiscal 1998. The Company opened 49 stores and
relocated four stores during the second quarter of fiscal 1999 compared with
23 new stores and one store relocation during the second quarter of fiscal
1998. General and administrative expenses as a percent of sales were 1.5%
for the second quarter of both fiscal 1999 and fiscal 1998, and 1.6% for the
first six months of both fiscal 1999 and fiscal 1998.
Net interest as a percent of sales was 0.0% for the second quarter and first
six months of both fiscal 1999 and fiscal 1998. As a percent of sales,
interest and investment income was 0.1% for both the second quarter and
first six months of fiscal 1999 and the comparable periods of fiscal 1998.
Interest expense as a percent of sales was 0.1% for all comparable periods.
The Company's combined federal and state effective income tax rate decreased
to 39.2% for the second quarter and first six months of fiscal 1999 from
39.3% for the comparable periods of fiscal 1998. During the fourth quarter
of fiscal 1998, an adjustment was made to lower the annual effective tax
rate to 39.2%
Net earnings as a percent of sales increased to 6.5% and 6.0% for the second
quarter and first six months of fiscal 1999, respectively, from 5.7% and
5.3% for the second quarter and first six months of fiscal 1998. The
increases as a percent of sales for fiscal 1999 were primarily attributable
to higher gross margin rates and lower selling and store operating expenses
as a percent of sales, as described above.
Diluted earnings per share were $0.44 and $0.76 for the second quarter and
first six months of fiscal 1999, respectively, compared to $0.31 and $0.53
for the second quarter and first six months of fiscal 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from store operations provides the Company with a
significant source of liquidity. Additionally, a significant portion of the
Company's inventory is financed under vendor credit terms. During the first
six months of fiscal 1999, the Company opened 86 stores, relocated five
stores and temporarily closed one store, which is planned to reopened on the
same site during the third quarter of fiscal 1999. During the remainder of
fiscal 1999, the Company plans to open approximately 83 new stores and
relocate one store, for a 22% unit growth rate for the year. It is
anticipated that approximately 81% of these locations will be owned, and the
remainder will be leased.
<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)
The Company has two operating lease agreements totaling $882 million for the
purpose of financing construction costs of certain new stores. Under the
operating lease agreements, the lessor purchases the properties, pays for
the construction costs and subsequently leases the facilities to the
Company. The leases provide for substantial residual value guarantees and
include purchase options at original cost on each property.
The Company financed a portion of new stores opened in fiscal 1997, 1998 and
1999 under the operating lease agreements and anticipates utilizing these
facilities to finance selected new stores during the remainder of fiscal
1999 and in 2000, as well as an office building in fiscal 1999. In
addition, some planned locations for fiscal 1999 will be leased
individually, and it is expected that many locations may be obtained through
the acquisition of land parcels and construction or purchase of buildings.
While the cost of new stores to be constructed and owned by the Company
varies widely, principally due to land costs, new store costs are currently
estimated to average approximately $13.0 million per location. The cost to
remodel and/or fixture stores to be leased is expected to average
approximately $3.9 million per store. In addition, each new store will
require approximately $3.1 million to finance inventories, net of vendor
financing.
During fiscal 1996, the Company issued, through a public offering, $1.1
billion of 3.25% Convertible Subordinated Notes due October 1, 2001 ("3.25%
Notes"). The 3.25% Notes were issued at par and are convertible into shares
of the Company's common stock at any time prior to maturity, unless
previously redeemed by the Company, at a conversion price of $23.0417 per
share,subject to adjustment under certain conditions. The 3.25% Notes may be
redeemed by the Company, at any time on or after October 2, 1999, in whole
or in part, at a redemption price of 100.813% of the principal amount and
after October 1, 2000, at 100% of the principal amount. The Company used
the net proceeds from the offering to repay outstanding commercial paper
obligations, to finance a portion of the Company's capital expenditure
program, including store expansions and renovations, and for general
corporate purposes.
The Company has a commercial paper program that allows borrowings up to a
maximum of $800 million. As of August 1, 1999, there were no borrowings
outstanding under the program. In connection with the program, the Company
has a back-up credit facility with a consortium of banks for up to $800
million. The credit facility, which expires in December 2000, contains
various restrictive covenants, none of which is expected to materially
impact the Company's liquidity or capital resources.
As of August 1, 1999, the Company had $520 million in cash and cash
equivalents and short-term investments, as well as $15 million in long-term
investments. Management believes that its current cash position, the
proceeds from short-term and long-term investments, internally generated
funds, funds available from its $800 million commercial paper program, funds
available from the $882 million operating lease agreement, and/or the
ability to obtain alternate sources of financing should enable the Company
to complete its capital expenditure programs, including store expansions and
renovations, through the next several fiscal years.
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
YEAR 2000
The Company is currently addressing a universal situation commonly referred
to as the "Year 2000 Problem." The Year 2000 Problem relates to the
inability of certain computer software programs to properly recognize and
process date-sensitive information relative to the year 2000 and beyond.
During fiscal 1997, the Company developed a plan to devote the necessary
resources to identify and modify internal systems impacted by the Year 2000
Problem, or implement new systems to become year 2000 compliant, in a timely
manner. This compliance plan consists of four major areas of focus:
systems, desktops, facilities and supplier management. The total cost of
executing this plan is estimated at $13 million, and as of August 1, 1999,
the Company had expended approximately $10.1 million to effect the plan.
As of August 1, 1999, the Company had completed the systems portion of the
compliance plan. In implementing the systems portion of the plan, the
Company completed an inventory of all software programs operating on its
systems, identified year 2000 problems, created an appropriate testing
environment, completed testing and installed year 2000 compliant software in
the production environment.
All desktop applications critical to the Company's overall business have
been inventoried and evaluated under the method described above, and as of
January 31, 1999, this process was complete. The compliance plan for
desktop infrastructure was complete at the end of the second quarter of
fiscal 1999.
Substantially all critical facilities systems, including, but not limited
to, security systems, energy management, material handling, copiers and
faxes, have been inventoried and are being tested. As of August 1, 1999,
this process was approximately 94% complete. The Company currently
anticipates completing the facilities systems portion of its compliance plan
early during the fourth quarter of fiscal 1999.
The Company is assessing the year 2000 compliance status of its suppliers,
many of which participate in electronic data interchange ("EDI") or similar
programs with the Company. The Company is conducting substantial testing
with EDI merchandise suppliers and transportation carriers. With respect to
merchandise suppliers participating in EDI programs with the Company, the
Company is conducting point-to-point testing of these EDI systems for year
2000 compliance. The Company currently anticipates that it will have
completed testing suppliers and carriers representing approximately 65% of
its EDI volume by the end of October 1999.
The Company's risks involved with not solving the Year 2000 Problem include,
but are not limited to, the following: loss of local or regional
electrical power, loss of telecommunication services, delays or
cancellations of merchandise shipments, manufacturing shutdowns, delays in
processing customer transactions, bank errors and computer errors by
suppliers. Because the Company's year 2000 compliance is dependent upon
certain third parties (including infrastructure providers) also being year
2000 compliant on a timely basis, there can be no assurance that the
Company's efforts will prevent a material adverse impact on its results of
operations, financial condition or business.
The Company is modifying its existing disaster recovery plans to include
year 2000 contingency planning. Also, the Company is identifying critical
activities that would normally be conducted during the first two weeks of
January 2000, which may be completed instead in December 1999. The Company
currently expects its year 2000 contingency planning to be substantially
complete by the end of September 1999 and to test, modify and test
implementation of the contingency plans throughout the remainder of 1999.
<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) is not material.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders
held on May 26, 1999, the stockholders elected the following
nominees to the Board of Directors with votes cast as follows: Mr.
John L. Clendenin: 1,267,015,470 shares for and 10,556,620 shares
against; Ms. Bonnie G. Hill: 1,259,464,258 shares for and 18,107,832
shares against; Mr. Kenneth G. Langone: 1,265,812,054 shares for and
11,760,036 shares against; and Mr. Bernard Marcus: 1,265,806,562
shares for and 11,765,528 shares against. There were no abstentions
or broker non-votes applicable to the election of directors. The
following other directors have terms as director that continue after
the meeting: Mr. Arthur M. Blank, Col. Frank Borman, Mr. Ronald M.
Brill, Mr. Berry R. Cox, Mr. William S. Davila, Mr. Milledge A.
Hart, III and Ms. M. Faye Wilson.
The stockholders approved an amendment to the Company's Certificate
of Incorporation to increase the number of authorized shares with
votes cast as follows: 1,182,070,494 shares for; 91,556,554 shares
against; and 3,945,042 shares abstained. There were no broker non-
votes.
The stockholders approved an amendment to The Home Depot, Inc.
Senior Officers' Bonus Pool Plan with votes cast as follows:
1,200,355,660 shares for; 68,420,992 shares against; and 8,795,439
shares abstained. There were no broker non-votes.
The stockholders rejected a proposal relating to a report on certain
employment matters with votes cast as follows: 107,458,718 shares
for; 830,988,994 shares against; 85,097,654 shares abstained; and
254,026,723 broker non-votes.
The stockholders rejected a proposal recommending that the Board of
Directors take steps to amend the Company's Certificate of
Incorporation to eliminate the classes of the Board of Directors
with votes cast as follows: 437,631,749 shares for; 570,801,871
shares against; 15,163,347 shares abstained; and 253,975,122 broker
non-votes.
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(CONTINUED)
PART II. OTHER INFORMATION - (Continued)
The stockholders rejected a proposal recommending that the Board of
Directors amend the Company's Bylaws to require that the Board of
Directors consist of a majority of independent directors with votes
cast as follows: 307,487,784 shares for; 642,554,747 shares against;
73,502,290 shares abstained; and 254,027,267 broker non-votes.
The stockholders rejected a proposal relating to certain
environmental matters with votes cast as follows: 113,143,811
shares for; 846,389,265 shares against; 64,000,289 shares
abstained; and 254,038,723 broker non-votes.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Basic and Diluted Earnings Per Share
27. Financial Data Schedule (only submitted to SEC in
electronic format)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
August 1, 1999.
<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
August 27, 1999
(Date)
<PAGE>
THE HOME DEPOT, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit Description
11.1 Computation of Basic and Diluted Earnings Per Share
27. Financial Data Schedule (only submitted to SEC in electronic
format)
<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 Six Months Ended
August 1, August 2, August 1, August2,
1999 1998 1999 1998
BASIC
<S> <C> <C> <C> <C>
Net Earnings Available
to Common Shareholders $ 679 $ 467 $ 1,169 $ 804
Weighted Average Number of
Common Shares Outstanding 1,482 1,470 1,480 1,468
Basic Earnings Per Share $ 0.46 $ 0.32 $ 0.79 $ 0.55
DILUTED
Net Earnings Available
to Common Shareholders $ 679 $ 467 $ 1,169 $ 804
Tax-Effected Interest Expense
Attributable to 3.25%
Convertible Subordinated Notes 5 6 10 12
Net Earnings Available
to Common Shareholders
Assuming Dilution $ 684 $ 473 $ 1,179 $ 816
Weighted Average Number of
Common Shares Outstanding 1,482 1,470 1,480 1,468
Effect of Potentially
Dilutive Securities:
3.25% Convertible
Subordinated Notes 48 48 48 48
Employee Stock Plans 29 28 30 26
Weighted Average Number
of Common Shares
Outstanding Assuming
Dilution 1,559 1,546 1,558 1,542
Diluted Earnings Per Share $ 0.44 $ 0.31 $ 0.76 $ 0.53
(1) Employee stock plans represent shares granted under the Company's
employee stock purchase plan and stock option plans, as well as shares
issued for deferred compensation stock plans. For fiscal years 1999 and
1998, shares issuable upon conversion of the Company's 3.25% Notes, issued
in October 1996,were included in weighted average shares assuming dilution
for purposes of calculating diluted earnings per share. To calculate
diluted earnings per share, net earnings are adjusted for tax-effected
net interest and issue costs on the 3.25% Notes and divided by weighted
average shares assuming dilution.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jan-30-2000
<PERIOD-END> Aug-1-1999
<CASH> 518
<SECURITIES> 2
<RECEIVABLES> 545
<ALLOWANCES> 0
<INVENTORY> 4,982
<CURRENT-ASSETS> 6,197
<PP&E> 10,554
<DEPRECIATION> 1,438
<TOTAL-ASSETS> 15,709
<CURRENT-LIABILITIES> 3,994
<BONDS> 1,338
0
0
<COMMON> 74
<OTHER-SE> 9,946
<TOTAL-LIABILITY-AND-EQUITY> 15,709
<SALES> 19,383
<TOTAL-REVENUES> 19,383
<CGS> 13,788
<TOTAL-COSTS> 13,788
<OTHER-EXPENSES> 3,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 1,923
<INCOME-TAX> 754
<INCOME-CONTINUING> 1,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,169
<EPS-BASIC> 0.79
<EPS-DILUTED> 0.76
</TABLE>
